1933 Act File No. 33-29838
1940 Act File No. 811-5843
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ___X__
Pre-Effective Amendment No. .....................
Post-Effective Amendment No. __19__ .....................___X__
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ___X__
Amendment No. ___17___........................................___X__
CASH TRUST SERIES, INC.
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b) on _________________
pursuant to paragraph (b) 60 days after filing pursuant to paragraph (a)(i)
X on September 30, 1999 pursuant to paragraph (a)(i) 75 days after filing
pursuant to paragraph (a)(ii) on _________________ pursuant to paragraph
(a)(ii) of Rule 485
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Copies to:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky, LLP
2101 L Street, N.W.
Washington, D.C. 20037
PROSPECTUS
TREASURY CASH SERIES
A Portfolio of Cash Trust Series, Inc.
A money market mutual fund seeking current income consistent with stability of
principal and liquidity by investing in a portfolio of U.S. Treasury securities
maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.
CONTENTS
Risk/Return Summary
What are the Fund's Fees and Expenses?
What are the Fund's Investment Strategies?
What are the Principal Securities in Which the Fund Invests?
What are the Specific Risks of Investing in the Fund?
What do Shares Cost?
How is the Fund Sold?
How to Purchase Shares
How to Redeem Shares
Account and Share Information
Who Manages the Fund?
Financial Information
September 30, 1999
<PAGE>
RISK/RETURN SUMMARY
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is current income consistent
with stability of principal and liquidity. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests primarily in a portfolio of U.S. Treasury securities maturing
in 397 days or less. These investments include repurchase agreements
collateralized fully by U.S. Treasury securities. The dollar-weighted average
maturity of the Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund. 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.
<PAGE>
RISK/RETURN BAR CHART AND TABLE
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Treasury Cash Series as of the calendar year-end for
each of eight years.
The `y' axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 1.00% up to 6.00%.
The `x' axis represents calculation periods from the earliest first full
calendar year end of the Fund's start of business through the calendar year
ended 1998. The light gray shaded chart features eight distinct vertical bars,
each shaded in charcoal, and each visually representing by height the total
return percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Fund for each calendar year is stated
directly at the top of each respective bar, for the calendar years 1991 through
1998. The percentages noted are: 5.23%, 2.94%, 2.26%, 3.28%, 5.06%, 4.49%,
4.64%, and 4.53%, respectively.
Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's total returns on a
calendar year-end basis.
The Fund's shares are not sold subject to a sales charge (load). The total
returns displayed above are based upon net asset value.
The Fund's total return from January 1, 1999 to June 30, 1999 was 1.91%.
Within the period shown in the Chart, the Fund's highest quarterly return
was 1.91% (quarter ended June 30, 1990). Its lowest quarterly return was 0.55%
(quarter ended
June 30, 1993).
<PAGE>
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Fund's Average Annual Total Returns for the
calendar periods ended December 31, 1998.
CALENDAR PERIOD FUND
1 Year 4.53%
5 Years 4.40%
Start of 4.41%
Performance1
1 THE FUND'S START OF PERFORMANCE DATE WAS FEBRUARY 7, 1990.
The Fund's 7-Day Net Yield as of December 31, 1998 was 3.94%. Investors may call
the Fund at 1-800-341-7400 to acquire the current 7-Day Net Yield.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
rewards.
<PAGE>
WHAT ARE THE FUND'S FEES AND EXPENSES?
TREASURY CASH SERIES
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
SHAREHOLDER FEES
FEES PAID DIRECTLY FROM YOUR INVESTMENT
Maximum Sales Charge (Load) Imposed on Purchases (as a None
percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of None
original purchase price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and None
other Distributions) (as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if None
applicable)
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (Before Waivers])(1) EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS (AS A PERCENTAGE OF AVERAGE NET ASSETS) Management Fee(2) 0.50%
Distribution (12b-1) Fee(3) 0.35% Shareholder Services Fee 0.25% Other Expenses
0.23% Total Annual Fund Operating Expenses 1.33% 1 Although not contractually
obligated to do so, the adviser and
distributor waived certain amounts. These are shown below along with the
net expenses the Fund ACTUALLY PAID for the fiscal year ended May 31,
1999.
Total Waiver of Fund Expenses 0.33%
Total Actual Annual Fund Operating Expenses (after waivers) 1.00%
2 The adviser voluntarily waived a portion of the management fee. The adviser
can terminate this voluntary waiver at any time. The management fee paid by
the Fund's shares (after the voluntary waiver) was 0.43% for the fiscal year
ended May 31, 1999.
3 The distributor voluntarily waived a portion of the distribution (12b-1) fee.
The distributor can terminate this voluntary waiver at any time. The
distribution (12b-1) fee paid by the Fund's shares (after the voluntary
waiver) was 0.10% for the fiscal year ended May 31, 1999.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Shares for the time
periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Shares operating expenses are BEFORE WAIVERS as shown in the
table and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$135 $421 $729 $1,601
<PAGE>
WHAT ARE THE FUND'S INVESTMENT STRATEGIES?
The Fund invests at least 65% of its total assets in a portfolio of U.S.
Treasury securities maturing in 397 days or less. These investments include
repurchase agreements collateralized fully by U.S. Treasury securities. The
dollar-weighted average maturity of the Fund's portfolio will be 90 days or
less.
The adviser targets a dollar-weighted average portfolio maturity range based
upon its interest rate outlook. The adviser formulates its interest rate outlook
by analyzing a variety of factors, such as:
o.......current U.S. economic activity and the economic outlook,
o current short-term interest rates,
o the Federal Reserve Board's policies regarding short-term interest rates,
and
o the potential effects of foreign economic activity on U.S. short term
interest rates.
The adviser generally shortens the portfolio's dollar-weighted average maturity
when it expects interest rates to rise and extends the maturity when it expects
interest rates to fall. The adviser selects securities used to lengthen or
shorten the portfolio's dollar-weighted average maturity by comparing the
returns currently offered by different investments to their historical and
expected returns.
WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?
U.S. TREASURY SECURITIES
U.S. Treasury securities are direct obligations of the federal government
of the United States. U.S. Treasury securities pay interest, dividends or
distributions at a specified rate. The rate may be a fixed percentage of the
principal or adjusted periodically. In addition, the U.S. Treasury must repay
the principal amount of the security, normally within a specified time.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser. Repurchase agreements are subject
to credit risks.
WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
CREDIT RISKS
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
WHAT DO SHARES COST?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share. The
Fund does not charge a front-end sales charge. NAV is determined at 12:00 noon
and 3:00 p.m. (Eastern time) and as of the end of regular trading (normally 4:00
p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. The minimum
subsequent investment amount is $500. The minimum initial investment for
retirement plans is $250. The minimum subsequent investment for retirement plans
is $100.
An institutional investor's minimum investment is calculated by combining all
accounts it maintains with the Fund. Accounts established through investment
professionals may be subject to a smaller minimum investment amount. Keep in
mind that investment professionals may charge you fees for their services in
connection with your Share transactions.
HOW IS THE FUND SOLD?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to customers of financial institutions such as banks,
fiduciaries, custodians of public funds, investment advisers and broker/dealers,
or individuals, directly or through investment professionals.
When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Shares. Because these Shares pay marketing fees
on an ongoing basis, your investment cost may be higher over time than other
shares with different sales charges and marketing fees.
HOW TO PURCHASE SHARES
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
o Establish an account with the investment professional; and
o Submit your purchase order to the investment professional before 3:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
o Establish your account with the Fund by submitting a completed New Account
Form; and
o Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees the Fund or its transfer agent incurs.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or The Federated Funds). 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.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
RETIREMENT INVESTMENTS
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.
HOW TO REDEEM SHARES
You should redeem Shares:
o through an investment professional if you purchased Shares through an
investment professional; or
o directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund once you have completed the
appropriate authorization form for telephone transactions.
If you call before 3:00 p.m. (Eastern time) your redemption will be wired to you
the same day. You will not receive that day's dividend.
If you call after 3:00 p.m. (Eastern time) your redemption will be wired to you
the following business day. You will receive that day's dividend. Under limited
circumstances, arrangements may be made with the Distributor for same-day
payment of redemption proceeds, without that day's dividend, for redemption
requests received before 2:00 p.m. (Eastern time).
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317 All requests must include:
o Fund Name and Share Class, account number and account registration;
o amount to be redeemed; and
o signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES Signatures must be guaranteed if:
o your redemption will be sent to an address other than the address of
record;
o your redemption will be sent to an address of record that was changed
within the last 30 days; or
o a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
o an electronic transfer to your account at a financial institution that is
an ACH member; or
o wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
o to allow your purchase to clear;
o during periods of market volatility; or
o when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
REDEMPTIONS FROM RETIREMENT ACCOUNTS
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
ACCOUNT AND SHARE INFORMATION
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
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 pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions cause the account balance to fall below
the minimum initial investment amount. Before an account is closed, you will be
notified and allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be primarily dividends. Redemptions are
taxable sales. Please consult your tax adviser regarding your federal, state,
and local tax liability.
WHO MANAGES THE FUND?
The Board of Directors governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 175 mutual
funds and separate accounts, which totaled approximately $111 billion in assets
as of December 31, 1998. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees.
More than 4,000 investment professionals make Federated Funds available to their
customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
YEAR 2000 READINESS
The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999 or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Fund, that rely on computers.
While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.
The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.
Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase. The financial impact of these issues for the Fund is still being
determined. There can be no assurance that potential Year 2000 problems would
not have a material adverse effect on the Fund.
LAST MEETING OF SHAREHOLDERS
(To be filed by amendment.)
FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
(Financial Statements to be filed by amendment.)
<PAGE>
TREASURY CASH SERIES
A Portfolio of Cash Trust Series, Inc.
A Statement of Additional Information (SAI) dated September 30, 1999, is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is contained in the Fund's Annual and Semi-Annual Reports to
shareholders as they become available. The Annual Report discusses market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year. To obtain the SAI, the Annual Report,
Semi-Annual Report and other information without charge, and make inquiries,
call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.
INVESTMENT COMPANY ACT FILE NO. 811-5843
CUSIP147551402
0010801A (9/99)
STATEMENT OF ADDITIONAL INFORMATION
TREASURY CASH SERIES
A Portfolio of Cash Trust Series, Inc.
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Treasury Cash Series (Fund), dated
September 30, 1999. This SAI incorporates by reference the Fund's Annual Report.
Obtain the prospectus or the Annual Report without charge by calling
1-800-341-7400.
september 30, 1999
CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Addresses
CUSIP 147551402
0010801B (9/99)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Cash Trust Series, Inc. (Corporation)].
The Corporation, an open-end, management investment company, was originally
organized as a Massachusetts business trust under the laws of the Commonwealth
of Massachusetts on May 16, 1989. It was reorganized under the laws of the State
of Maryland on February 1, 1993. The Corporation may offer separate series of
shares representing interests in separate portfolios of securities.
The Fund's investment adviser is Federated Investment Management Company
(Adviser). The Adviser, formerly known as Federated Advisers, changed its name
effective March 31, 1999.
SECURITIES IN WHICH THE FUND INVESTS
In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.
ZERO COUPON SECURITIES
Zero coupon securities do not pay interest or principal until final
maturity unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities at
a price below the amount payable at maturity. The difference between the
purchase price and the amount paid at maturity represents interest on the
zero coupon security. Investors must wait until maturity to receive
interest and principal, which increases the INTEREST RATE and CREDIT RISKS
of a zero coupon security.
There are many forms of zero coupon securities. Some are issued at a
discount and are referred to as zero coupon or capital appreciation bonds.
Others are created from interest bearing bonds by separating the right to
receive the bond's coupon payments from the right to receive the bond's
principal due at maturity, a process known as coupon stripping. In
addition, some securities give the issuer the option to deliver additional
securities in place of cash interest payments, thereby increasing the
amount payable at maturity. These are referred to as pay-in-kind or PIK
securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
SPECIAL TRANSACTIONS
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to CREDIT RISKS.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which the Fund
is the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to CREDIT risks. In addition, reverse
repurchase agreements create LEVERAGE RISKS because the Fund must
repurchase the underlying security at a higher price, regardless of the
market value of the security at the time of repurchase.
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with
payment and delivery of the securities scheduled for a future time. During
the period between purchase and settlement, no payment is made by the Fund
to the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value
in determining the price of its shares. Settlement dates may be a month or
more after entering into these transactions so that the market values of
the securities bought may vary from the purchase prices. Therefore, delayed
delivery transactions create INTEREST RATE RISKS for the Fund. Delayed
delivery transactions also involve CREDIT RISKS in the event of a
counterparty default.
ASSET COVERAGE
In order to secure its obligations in connection with special transactions,
the Fund will either own the underlying assets, enter into an offsetting
transaction or set aside readily marketable securities with a value that
equals or exceeds the Fund's obligations. Unless the Fund has other readily
marketable assets to set aside, it cannot trade assets used to secure such
obligations without entering into an offsetting transaction or terminating
the special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on special transactions.
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.
LEVERAGE RISKS
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
INVESTMENT LIMITATIONS
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the 1940 Act.
LENDING CASH OR SECURITIES
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
(The Fund has no present intention of engaging in securities lending.)
INVESTING IN COMMODITIES
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
UNDERWRITING
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
CONCENTRATION OF INVESTMENTS
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute 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; and securities of other investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.
THE ABOVE LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE BOARD AND BY
THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING SECURITIES," AS DEFINED BY THE
INVESTMENT COMPANY ACT. THE FOLLOWING LIMITATIONS, HOWEVER, MAY BE CHANGED BY
THE BOARD WITHOUT SHAREHOLDER APPROVAL. SHAREHOLDERS WILL BE NOTIFIED BEFORE ANY
MATERIAL CHANGE IN THESE LIMITATIONS BECOMES EFFECTIVE.
BUYING SECURITIES ON MARGIN
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
INVESTING IN ILLIQUID SECURITIES
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
INVESTING IN RESTRICTED SECURITIES
The Fund will not purchase or sell securities which are restricted as to resale
under federal securities law.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
In applying the Fund's concentration policy, (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities. To conform to the current view of the SEC staff that only domestic
bank instruments may be excluded from industry concentration limitations, the
Fund will not exclude foreign bank instruments from industry concentration tests
as long as the policy of the SEC remains in effect.
DETERMINING MARKET VALUE OF SECURITIES
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of the
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 Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into account
current market conditions and the 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 Trustees will decide what, if any, steps should be taken if there is
a difference of more than 0.5 of 1% between the two values. The Trustees will
take any steps they consider 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.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this 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. In particular, the Fund will comply
with the various requirements of the Rule which regulates money market mutual
funds. The Fund will determine the effective maturity of its investments
according to the Rule. The Fund may change these operational policies to reflect
changes in the laws and regulations without the approval of its shareholders.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
RULE 12B-1 PLAN
As a reimbursement-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.
The Fund reimburses the Distributor only for those payments made to investment
professionals up to the maximum Rule 12b-1 Plan fee. The Distributor may seek
reimbursement in following years for any unreimbursed expenses permitted under
the Plan. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.
The maximum Rule 12b-1 Plan fee that can be paid in any one year may not be
sufficient to cover the marketing-related expenses the Distributor has incurred.
Therefore, it may take the Distributor a number of years to recoup these
expenses.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
ACCOUNT AND SHARE 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 the Corporation
have equal voting rights, except that in matters affecting only a particular
Fund or class, only Shares of that Fund or class are entitled to vote.
Directors may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Corporation's outstanding
shares of all series entitled to vote.
As of ____, 1999, the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Shares: (to be filed by amendment).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Corporation's other portfolios will be separate from those realized by the Fund.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF DIRECTORS
The Board is responsible for managing the Corporation's business affairs and for
exercising all the Corporation's powers except those reserved for the
shareholders. Information about each Board member is provided below and includes
each person's: name, address, birth date, present position(s) held with the
Corporation, principal occupations for the past five years and positions held
prior to the past five years, total compensation received as a Director from the
Corporation for its most recent fiscal year, and the total compensation received
from the Federated Fund Complex for the most recent calendar year. The
Corporation is comprised of four funds and the Federated Fund Complex is
comprised of 54 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.
As of ____, 1999, the Fund's Board and Officers as a group owned less than 1% of
the Fund's outstanding Shares.
An asterisk (*) denotes a Director who is deemed to be an interested person as
defined in the Investment Company Act of 1940. A pound sign (#) denotes a Member
of the Board's Executive Committee, which handles the Board's responsibilities
between its meetings.
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
NAME AGGREGATE TOTAL
BIRTH DATE COMPENSATION COMPENSATION
ADDRESS FROM FROM CORPORATION
POSITION WITH PRINCIPAL OCCUPATIONS CORPORATION AND FUND COMPLEX
CORPORATION FOR PAST FIVE YEARS
<S> <C> <C> <C>
JOHN F. DONAHUE*+# Chief Executive Officer and Director or $0 $0 for the
Birth Date: July 28, Trustee of the Federated Fund Complex; Corporation and
1924 Chairman and Director, Federated Investors, 54 other investment
Federated Investors Inc.; Chairman and Trustee, Federated companies
Tower Investment Management Company; Chairman and in the Fund Complex
1001 Liberty Avenue Director, Federated Investment Counseling and
Pittsburgh, PA Federated Global Investment Management Corp.;
CHAIRMAN AND DIRECTOR Chairman, Passport Research, Ltd.
THOMAS G. BIGLEY Director or Trustee of the Federated Fund $4,751.12 $113,860.22 for the
Birth Date: February 3, Complex; Director, Member of Executive Corporation and
1934 Committee, Children's Hospital of Pittsburgh; 54 other investment
15 Old Timber Trail Director, Robroy Industries, Inc. (coated companies
Pittsburgh, PA steel wire/computer storage equipment); in the Fund Complex
DIRECTOR formerly: Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc. (physician
practice management); Director, Member of
Executive Committee, University of Pittsburgh.
JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $5,227.03 $125,264.48 for the
Birth Date: June 23, Complex; President, Investment Properties Corporation and
1937 Corporation; Senior Vice President, 54 other investment
Wood Commercial Dept. John R. Wood and Associates, Inc., Realtors; companies
John R. Wood Partner or Trustee in private real estate in the Fund Complex
Associates, Inc. ventures in Southwest Florida; formerly:
Realtors President, Naples Property Management, Inc.
3255 Tamiami Trail and Northgate Village Development Corporation.
North
Naples, FL
DIRECTOR
NICHOLAS CONSTANTAKIS Director or Trustee of the Federated Fund $4,751.22 $47,958.02for the
Birth Date: September Complex; formerly: Partner, Andersen Corporation and
3, 1939 Worldwide SC. 39 other investment
175 Woodshire Drive companies
Pittsburgh, PA in the Fund Complex
DIRECTOR
JOHN F. CUNNINGHAM Director or Trustee of some of the Federated $2,408.40 $0 for the
Birth Date: March 5, Fund Complex; Chairman, President and Chief Corporation and
1943 Executive Officer, Cunningham & Co., Inc. 40 other investment
353 El Brillo Way (strategic business consulting); Trustee companies
Palm Beach, FL Associate, Boston College; Director, EMC in the Fund Complex
DIRECTOR Corporation (computer storage systems);
formerly: Director, Redgate Communications.
Previous Positions: Chairman of the Board and
Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer,
Wang Laboratories; Director, First National
Bank of Boston; Director, Apollo Computer,
Inc.
LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $4,751.12 $113,860.22 for the
Birth Date: October 11, Complex; Professor of Medicine, University of Corporation and
1932 Pittsburgh; Medical Director, University of 54 other investment
3471 Fifth Avenue Pittsburgh Medical Center - Downtown; companies
Suite 1111 Hematologist, Oncologist, and Internist, in the Fund Complex
Pittsburgh, PA University of Pittsburgh Medical Center;
DIRECTOR Member, National Board of Trustees, Leukemia
Society of America.
PETER E. MADDEN Director or Trustee of the Federated Fund $4,209.51 $113,860.22 for the
Birth Date: March 16, Complex; formerly: Representative, Corporation and
1942 Commonwealth of Massachusetts General Court; 54 other investment
One Royal Palm Way President, State Street Bank and Trust companies
100 Royal Palm Way Company and State Street Corporation. in the Fund Complex
Palm Beach, FL
DIRECTOR Previous Positions: Director, VISA USA and
VISA International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.
CHARLES F. MANSFIELD, Director or Trustee of some of the Federated $2,408.40 $0 for the
JR. Fund Complex; Management Consultant. Corporation and
Birth Date: April 10, 43 other investment
1945 Previous Positions: Chief Executive Officer, companies
80 South Road PBTC International Bank; Partner, Arthur in the Fund Complex
Westhampton Beach, NY Young & Company (now Ernst & Young LLP);
DIRECTOR Chief Financial Officer of Retail Banking
Sector, Chase Manhattan Bank; Senior Vice
President, Marine Midland Bank; Vice
President, Citibank; Assistant Professor of
Banking and Finance, Frank G. Zarb School of
Business, Hofstra University.
JOHN E. MURRAY, JR., Director or Trustee of the Federated Fund $4,992.37 $113,860.22 for the
J.D., S.J.D.# Complex; President, Law Professor, Duquesne Corporation and
Birth Date: December University; Consulting Partner, Mollica & 54 other investment
20, 1932 Murray; Director, Michael Baker Corp. companies
President, Duquesne (engineering, construction, operations, and in the Fund Complex
University technical services).
Pittsburgh, PA
DIRECTOR Previous Positions: Dean and Professor of
Law, University of Pittsburgh School of Law;
Dean and Professor of Law, Villanova
University School of Law.
MARJORIE P. SMUTS Director or Trustee of the Federated Fund $4,751.12 $113,860.22 for the
Birth Date: June 21, Complex; Public Corporation and
1935 Relations/Marketing/Conference Planning. 54 other investment
4905 Bayard Street companies
Pittsburgh, PA Previous Positions: National Spokesperson, in the Fund Complex
DIRECTOR Aluminum Company of America; television
producer; business owner.
JOHN S. WALSH Director or Trustee of some of the Federated $2,408.40 $0 for the
Birth Date: November Fund Complex; President and Director, Heat Corporation and
28, 1957 Wagon, Inc. (manufacturer of construction 41 other investment
2007 Sherwood Drive temporary heaters); President and Director, companies
Valparaiso, IN Manufacturers Products, Inc. (distributor of in the Fund Complex
DIRECTOR portable construction heaters); President,
Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh
& Kelly, Inc. (heavy highway contractor);
formerly: Vice President, Walsh & Kelly, Inc.
J. CHRISTOPHER DONAHUE+* President or Executive Vice President of the $0 $0 for the
Birth Date: April 11, Federated Fund Complex; Director or Trustee Corporation and
1949 of some of the Funds in the Federated Fund 22 other investment
Federated Investors Complex; President and Director, Federated companies
Tower Investors, Inc.; President and Trustee, in the Fund Complex
1001 Liberty Avenue Federated Investment Management Company;
Pittsburgh, PA President and Director, Federated Investment
EXECUTIVE VICE Counseling and Federated Global Investment
PRESIDENT AND DIRECTOR Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director,
Federated Services Company.
<PAGE>
EDWARD C. GONZALES Trustee or Director of some of the Funds in $0 $0 for the
Birth Date: October 22, the Federated Fund Complex; President, Corporation and
1930 Executive Vice President and Treasurer of 1 other investment
Federated Investors some of the Funds in the Federated Fund company
Tower Complex; Vice Chairman, Federated Investors, in the Fund Complex
1001 Liberty Avenue Inc.; Vice President, Federated Investment
Pittsburgh, PA Management Company and Federated Investment
EXECUTIVE VICE PRESIDENT Counseling, Federated Global Investment
Management Corp. and Passport Research, Ltd.;
Executive Vice President and Director,
Federated Securities Corp.; Trustee,
Federated Shareholder Services Company.
JOHN W. MCGONIGLE Executive Vice President and Secretary of the $0 $0 for the
Birth Date: October 26, Federated Fund Complex; Executive Vice Corporation and
1938 President, Secretary, and Director, Federated 54 other investment
Federated Investors Investors, Inc.; Trustee, Federated companies
Tower Investment Management Company; Director, in the Fund Complex
1001 Liberty Avenue Federated Investment Counseling and Federated Pittsburgh, PA
Global Investment Management Corp.; Director, EXECUTIVE VICE Federated Services
Company; Director, PRESIDENT AND SECRETARY Federated Securities Corp.
RICHARD J. THOMAS Treasurer of the Federated Fund Complex; Vice $0 $0 for the
Birth Date: June 17, President - Funds Financial Services Corporation and
1954 Division, Federated Investors, Inc.; 54 other investment
Federated Investors formerly: various management positions within companies
Tower Funds Financial Services Division of in the Fund Complex
1001 Liberty Avenue Federated Investors, Inc.
Pittsburgh, PA
TREASURER
RICHARD B. FISHER President or Vice President of some of the $0 $0 for the
Birth Date: May 17, 1923 Funds in the Federated Fund Complex; Director Corporation and
Federated Investors or Trustee of some of the Funds in the 6 other investment
Tower Federated Fund Complex; Executive Vice companies
1001 Liberty Avenue President, Federated Investors, Inc.; in the Fund Complex
Pittsburgh, PA Chairman and Director, Federated Securities
PRESIDENT Corp.
WILLIAM D. DAWSON, III Chief Investment Officer of this Fund and $0 $0 for the
Birth Date: March 3, various other Funds in the Federated Fund Corporation and
1949 Complex; Executive Vice President, Federated 41 other investment
Federated Investors Investment Counseling, Federated Global companies
Tower Investment Management Corp., Federated in the Fund Complex
1001 Liberty Avenue Investment Management Company and Passport
Pittsburgh, PA Research, Ltd.; Registered Representative,
CHIEF INVESTMENT OFFICER Federated Securities Corp.; Portfolio
Manager, Federated Administrative Services; Vice
President, Federated Investors, Inc.; formerly:
Executive Vice President and Senior Vice President,
Federated Investment Counseling Institutional
Portfolio Management Services Division; Senior Vice
President, Federated Investment Management Company
and Passport Research, Ltd.
DEBORAH A. CUNNINGHAM Deborah A. Cunningham has been the Fund's $0 $0 for the
Birth Date: September portfolio manager since 1994. She is Vice Corporation and
15, 1959 President of the Corporation. Ms. Cunningham 6 other investment
Federated Investors joined Federated in 1981 and has been a companies
Tower Senior Portfolio Manager and a Senior Vice in the Fund Complex
1001 Liberty Avenue President of the Fund's Adviser since 1997.
Pittsburgh, PA Ms. Cunningham served as a Portfolio Manager
VICE PRESIDENT and a Vice President of the Adviser from 1993
until 1996. Ms. Cunningham is a Chartered
Financial Analyst and received her M.S.B.A.
in Finance from Robert Morris College.
MARY JO OCHSON Mary Jo Ochson is Vice President of the $0 $0 for the
Birth Date: September Corporation. Ms. Ochson joined Federated in Corporation and
12, 1953 1982 and has been a Senior Portfolio Manager 7 other investment
Federated Investors and a Senior Vice President of the Fund's companies
Tower Adviser since 1996. From 1988 through 1995, in the Fund Complex
1001 Liberty Avenue Ms. Ochson served as a Portfolio Manager and
Pittsburgh, PA a Vice President of the Fund's Adviser. Ms.
VICE PRESIDENT Ochson is a Chartered Financial Analyst and
received her M.B.A. in Finance from the
University of Pittsburgh.
</TABLE>
+ MR. DONAHUE IS THE FATHER OF J. CHRISTOPHER DONAHUE, EXECUTIVE VICE
PRESIDENT AND DIRECTOR OF THE CORPORATION.
++ MESSRS. CUNNINGHAM, MANSFIELD AND WALSH BECAME MEMBERS OF THE BOARD OF
DIRECTORS ON JANUARY 1, 1999. THEY DID NOT EARN ANY FEES FOR SERVING THE FUND
COMPLEX SINCE THESE FEES ARE REPORTED AS OF THE END OF THE LAST CALENDAR YEAR.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Corporation or any Fund shareholder for
any losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Corporation.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS OF THE FEDERATED
FEE FUNDS
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
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.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountant for the Fund, Deloitte & Touche LLP, plans and
performs their audit so that they may provide an opinion as to whether the
Fund's financial statements and financial highlights are free of material
misstatement.
FEES PAID BY THE FUND FOR SERVICES
FOR THE YEAR ENDED MAY 31,
1999 1998 1997
Advisory Fee Earned $___ $___ $___
Advisory Fee Reduction $___ $___ $___
Brokerage Commissions $___ $___ $___
Administrative Fee $___ $___ $___
12b-1 Fee $___ NA NA
Shareholder Services Fee $___ NA NA
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns given for the one-year, five-year and Start of Performance periods
ended May 31, 1999.
Yield and Effective Yield given for the 7-day period ended May 31, 1999.
7-DAY PERIOD 1 Year 5 Years Start of Performance
on February 7, 1990
Total Return NA __% __% __%
Yield __% NA NA NA
Effective Yield __% NA NA NA
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD AND EFFECTIVE YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o.......references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and
o information about the mutual fund industry from sources such as the Investment
Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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.
IBC/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.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
MUNICIPAL FUNDS
In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
EQUITY FUNDS
In the equity sector, Federated has more than 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
CORPORATE BOND FUNDS
In the corporate bond sector, as of December 31, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
GOVERNMENT FUNDS
In the government sector, as of December 31, 1998, Federated manages 9 mortgage
backed, 5 government/agency and 19 government money market mutual funds, with
assets approximating $5.3 billion, $1.8 billion and $41.6 billion, respectively.
Federated trades approximately $425 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.2 billion in government funds within these
maturity ranges.
MONEY MARKET FUNDS
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,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated
advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
INSTITUTIONAL CLIENTS
Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, 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 advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.
BANK MARKETING
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Sales Division, Federated Securities Corp.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended May 31, 1999 are
incorporated herein by reference to the Annual Report to Shareholders of
Treasury Cash Series dated May 31, 1999.
(To be filed by amendment.)
<PAGE>
42
ADDRESSES
TREASURY CASH SERIES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
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 Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
PROSPECTUS
GOVERNMENT CASH SERIES
A Portfolio of Cash Trust Series, Inc.
A money market mutual fund seeking current income consistent with stability of
principal and liquidity by investing primarily in a portfolio of U.S. Treasury
and government agency securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.
CONTENTS
Risk/Return Summary
What are the Fund's Fees and Expenses?
What are the Fund's Investment Strategies?
What are the Principal Securities in Which the Fund Invests?
What are the Specific Risks of Investing in the Fund?
What do Shares Cost?
How is the Fund Sold?
How to Purchase Shares
How to Redeem Shares
Account and Share Information
Who Manages the Fund?
Financial Information
September 30, 1999
<PAGE>
RISK/RETURN SUMMARY
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is current income consistent
with stability of principal and liquidity. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests primarily in a portfolio of U.S. Treasury and government agency
securities maturing in 397 days or less. These investments include repurchase
agreements collateralized fully by U.S. Treasury and government agency
securities. The dollar-weighted average maturity of the Fund's portfolio will be
90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund. 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.
<PAGE>
RISK/RETURN BAR CHART AND TABLE
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Government Cash Series as of the calendar year-end for
each of nine years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1.00% up to 8.00%.
The `x' axis represents calculation periods from the earliest first full
calendar year end of the Fund's start of business through the calendar year
ended December 31, 1998. The light gray shaded chart features nine distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Fund for each calendar year is
stated directly at the top of each respective bar, for the calendar years 1990
through 1998. The percentages noted are: 7.62%, 5.33%, 3.01%, 2.34%, 3.38%,
5.09%, 4.63%, 4.58% and 4.59%, respectively.
Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's total returns on a
calendar year-end
basis.
The Fund's shares are not sold subject to a sales charge (load). The total
returns displayed above are based upon net asset value.
The Fund's total return from January 1, 1999 to June 30, 1999 was 1.97%.
Within the period shown in the Chart, the Fund's highest quarterly return
was 2.09% (quarter ended December 31, 1989). Its lowest quarterly return was
0.57% (quarter ended June 30, 1993).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Fund's Average Annual Total Returns for the
calendar periods ending December 31, 1998.
CALENDAR PERIOD FUND
1 Year 4.59%
5 Years 4.45%
Start of 4.67
Performance1
1 THE FUND'S START OF PERFORMANCE DATE WAS AUGUST 15, 1989.
The Fund's 7-Day Net Yield as of December 31, 1998 was 4.09%. Investors may
call the Fund at 1-800-7400 to acquire the current 7-Day Net Yield.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
rewards.
<PAGE>
WHAT ARE THE FUND'S FEES AND EXPENSES?
GOVERNMENT CASH SERIES
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
SHAREHOLDER FEES
FEES PAID DIRECTLY FROM YOUR INVESTMENT
Maximum Sales Charge (Load) Imposed on Purchases (as a None
percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of None
original purchase price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and None
other Distributions) (as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if None
applicable)
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1 EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS (AS A PERCENTAGE OF AVERAGE NET ASSETS) Management Fee 2 0.50%
Distribution (12b-1) Fee 3 0.35% Shareholder Services Fee 0.25% Other Expenses
0.27% Total Annual Fund Operating Expenses 1.37% 1 Although not contractually
obligated to do so, the adviser and
distributor waived certain amounts. These are shown below along with the
net expenses the Fund ACTUALLY PAID for the fiscal year ended May 31,
1999.
Total Waivers of Fund Expenses 0.37%
Total Actual Annual Fund Operating Expenses (after waivers) 1.00%
2 The adviser voluntarily waived a portion of the management fee. The Adviser
can terminate this voluntary waiver at any time. The management fee paid by
the Fund's shares (after the voluntary waiver) was 0.38% for the fiscal year
ended May 31, 1999.
3 The distributor voluntarily waived a portion of the distribution fee. The
distributor can terminate this voluntary waiver at any time. The distribution
fee paid by the Fund's shares (after the voluntary waiver) was 0.10% for the
fiscal year ended May 31, 1999.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Shares for the time
periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Shares operating expenses are BEFORE WAIVERS as shown in the
table and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$139 $434 $750 $1,646
<PAGE>
WHAT ARE THE FUND'S INVESTMENT STRATEGIES?
The Fund invests at least 65% of its total assets in a portfolio of U.S.
Treasury and government agency securities maturing in 397 days or less. These
investments include repurchase agreements collateralized fully by U.S. Treasury
and government agency securities. The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
The adviser targets a dollar-weighted average portfolio maturity range based
upon its interest rate outlook. The adviser formulates its interest rate outlook
by analyzing a variety of factors, such as:
o.......current U.S. economic activity and the economic outlook,
o current short-term interest rates,
o the Federal Reserve Board's policies regarding short-term interest rates,
and
o the potential effects of foreign economic activity on U.S. short term
interest rates.
The adviser generally shortens the portfolio's dollar-weighted average maturity
when it expects interest rates to rise and extends the maturity when it expects
interest rates to fall. The adviser selects securities used to lengthen or
shorten the portfolio's dollar-weighted average maturity by comparing the
returns currently offered by different investments to their historical and
expected returns.
WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. The
following describes the types of fixed income securities in which the Fund
invests.
U.S. TREASURY SECURITIES
U.S. Treasury securities are direct obligations of the federal government
of the United States.
AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser. Repurchase agreements are subject
to credit risks.
WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
CREDIT RISKS
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
WHAT DO SHARES COST?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share.
The Fund does not charge a front-end sales charge. NAV is determined at
12:00 noon and 3:00 p.m. (Eastern time) and as of the end of regular trading
(normally 4:00 p.m.
Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. The minimum
subsequent investment is $500. The minimum initial investment for retirement
plans is $250. The minimum subsequent investment for retirement plans is $100.
An institutional investor's minimum investment is calculated by combining all
accounts it maintains with the Fund. Accounts established through investment
professionals may be subject to a smaller minimum investment amount. Keep in
mind that investment professionals may charge you fees for their services in
connection with your Share transactions.
HOW IS THE FUND SOLD?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to customers of financial institutions such as banks,
fiduciaries, custodians of public funds, investment advisers and broker/dealers
or individuals, directly or through investment professionals.
When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Shares. Because these Shares pay marketing fees
on an ongoing basis, your investment cost may be higher over time than other
shares with different sales charges and marketing fees.
HOW TO PURCHASE SHARES
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
o Establish an account with the investment professional; and
o Submit your purchase order to the investment professional before 3:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
o Establish your account with the Fund by submitting a completed New Account
Form; and
o Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees the Fund or its transfer agent incurs.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone other
than you or The Federated Funds).
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.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
RETIREMENT INVESTMENTS
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.
HOW TO REDEEM SHARES
You should redeem Shares:
o through an investment professional if you purchased Shares through an
investment professional; or
o directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund once you have completed the
appropriate authorization form for telephone transactions.
If you call before 3:00 p.m. (Eastern time) your redemption will be wired to you
the same day. You will not receive that day's dividend.
If you call after 3:00 p.m. (Eastern time) your redemption will be wired to you
the following business day. You will receive that day's dividend. Under limited
circumstances, arrangements may be made with the Distributor for same-day
payment of redemption proceeds, without that day's dividend, for redemption
requests received before 2:00 p.m. (Eastern time).
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317 All requests must include:
o Fund Name and Share Class, account number and account registration;
o amount to be redeemed; and
o signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES Signatures must be guaranteed if:
o your redemption will be sent to an address other than the address of
record;
o your redemption will be sent to an address of record that was changed
within the last 30 days; or
o a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
o an electronic transfer to your account at a financial institution that is
an ACH member; or
o wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
o to allow your purchase to clear;
o during periods of market volatility; or
o when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
REDEMPTIONS FROM RETIREMENT ACCOUNTS
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
ACCOUNT AND SHARE INFORMATION
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
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 pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions cause the account balance to fall below
the minimum initial investment amount. Before an account is closed, you will be
notified and allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be primarily dividends. Redemptions are
taxable sales. Please consult your tax adviser regarding your federal, state,
and local tax liability.
WHO MANAGES THE FUND?
The Board of Directors governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 175 mutual
funds and separate accounts, which totaled approximately $111 billion in assets
as of December 31, 1998. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees.
More than 4,000 investment professionals make Federated Funds available to their
customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the
Fund's average daily net assets. The Adviser may voluntarily waive a portion of
its fee or reimburse the Fund for certain operating expenses.
YEAR 2000 READINESS
The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999 or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Fund, that rely on computers.
While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.
The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.
Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase. The financial impact of these issues for the Fund is still being
determined. There can be no assurance that potential Year 2000 problems would
not have a material adverse effect on the Fund.
LAST MEETING OF SHAREHOLDERS
(To be filed by Amendment)
A Special Meeting of Corporation shareholders was held on XXX. On XXX the record
date for shareholders voting at the meeting, there were XXX total outstanding
shares. The following items were considered by shareholders and the results of
their voting were as follows:
ABSTENTIONS AND WITHHELD
FOR AGAINST BROKER NON-VOTES AUTHORITY TO
VOTE
1 THE FOLLOWING DIRECTORS OF THE FUND CONTINUED THEIR TERMS AS DIRECTOR OF THE
FUND:.
FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
(Financial information to be filed by Amendment)
<PAGE>
GOVERNMENT CASH SERIES
A Portfolio of Cash Trust Series, Inc.
A Statement of Additional Information (SAI) dated September 30, 1999 is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is contained in the Fund's Annual and Semi-Annual Reports to
shareholders as they become available. The Annual Report discusses market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year. To obtain the SAI, the Annual Report,
Semi-Annual Report and other information without charge, and make inquiries,
call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.
INVESTMENT COMPANY ACT FILE NO. 811-5843
CUSIP 147551204
9080103A (9/99)
STATEMENT OF ADDITIONAL INFORMATION
GOVERNMENT CASH SERIES
A Portfolio of Cash Trust Series, Inc.
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Government Cash Series (Fund), dated
September 30, 1999.
This SAI incorporates by reference the Fund's Annual Report. Obtain the
prospectus or the Annual Report without charge by calling 1-800-341-7400.
September 30, 1999
CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Addresses
CUSIP 147551204
9080103B (9/99)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Cash Trust Series, Inc. (Corporation).
The Corporation, an open-end, management investment company was originally
organized as a Massachusetts business trust under the laws of the Commonwealth
of Massachusetts on May 16, 1989. It was reorganized under the laws of the State
of Maryland on February 1, 1993. The Corporation may offer separate series of
shares representing interests in separate portfolios of securities.
The Fund's investment adviser is Federated Investment Management Company
(Adviser). The Adviser, formerly known as Federated Advisers, changed its name
effective March 31, 1999.
SECURITIES IN WHICH THE FUND INVESTS
In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Treasury Securities
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate and credit risks of a zero coupon security.
There are many forms of zero coupon securities. Some are issued at a discount
and are referred to as zero coupon or capital appreciation bonds. Others are
created from interest bearing bonds by separating the right to receive the
bond's coupon payments from the right to receive the bond's principal due at
maturity, a process known as coupon stripping. Treasury strips are the most
common form of stripped zero coupon security. In addition, some securities give
the issuer the option to deliver additional securities in place of cash interest
payments, thereby increasing the amount payable at maturity. These are referred
to as pay-in-kind or PIK securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
SPECIAL TRANSACTIONS
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve CREDIT RISKS
in the event of a counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions, the
Fund will either own the underlying assets, enter into an offsetting transaction
or set aside readily marketable securities with a value that equals or exceeds
the Fund's obligations. Unless the Fund has other readily marketable assets to
set aside, it cannot trade assets used to secure such obligations without
entering into an offsetting transaction or terminating the special transaction.
This may cause the Fund to miss favorable trading opportunities or to realize
losses on special transactions.
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.
LEVERAGE RISKS
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
INVESTMENT LIMITATIONS
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the 1940 Act.
LENDING CASH OR SECURITIES
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
INVESTING IN COMMODITIES
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
INVESTING IN REAL ESTATE
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner."
UNDERWRITING
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
CONCENTRATION OF INVESTMENTS
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute 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; and securities of other investment companies)
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 UNLESS AUTHORIZED BY THE BOARD OF
DIRECTORS (THE BOARD) AND BY THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING
SECURITIES," AS DEFINED BY THE INVESTMENT COMPANY ACT. THE FOLLOWING
LIMITATIONS, HOWEVER, MAY BE CHANGED BY THE BOARD WITHOUT SHAREHOLDER APPROVAL.
SHAREHOLDERS WILL BE NOTIFIED BEFORE ANY MATERIAL CHANGE IN THESE LIMITATIONS
BECOMES EFFECTIVE.
BUYING ON MARGIN
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
INVESTING IN ILLIQUID SECURITIES
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets. 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 association 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.
In applying the Fund's concentration restriction: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to end users of their
services, for example, automobile finance, bank finance and diversified finance
will each be considered a separate industry; and (c) asset-backed securities
will be classified according to the underlying assets securing such securities.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, as a matter
of non-fundamental policy, the Fund will not exclude foreign bank instruments
from industry concentration tests as long as the policy of the SEC remains in
effect.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this 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. In particular, the Fund will comply
with the various requirements of Rule 2a-7 (the "Rule"), which regulates money
market mutual funds. The Fund will determine the effective maturity of its
investments according to the Rule. The Fund may change these operational
policies to reflect changes in the laws and regulations without the approval of
its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of the
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 the Rule. Under the Rule, the
Trustees must establish procedures reasonably designed to stabilize the net
asset value per share, as computed for purposes of distribution and redemption,
at $1.00 per share, taking into account current market conditions and the 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 Trustees will decide what, if any,
steps should be taken if there is a difference of more than 0.5 of 1% between
the two values. The Trustees will take any steps they consider 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.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
RULE 12B-1 PLAN
As a reimbursement-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.
The Fund reimburses the Distributor only for those payments made to investment
professionals up to the maximum Rule 12b-1 Plan fee. The Distributor may seek
reimbursement in following years for any unreimbursed expenses permitted under
the Plan. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.
The maximum Rule 12b-1 Plan fee that can be paid in any one year may not be
sufficient to cover the marketing-related expenses the Distributor has incurred.
Therefore, it may take the Distributor a number of years to recoup these
expenses.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
ACCOUNT AND SHARE 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 the Corporation have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Director may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Corporation's outstanding
shares of all series entitled to vote.
As of XXXX, 1999 the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Shares: To be filed by Amendment
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Corporation's other portfolios will be separate from those realized by the Fund.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF DIRECTORS
The Board is responsible for managing the Corporation's business affairs and for
exercising all the Corporation's powers except those reserved for the
shareholders. Information about each Board member is provided below and includes
each person's: name, address, birth date, present position(s) held with the
Corporation, principal occupations for the past five years and positions held
prior to the past five years, total compensation received as a Director from the
Corporation for its most recent fiscal year, and the total compensation received
from the Federated Fund Complex for the most recent calendar year. The
Corporation is comprised of four funds and the Federated Fund Complex is
comprised of 54 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.
As of XXXX, 1999 the Fund's Board and Officers as a group owned less than 1% of
the Fund's outstanding Shares.
An asterisk (*) denotes a Director who is deemed to be an interested person as
defined in the Investment Company Act of 1940. A pound sign (#) denotes a Member
of the Board's Executive Committee, which handles the Board's responsibilities
between its meetings.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
NAME AGGREGATE TOTAL
BIRTH DATE COMPENSATION COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS FROM FROM CORPORATION
POSITION WITH FOR PAST FIVE YEARS CORPORATION AND FUND COMPLEX
CORPORATION
JOHN F. DONAHUE*+# Chief Executive Officer and Director or $0 $0 for the
Birth Date: July 28, Trustee of the Federated Fund Complex; Corporation and
1924 Chairman and Director, Federated Investors, 54 other investment
Federated Investors Inc.; Chairman and Trustee, Federated companies
Tower Investment Management Company; Chairman and in the Fund Complex
1001 Liberty Avenue Director, Federated Investment Counseling and
Pittsburgh, PA Federated Global Investment Management Corp.;
CHAIRMAN AND DIRECTOR Chairman, Passport Research, Ltd.
THOMAS G. BIGLEY Director or Trustee of the Federated Fund $4,751.12 $113,860.22 for the
Birth Date: February 3, Complex; Director, Member of Executive Corporation and
1934 Committee, Children's Hospital of Pittsburgh; 54 other investment
15 Old Timber Trail Director, Robroy Industries, Inc. (coated companies
Pittsburgh, PA steel conduits/computer storage equipment); in the Fund Complex
DIRECTOR formerly: Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc. (physician
practice management); Director, Member of
Executive Committee, University of Pittsburgh.
JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $5,227.03 $125,264.48 for the
Birth Date: June 23, Complex; President, Investment Properties Corporation and
1937 Corporation; Senior Vice President, 54 other investment
Wood/ Commercial Dept. John R. Wood and Associates, Inc., Realtors; companies
John R. Wood Partner or Trustee in private real estate in the Fund Complex
Associates, Inc. ventures in Southwest Florida; formerly:
Realtors President, Naples Property Management, Inc.
3255 Tamiami Trail and Northgate Village Development Corporation.
North
Naples, FL
DIRECTOR
NICHOLAS CONSTANTAKIS Director or Trustee of the Federated Fund $4,751.22 $47,958.02 for the
Birth Date: September Complex; formerly: Partner, Andersen Corporation and
3, 1939 Worldwide SC. 29 other investment
175 Woodshire Drive companies
Pittsburgh, PA in the Fund Complex
DIRECTOR
JOHN F. CUNNINGHAM Director or Trustee of some of the Federated $2,408.40 $0 for the
Birth Date: March 5, Fund Complex; Chairman, President and Chief Corporation and
1943 Executive Officer, Cunningham & Co., Inc. 40 other
353 El Brillo Way (strategic business consulting); Trustee investment
Palm Beach, FL Associate, Boston College; Director, EMC companies
DIRECTOR Corporation (computer storage systems); in the Fund Complex
formerly: Director, Redgate Communications.
Previous Positions: Chairman of the Board and
Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer,
Wang Laboratories; Director, First National
Bank of Boston; Director, Apollo Computer,
Inc.
LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $4,751.12 $113,860.22 for the
Birth Date: October 11, Complex; Professor of Medicine, University of Corporation and
1932 Pittsburgh; Medical Director, University of 54 other investment
3471 Fifth Avenue Pittsburgh Medical Center - Downtown; companies
Suite 1111 Hematologist, Oncologist, and Internist, in the Fund Complex
Pittsburgh, PA University of Pittsburgh Medical Center;
DIRECTOR Member, National Board of Trustees, Leukemia
Society of America.
PETER E. MADDEN Director or Trustee of the Federated Fund $4,209.51 $113,860.22 for the
Birth Date: March 16, Complex; formerly: Representative, Corporation and
1942 Commonwealth of Massachusetts General Court; 54 other investment
One Royal Palm Way President, State Street Bank and Trust companies
100 Royal Palm Way Company and State Street Corporation. in the Fund Complex
Palm Beach, FL
DIRECTOR Previous Positions: Director, VISA USA and
VISA International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.
CHARLES F. MANSFIELD, Director or Trustee of some of the Federated $2,408.31 $0 for the
JR. Fund Complex; Management Consultant. Corporation and
Birth Date: April 10, 43 other investment
1945 Previous Positions: Chief Executive Officer, companies
80 South Road PBTC International Bank; Partner, Arthur in the Fund Complex
Westhampton Beach, NY Young & Company (now Ernst & Young LLP);
DIRECTOR Chief Financial Officer of Retail Banking
Sector, Chase Manhattan Bank; Senior Vice
President, Marine Midland Bank; Vice
President, Citibank; Assistant Professor of
Banking and Finance, Frank G. Zarb School of
Business, Hofstra University.
JOHN E. MURRAY, JR., Director or Trustee of the Federated Fund $4,992.37 $113,860.22 for the
J.D., S.J.D.# Complex; President, Law Professor, Duquesne Corporation and
Birth Date: December University; Consulting Partner, Mollica & 54 other investment
20, 1932 Murray; Director, Michael Baker Corp. companies
President, Duquesne (engineering, construction, operations, and in the Fund Complex
University technical services).
Pittsburgh, PA
DIRECTOR Previous Positions: Dean and Professor of
Law, University of Pittsburgh School of Law;
Dean and Professor of Law, Villanova
University School of Law.
MARJORIE P. SMUTS Director or Trustee of the Federated Fund $4,751.12 $113,860.22 for the
Birth Date: June 21, Complex; Public Corporation and
1935 Relations/Marketing/Conference Planning. 54 other investment
4905 Bayard Street companies
Pittsburgh, PA Previous Positions: National Spokesperson, in the Fund Complex
DIRECTOR Aluminum Company of America; television
producer; business owner.
JOHN S. WALSH Director or Trustee of some of the Federated $2,408.40 $0 for the
Birth Date: November Fund Complex; President and Director, Heat Corporation and
28, 1957 Wagon, Inc. (manufacturer of construction 41 other
2007 Sherwood Drive temporary heaters); President and Director, investment
Valparaiso, IN Manufacturers Products, Inc. (distributor of companies
DIRECTOR portable construction heaters); President, in the Fund Complex
Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh
& Kelly, Inc. (heavy highway contractor);
formerly: Vice President, Walsh & Kelly, Inc.
J. CHRISTOPHER DONAHUE+* President or Executive Vice President of the $0 $0 for the
Birth Date: April 11, Federated Fund Complex; Director or Trustee Corporation and
1949 of some of the Funds in the Federated Fund 16 other investment
Federated Investors Complex; President and Director, Federated companies
Tower Investors, Inc.; President and Trustee, in the Fund Complex
1001 Liberty Avenue Federated Investment Management Company;
Pittsburgh, PA President and Director, Federated Investment
EXECUTIVE VICE Counseling and Federated Global Investment
PRESIDENT AND DIRECTOR Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director,
Federated Services Company.
<PAGE>
- ----------------------------
EDWARD C. GONZALES Trustee or Director of some of the Funds in $0 $0 for the
Birth Date: October the Federated Fund Complex; President, Corporation and
22, 1930 Executive Vice President and Treasurer of 1 other investment
Federated Investors some of the Funds in the Federated Fund company
Tower Complex; Vice Chairman, Federated Investors, in the Fund Complex
1001 Liberty Avenue Inc.; Vice President, Federated Investment
Pittsburgh, PA Management Company and Federated Investment
EXECUTIVE VICE PRESIDENT Counseling, Federated Global Investment
Management Corp. and Passport Research, Ltd.;
Executive Vice President and Director,
Federated Securities Corp.; Trustee,
Federated Shareholder Services Company.
JOHN W. MCGONIGLE Executive Vice President and Secretary of the $0 $0 for the
Birth Date: October 26, Federated Fund Complex; Executive Vice Corporation and
1938 President, Secretary, and Director, Federated 54 other investment
Federated Investors Investors, Inc.; Trustee, Federated companies
Tower Investment Management Company; Director, in the Fund Complex
1001 Liberty Avenue Federated Investment Counseling and Federated Pittsburgh, PA
Global Investment Management Corp.; Director, EXECUTIVE VICE Federated Services
Company; Director, PRESIDENT AND SECRETARY Federated Securities Corp.
RICHARD J. THOMAS Treasurer of the Federated Fund Complex; Vice $0 $0 for the
Birth Date: June 17, President - Funds Financial Services Corporation and
1954 Division, Federated Investors, Inc.; 54 other investment
Federated Investors formerly: various management positions within companies
Tower Funds Financial Services Division of in the Fund Complex
1001 Liberty Avenue Federated Investors, Inc.
Pittsburgh, PA
TREASURER
RICHARD B. FISHER President or Vice President of some of the $0 $0 for the
Birth Date: May 17, 1923 Funds in the Federated Fund Complex; Director Corporation and
Federated Investors or Trustee of some of the Funds in the 6 other investment
Tower Federated Fund Complex; Executive Vice companies
1001 Liberty Avenue President, Federated Investors, Inc.; in the Fund Complex
Pittsburgh, PA Chairman and Director, Federated Securities
PRESIDENT Corp.
WILLIAM D. DAWSON, III Chief Investment Officer of this Fund and $0 $0 for the
Birth Date: March 3, various other Funds in the Federated Fund Corporation and
1949 Complex; Executive Vice President, Federated 41 other investment
Federated Investors Investment Counseling, Federated Global companies
Tower Investment Management Corp., Federated in the Fund Complex
1001 Liberty Avenue Investment Management Company and Passport
Pittsburgh, PA Research, Ltd.; Registered Representative,
CHIEF INVESTMENT OFFICER Federated Securities Corp.; Portfolio
Manager, Federated Administrative Services; Vice
President, Federated Investors, Inc.; formerly:
Executive Vice President and Senior Vice President,
Federated Investment Counseling Institutional
Portfolio Management Services Division; Senior Vice
President, Federated Investment Management Company
and Passport Research, Ltd.
DEBORAH A. CUNNINGHAM Deborah A. Cunningham has been the Fund's $0 $0 for the
Birth Date: September portfolio manager since August 1989. She is Corporation and
15, 1959 Vice President of the Corporation. Ms. 6 other investment
Federated Investors Cunningham joined Federated in 1981 and has companies
Tower been a Senior Portfolio Manager and a Senior in the Fund Complex
1001 Liberty Avenue Vice President of the Fund's Adviser since
Pittsburgh, PA 1997. Ms. Cunningham served as a Portfolio
VICE PRESIDENT Manager and a Vice President of the Adviser
from 1993 until 1996. Ms. Cunningham is a
Chartered Financial Analyst and received her
M.S.B.A. in Finance from Robert Morris
College.
MARY JO OCHSON Mary Jo Ochson is Vice President of the $0 $0 for the
Birth Date: September Corporation. Ms. Ochson joined Federated in Corporation and
12, 1953 1982 and has been a Senior Portfolio Manager 7 other investment
Federated Investors and a Senior Vice President of the Fund's companies
Tower Adviser since 1996. From 1988 through 1995, in the Fund Complex
1001 Liberty Avenue Ms. Ochson served as a Portfolio Manager and
Pittsburgh, PA a Vice President of the Fund's Adviser. Ms.
VICE PRESIDENT Ochson is a Chartered Financial Analyst and
received her M.B.A. in Finance from the
University of Pittsburgh.
</TABLE>
+ MR. DONAHUE IS THE FATHER OF J. CHRISTOPHER DONAHUE, EXECUTIVE VICE
PRESIDENT AND DIRECTOR OF THE CORPORATION.
++ MESSRS. CUNNINGHAM, MANSFIELD AND WALSH BECAME MEMBERS OF THE BOARD OF
DIRECTORS ON JANUARY 1, 1999. THEY DID NOT EARN ANY FEES FOR SERVING THE FUND
COMPLEX SINCE THESE FEES ARE REPORTED AS OF THE END OF THE LAST CALENDAR.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Corporation or any Fund shareholder for
any losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Corporation.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS OF THE FEDERATED
FEE FUNDS
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio. Federated Services Company may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountant for the Fund, Deloitte & Touche LLP, plans and
performs their audit so that they may provide an opinion as to whether the
Fund's financial statements and financial highlights are free of material
misstatement.
<PAGE>
FEES PAID BY THE FUND FOR SERVICES
FOR THE YEAR ENDED MAY 31,
1999 1998 1997
Advisory Fee Earned $ $2,817,822 $2,761,277
Advisory Fee Reduction $ $485,748 $533,592
Administrative Fee $ $425,199 $417,215
12b-1 Fee $ -- --
Shareholder Services Fee $ -- --
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns given for the one-year, five-year and Start of Performance periods
ended May 31, 1999
Yield and Effective Yield given for the 7-day period ended May 31, 1999.
7 DAY PERIOD 1 Year 5 Years Start of Performance
on 8/23/89
Total Return
Yield
Effective Yield
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o.......references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and
o information about the mutual fund industry from sources such as the Investment
Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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.
IBC/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.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
MUNICIPAL FUNDS
In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
EQUITY FUNDS
In the equity sector, Federated has more than 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
CORPORATE BOND FUNDS
In the corporate bond sector, as of December 31, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
GOVERNMENT FUNDS
In the government sector, as of December 31, 1998, Federated managed 9 mortgage
backed, 5 government/agency and 19 government money market mutual funds, with
assets approximating $5.3 billion, $1.8 billion and $41.6 billion, respectively.
Federated trades approximately $425 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.2 billion in government funds within these
maturity ranges.
MONEY MARKET FUNDS
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,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated
advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
INSTITUTIONAL CLIENTS
Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, 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 advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.
BANK MARKETING
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Sales Division, Federated Securities Corp.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended May 31, 1999 are
incorporated herein by reference to the Annual Report to Shareholders of
Government Cash Series dated May 31, 1999.
(Financial information to be filed by Amendment)
<PAGE>
72
ADDRESSES
GOVERNMENT CASH SERIES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
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 Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
PROSPECTUS
PRIME CASH SERIES
A Portfolio of Cash Trust Series, Inc.
A money market mutual fund seeking current income consistent with stability of
principal and liquidity by investing in fixed income securities maturing in 397
days or less.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.
CONTENTS
Risk/Return Summary
What are the Fund's Fees and Expenses?
What are the Fund's Investment Strategies?
What are the Principal Securities in Which the Fund Invests?
What are the Specific Risks of Investing in the Fund?
What do Shares Cost?
How is the Fund Sold?
How to Purchase Shares
How to Redeem Shares
Account and Share Information
Who Manages the Fund?
Financial Information
September 30, 1999
<PAGE>
RISK/RETURN SUMMARY
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund which seeks to maintain a stable net asset value
of $1.00. The Fund's investment objective is current income consistent with
stability of principal and liquidity. While there is no assurance that the Fund
will achieve its investment objective, it endeavors to do so by following the
strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in a portfolio of high quality fixed income securities
maturing in 397 days or less. The average maturity of the fund's portfolio will
be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund. 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.
<PAGE>
RISK/RETURN BAR CHART AND TABLE
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Prime Cash Series as of the calendar year-end for each
of nine years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1.00% up to 8.00%.
The `x' axis represents calculation periods from the earliest first full
calendar year end of the Fund's start of business through the calendar year
ended December 31, 1998. The light gray shaded chart features nine distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Fund for each calendar year is
stated directly at the top of each respective bar, for the calendar years 1991
through 1998. The percentages noted are: 7.74%, 5.47%, 3.06%, 2.38%, 3.48%,
5.20%, 4.63%, 4.77% and 4.73%, respectively.
Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's total returns on a
calendar year-end basis.
The Fund's shares are not sold subject to a sales charge (load). The total
returns displayed above are based upon net asset value.
The Fund's total return from January 1, 1999 to June 30, 1999 was 2.05%.
Within the period shown in the Chart, the Fund's highest quarterly return
was 2.09% (quarter ended December 31, 1989). Its lowest quarterly return was
0.58% (quarters ended June 30, 1993 and September 30, 1993).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Fund's Average Annual Total Returns for the
calendar periods ending December 31, 1998.
CALENDAR PERIOD FUND
1 Year 4.73%
5 Years 4.56%
Start of 4.76%
Performance1
1 THE FUND'S START OF PERFORMANCE DATE WAS AUGUST 15, 1989.
The Fund's 7-Day Net Yield as of December 31, 1998 was 4.37%. Investors may call
the Fund at 1-800-7400 to acquire the current 7-Day Net Yield.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
rewards.
<PAGE>
WHAT ARE THE FUND'S FEES AND EXPENSES?
PRIME CASH SERIES
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
SHAREHOLDER FEES
FEES PAID DIRECTLY FROM YOUR INVESTMENT
Maximum Sales Charge (Load) Imposed on Purchases (as a None
percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of None
original purchase price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and None
other Distributions) (as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if None
applicable)
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1 EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS (AS A PERCENTAGE OF AVERAGE NET ASSETS) Management Fee 2 0.50%
Distribution (12b-1) Fee 3 0.35% Shareholder Services Fee 0.25% Other Expenses
0.31% Total Annual Fund Operating Expenses 1.41% 1 Although not contractually
obligated to do so, the adviser and
distributor waived certain amounts. These are shown below along with the
net expenses the Fund ACTUALLY PAID for the fiscal year ended May 31,
1999.
Total Waivers of Fund Expenses 0.41%
Total Actual Annual Fund Operating Expenses (after waivers) 1.00%
2 The adviser voluntarily waived a portion of the management fee. The adviser
can terminate this voluntary waiver at any time. The management fee paid by
the Fund's shares (after the voluntary waiver) was 0.34% for the year ended
May 31, 1999.
3 The distributor voluntarily waived a portion of the distribution fee. The
distributor can terminate this voluntary waiver at any time. The distribution
fee paid by the Fund's shares (after the voluntary waiver) was 0.10% for the
fiscal year ended May 31, 1999.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Shares for the time
periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Shares operating expenses are BEFORE WAIVERS as shown in the
table and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$144 $446 $771 $1,691
<PAGE>
WHAT ARE THE FUND'S INVESTMENT STRATEGIES?
The Fund invests in a portfolio of high-quality fixed income securities maturing
in 397 days or less. The average maturity of the Fund's portfolio is 90 days or
less. The Fund's investment adviser (Adviser) actively manages the fund's
portfolio, seeking to limit the credit risk taken by the Fund and provide
enhanced returns.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized rating services.
The Adviser targets an average portfolio maturity based upon its interest rate
outlook. The Adviser formulates its interest rate outlook by analyzing a variety
of factors such as current and expected U.S. economic growth; current and
expected interest rates and inflation; and the Federal Reserve's monetary
policy. The Adviser structures the portfolio by investing primarily in variable
rate demand instruments and commercial paper to achieve a limited barbell
structure. The Adviser generally shortens the portfolio's maturity when it
expects interest rates to rise and extends the maturity when it expects interest
rates to fall. This strategy seeks to enhance the returns from favorable
interest rate changes and reduce the effect of unfavorable changes.
WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. The
following describes the types of fixed income securities in which the Fund
invests.
CORPORATE DEBT SECURITIES
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default.
DEMAND INSTRUMENTS
Demand instruments are corporate debt securities that the issuer must repay upon
demand. Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The Fund treats
demand instruments as short-term securities, even though their stated maturity
may extend beyond one year.
BANK INSTRUMENTS
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances.
ASSET BACKED SECURITIES
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed income
assets (including other fixed income securities) may be used to create an asset
backed security. Asset backed securities may take the form of commercial paper,
notes, or pass through certificates.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser. Repurchase agreements are subject
to credit risks.
INVESTMENT RATINGS
The Fund invests in high quality fixed income instruments that are either rated
in one of the two highest short-term rating categories by one or more nationally
recognized statistical rating organizations or are of comparable quality to
securities having such ratings.
WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investors Services, Inc. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not received
a rating, the Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities credit
enhanced by banks or companies with similar characteristics. As a result, the
Fund will be more susceptible to any economic, business, political or other
developments which generally affect these entities.
WHAT DO SHARES COST?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share.
The Fund does not charge a front-end sales charge. NAV is determined at
12:00 noon and 3:00 p.m. (Eastern time) and as of the end of regular trading
(normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. The minimum
subsequent investment is $500. The minimum initial investment for retirement
plans is $250. The minimum subsequent investment for retirement plans is $100.
An institutional investor's minimum investment is calculated by combining all
accounts it maintains with the Fund. Accounts established through investment
professionals may be subject to a smaller minimum investment amount. Keep in
mind that investment professionals may charge you fees for their services in
connection with your Share transactions.
HOW IS THE FUND SOLD?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to customers of financial institutions such as banks,
fiduciaries, custodians of public funds, investment advisers and broker/dealers
or individuals, directly or through investment professionals.
When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Shares. Because these Shares pay marketing fees
on an ongoing basis, your investment cost may be higher over time than other
shares with different sales charges and marketing fees.
HOW TO PURCHASE SHARES
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
o.......Establish an account with the investment professional; and
o Submit your purchase order to the investment professional before 3:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
o Establish your account with the Fund by submitting a completed New Account
Form; and
o Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees the Fund or its transfer agent incurs.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone other
than you or The Federated Funds).
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.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
RETIREMENT INVESTMENTS
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.
HOW TO REDEEM SHARES
You should redeem Shares:
o through an investment professional if you purchased Shares through an
investment professional; or
o directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund once you have completed the
appropriate authorization form for telephone transactions.
If you call before 3:00 p.m. (Eastern time) your redemption will be wired to you
the same day. You will not receive that day's dividend.
If you call after 3:00 p.m. (Eastern time) your redemption will be wired to you
the following business day. You will receive that day's dividend. Under limited
circumstances, arrangements may be made with the Distributor for same-day
payment of redemption proceeds, without that day's dividend, for redemption
requests received before 2:00 p.m. (Eastern time).
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317 All requests must include:
o Fund Name and Share Class, account number and account registration;
o amount to be redeemed; and
o signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES Signatures must be guaranteed if:
o your redemption will be sent to an address other than the address of
record;
o your redemption will be sent to an address of record that was changed
within the last 30 days; or
o a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
o an electronic transfer to your account at a financial institution that is
an ACH member; or
o wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
o to allow your purchase to clear;
o during periods of market volatility; or
o when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
REDEMPTIONS FROM RETIREMENT ACCOUNTS
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
ACCOUNT AND SHARE INFORMATION
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
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 pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions cause the account balance to fall below
the minimum initial investment amount. Before an account is closed, you will be
notified and allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be primarily dividends. Redemptions are
taxable sales. Please consult your tax adviser regarding your federal, state,
and local tax liability.
WHO MANAGES THE FUND?
The Board of Directors governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 175 mutual
funds and separate accounts, which totaled approximately $111 billion in assets
as of December 31, 1998. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees.
More than 4,000 investment professionals make Federated Funds available to their
customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the
Fund's average daily net assets. The Adviser may voluntarily waive a portion of
its fee or reimburse the Fund for certain operating expenses.
YEAR 2000 READINESS
The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999 or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Fund, that rely on computers.
While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.
The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.
Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase. The financial impact of these issues for the Fund is still being
determined. There can be no assurance that potential Year 2000 problems would
not have a material adverse effect on the Fund.
LAST MEETING OF SHAREHOLDERS
(To be filed by Amendment)
A Special Meeting of Corporation shareholders was held on XXX. On XXX the record
date for shareholders voting at the meeting, there were XXX total outstanding
shares. The following items were considered by shareholders and the results of
their voting were as follows:
ABSTENTIONS AND WITHHELD
FOR AGAINST BROKER NON-VOTES AUTHORITY TO
VOTE
1 THE FOLLOWING DIRECTORS OF THE FUND CONTINUED THEIR TERMS AS DIRECTOR OF THE
FUND:.
FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
(Financial information to be filed by Amendment)
<PAGE>
PRIME CASH SERIES
A Portfolio of Cash Trust Series, Inc.
A Statement of Additional Information (SAI) dated September 30, 1999 is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is contained in the Fund's Annual and Semi-Annual Reports to
shareholders as they become available. The Annual Report discusses market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year. To obtain the SAI, the Annual Report,
Semi-Annual Report and other information without charge, and make inquiries,
call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.
INVESTMENT COMPANY ACT FILE NO. 811-5843
CUSIP 147551105
9080101A (9/99)
STATEMENT OF ADDITIONAL INFORMATION
PRIME CASH SERIES
A Portfolio of Cash Trust Series, Inc.
This Statement of Additional Information (SAI) is not a prospectus. Read
this SAI in conjunction with the prospectus for Prime Cash Series (Fund), dated
September 30, 1999.
This SAI incorporates by reference the Fund's Annual Report. Obtain the
prospectus or the Annual Report without charge by calling 1-800-341-7400.
September 30, 1999
CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Addresses
CUSIP 147551105
9080101B (9/99)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Cash Trust Series, Inc. (Corporation).
The Corporation, an open-end, management investment company was originally
organized as a Massachusetts business trust under the laws of the Commonwealth
of Massachusetts on May 16, 1989. It was reorganized under the laws of the State
of Maryland on February 1, 1993. The Corporation may offer separate series of
shares representing interests in separate portfolios of securities.
The Fund's investment adviser is Federated Investment Management Company
(Adviser). The Adviser, formerly known as Federated Advisers, changed its name
effective March 31, 1999.
SECURITIES IN WHICH THE FUND INVESTS
In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Treasury Securities
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies. The credit risks of corporate debt securities vary widely among
issuers.
In addition, the credit risk of an issuer's debt security may vary based on its
priority for repayment. For example, higher ranking (senior) debt securities
have a higher priority than lower ranking (subordinated) securities. This means
that the issuer might not make payments on subordinated securities while
continuing to make payments on senior securities. In addition, in the event of
bankruptcy, holders of senior securities may receive amounts otherwise payable
to the holders of subordinated securities. Some subordinated securities, such as
trust preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue
securities known as surplus notes that permit the insurance company to defer any
payment that would reduce its capital below regulatory requirements.
<PAGE>
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default.
Demand Instruments
Demand instruments are corporate debt securities that the issuer must repay upon
demand. Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The Fund treats
demand instruments as short-term securities, even though their stated maturity
may extend beyond one year.
Municipal Securities
Municipal securities are issued by states, counties, cities and other political
subdivisions and authorities. Although many municipal securities are exempt from
federal income tax, the Fund may invest in taxable municipal securities.
Asset Backed Securities
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed income
assets (including other fixed income securities) may be used to create an asset
backed security. Asset backed securities may take the form of commercial paper,
notes, or pass through certificates.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the market and credit risks of a zero coupon security.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Yankee instruments are denominated in U.S. dollars and
issued by U.S. branches of foreign banks. Eurodollar instruments are denominated
in U.S. dollars and issued by non-U.S. branches of U.S. or foreign banks.
Insurance Contracts
Insurance contracts include guaranteed investment contracts, funding agreements
and annuities. The Fund treats these contracts as fixed income securities.
Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
FOREIGN SECURITIES
Foreign securities are securities of issuers based outside the United States.
The Fund considers an issuer to be based outside the United States if:
o it is organized under the laws of, or has a principal office located in,
another country;
o the principal trading market for its securities is in another country; or
o it (or its subsidiaries) derived in its most current fiscal year at least
50% of its total assets, capitalization, gross revenue or profit from goods
produced, services performed, or sales made in another country.
Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
SPECIAL TRANSACTIONS
SECURITIES LENDING
The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.
The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.
Loans are subject to termination at the option of the Fund or the borrower. The
Fund will not have the right to vote on securities while they are on loan, but
it will terminate a loan in anticipation of any important vote. The Fund may pay
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.
Securities lending activities are subject to interest rate risks and credit
risks.
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve CREDIT RISKS
in the event of a counterparty default.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
ASSET COVERAGE
In order to secure its obligations in connection with special transactions, the
Fund will either own the underlying assets, enter into an offsetting transaction
or set aside readily marketable securities with a value that equals or exceeds
the Fund's obligations. Unless the Fund has other readily marketable assets to
set aside, it cannot trade assets used to secure such obligations without
entering into an offsetting transaction or terminating the special transaction.
This may cause the Fund to miss favorable trading opportunities or to realize
losses on special transactions.
INVESTMENT RATINGS
A nationally recognized statistical rating organization's ("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
("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 IBCA, 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."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
CREDIT RISKS
Fixed income securities generally compensate for greater credit risk by paying
interest at a higher rate. The difference between the yield of a security and
the yield of a U.S. Treasury security with a comparable maturity (the spread)
measures the additional interest paid for risk. Spreads may increase generally
in response to adverse economic or market conditions. A security's spread may
also increase if the security's rating is lowered, or the security is perceived
to have an increased credit risk. An increase in the spread will cause the price
of the security to decline.
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
LEVERAGE RISKS
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
CURRENCY RISKS
Exchange rates for currencies fluctuate daily. The combination of currency risk
and market risks tends to make securities traded in foreign markets more
volatile than securities traded exclusively in the U.S.
RISKS OF FOREIGN INVESTING
Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable than those of the United States. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors.
INVESTMENT LIMITATIONS
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the 1940 Act.
LENDING CASH OR SECURITIES
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
INVESTING IN COMMODITIES
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
<PAGE>
INVESTING IN REAL ESTATE
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
UNDERWRITING
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
CONCENTRATION OF INVESTMENTS
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
THE ABOVE LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE BOARD OF
DIRECTORS (THE BOARD) AND BY THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING
SECURITIES," AS DEFINED BY THE INVESTMENT COMPANY ACT. THE FOLLOWING
LIMITATIONS, HOWEVER, MAY BE CHANGED BY THE BOARD WITHOUT SHAREHOLDER APPROVAL.
SHAREHOLDERS WILL BE NOTIFIED BEFORE ANY MATERIAL CHANGE IN THESE LIMITATIONS
BECOMES EFFECTIVE.
BUYING ON MARGIN
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
INVESTING IN ILLIQUID SECURITIES
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result , the value of
such securities would exceed, in the aggregate 10% of the Fund's net assets.
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 association 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.
In applying the Fund's concentration restriction: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to end users of their
services, for example, automobile finance, bank finance and diversified finance
will each be considered a separate industry; and (c) asset-backed securities
will be classified according to the underlying assets securing such securities.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, as a matter
of non-fundamental policy, the Fund will not exclude foreign bank instruments
from industry concentration tests as long as the policy of the SEC remains in
effect.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this 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. In particular, the Fund will comply
with the various requirements of Rule 2a-7 (the "Rule"), which regulates money
market mutual funds. For example, with limited exceptions, the Rule 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 the Rule. 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 the Rule. The Fund may
change these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of the
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 the Rule. Under the Rule,
the Trustees must establish procedures reasonably designed to stabilize the net
asset value per share, as computed for purposes of distribution and redemption,
at $1.00 per share, taking into account current market conditions and the 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 Trustees will decide what, if any,
steps should be taken if there is a difference of more than 0.5 of 1% between
the two values. The Trustees will take any steps they consider 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.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
RULE 12B-1 PLAN
As a reimbursement-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.
The Fund reimburses the Distributor only for those payments made to investment
professionals up to the maximum Rule 12b-1 Plan fee. The Distributor may seek
reimbursement in following years for any unreimbursed expenses permitted under
the Plan. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.
The maximum Rule 12b-1 Plan fee that can be paid in any one year may not be
sufficient to cover the marketing-related expenses the Distributor has incurred.
Therefore, it may take the Distributor a number of years to recoup these
expenses.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
ACCOUNT AND SHARE 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 the Corporation have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Director may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Corporation's outstanding
shares of all series entitled to vote.
As of XXXX, 1999 the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Shares: To be filed by Amendment
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Corporation's other portfolios will be separate from those realized by the Fund.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF DIRECTORS
The Board is responsible for managing the Corporation's business affairs and for
exercising all the Corporation's powers except those reserved for the
shareholders. Information about each Board member is provided below and includes
each person's: name, address, birth date, present position(s) held with the
Corporation, principal occupations for the past five years and positions held
prior to the past five years, total compensation received as a Director from the
Corporation for its most recent fiscal year, and the total compensation received
from the Federated Fund Complex for the most recent calendar year. The
Corporation is comprised of four funds and the Federated Fund Complex is
comprised of 54 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.
As of XXXX, 1999 the Fund's Board and Officers as a group owned less than 1% of
the Fund's outstanding Shares.
An asterisk (*) denotes a Director who is deemed to be an interested person as
defined in the Investment Company Act of 1940. A pound sign (#) denotes a Member
of the Board's Executive Committee, which handles the Board's responsibilities
between its meetings.
<PAGE>
<TABLE>
<CAPTION>
NAME AGGREGATE TOTAL
BIRTH DATE COMPENSATION COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS FROM FROM CORPORATION
POSITION WITH FOR PAST FIVE YEARS CORPORATION AND FUND COMPLEX
CORPORATION
<S> <C> <C> <C>
JOHN F. DONAHUE*+# Chief Executive Officer and Director or $0 $0 for the
Birth Date: July 28, Trustee of the Federated Fund Complex; Corporation and
1924 Chairman and Director, Federated Investors, 54 other investment
Federated Investors Inc.; Chairman and Trustee, Federated companies
Tower Investment Management Company; Chairman and in the Fund Complex
1001 Liberty Avenue Director, Federated Investment Counseling and
Pittsburgh, PA Federated Global Investment Management Corp.;
CHAIRMAN AND DIRECTOR Chairman, Passport Research, Ltd.
THOMAS G. BIGLEY Director or Trustee of the Federated Fund $4,751.12 $113,860.22 for the
Birth Date: February 3, Complex; Director, Member of Executive Corporation and
1934 Committee, Children's Hospital of Pittsburgh; 54 other investment
15 Old Timber Trail Director, Robroy Industries, Inc. (coated companies
Pittsburgh, PA steel conduits/computer storage equipment); in the Fund Complex
DIRECTOR formerly: Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc. (physician
practice management); Director, Member of
Executive Committee, University of Pittsburgh.
JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $5,227.03 $125,264.48 for the
Birth Date: June 23, Complex; President, Investment Properties Corporation and
1937 Corporation; Senior Vice President, 54 other investment
Wood/ Commercial Dept. John R. Wood and Associates, Inc., Realtors; companies
John R. Wood Partner or Trustee in private real estate in the Fund Complex
Associates, Inc. ventures in Southwest Florida; formerly:
Realtors President, Naples Property Management, Inc.
3255 Tamiami Trail and Northgate Village Development Corporation.
North
Naples, FL
DIRECTOR
NICHOLAS CONSTANTAKIS Director or Trustee of the Federated Fund $4,751.22 $47,958.02 for the
Birth Date: September Complex; formerly: Partner, Andersen Corporation and
3, 1939 Worldwide SC. 29 other investment
175 Woodshire Drive companies
Pittsburgh, PA in the Fund Complex
DIRECTOR
JOHN F. CUNNINGHAM Director or Trustee of some of the Federated $2,408.40 $0 for the
Birth Date: March 5, Fund Complex; Chairman, President and Chief Corporation and
1943 Executive Officer, Cunningham & Co., Inc. 40 other investment
353 El Brillo Way (strategic business consulting); Trustee companies
Palm Beach, FL Associate, Boston College; Director, EMC in the Fund Complex
DIRECTOR Corporation (computer storage systems);
formerly: Director, Redgate Communications.
Previous Positions: Chairman of the Board and
Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer,
Wang Laboratories; Director, First National
Bank of Boston; Director, Apollo Computer,
Inc.
LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $4,751.12 $113,860.22 for the
Birth Date: October 11, Complex; Professor of Medicine, University of Corporation and
1932 Pittsburgh; Medical Director, University of 54 other investment
3471 Fifth Avenue Pittsburgh Medical Center - Downtown; companies
Suite 1111 Hematologist, Oncologist, and Internist, in the Fund Complex
Pittsburgh, PA University of Pittsburgh Medical Center;
DIRECTOR Member, National Board of Trustees, Leukemia
Society of America.
PETER E. MADDEN Director or Trustee of the Federated Fund $4,209.51 $113,860.22 for the
Birth Date: March 16, Complex; formerly: Representative, Corporation and
1942 Commonwealth of Massachusetts General Court; 54 other investment
One Royal Palm Way President, State Street Bank and Trust companies
100 Royal Palm Way Company and State Street Corporation. in the Fund Complex
Palm Beach, FL
DIRECTOR Previous Positions: Director, VISA USA and
VISA International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.
CHARLES F. MANSFIELD, Director or Trustee of some of the Federated $2,408.31 $0 for the
JR. Fund Complex; Management Consultant. Corporation and
Birth Date: April 10, 43 other
1945 Previous Positions: Chief Executive Officer, investment
80 South Road PBTC International Bank; Partner, Arthur companies
Westhampton Beach, NY Young & Company (now Ernst & Young LLP); in the Fund Complex
DIRECTOR Chief Financial Officer of Retail Banking
Sector, Chase Manhattan Bank; Senior Vice
President, Marine Midland Bank; Vice
President, Citibank; Assistant Professor of
Banking and Finance, Frank G. Zarb School of
Business, Hofstra University.
JOHN E. MURRAY, JR., Director or Trustee of the Federated Fund $4,992.37 $113,860.22 for the
J.D., S.J.D.# Complex; President, Law Professor, Duquesne Corporation and
Birth Date: December University; Consulting Partner, Mollica & 54 other investment
20, 1932 Murray; Director, Michael Baker Corp. companies
President, Duquesne (engineering, construction, operations, and in the Fund Complex
University technical services).
Pittsburgh, PA
DIRECTOR Previous Positions: Dean and Professor of
Law, University of Pittsburgh School of Law;
Dean and Professor of Law, Villanova
University School of Law.
MARJORIE P. SMUTS Director or Trustee of the Federated Fund $4,751.12 $113,860.22 for the
Birth Date: June 21, Complex; Public Corporation and
1935 Relations/Marketing/Conference Planning. 54 other investment
4905 Bayard Street companies
Pittsburgh, PA Previous Positions: National Spokesperson, in the Fund Complex
DIRECTOR Aluminum Company of America; television
producer, business owner.
JOHN S. WALSH Director or Trustee of some of the Federated $2,408.40 $0 for the
Birth Date: November Fund Complex; President and Director, Heat Corporation and
28, 1957 Wagon, Inc. (manufacturer of construction 41 other investment
2007 Sherwood Drive temporary heaters); President and Director, companies
Valparaiso, IN Manufacturers Products, Inc. (distributor of in the Fund Complex
DIRECTOR portable construction heaters); President,
Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh
& Kelly, Inc. (heavy highway contractor);
formerly: Vice President, Walsh & Kelly, Inc.
J. CHRISTOPHER DONAHUE+* President or Executive Vice President of the $0 $0 for the
Birth Date: April 11, Federated Fund Complex; Director or Trustee Corporation and
1949 of some of the Funds in the Federated Fund 16 other investment
Federated Investors Complex; President and Director, Federated companies
Tower Investors, Inc.; President and Trustee, in the Fund Complex
1001 Liberty Avenue Federated Investment Management Company;
Pittsburgh, PA President and Director, Federated Investment
EXECUTIVE VICE Counseling and Federated Global Investment
PRESIDENT AND DIRECTOR Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director,
Federated Services Company.
<PAGE>
- ----------------------------
EDWARD C. GONZALES Trustee or Director of some of the Funds in $0 $0 for the
Birth Date: October the Federated Fund Complex; President, Corporation and
22, 1930 Executive Vice President and Treasurer of 1 other investment
Federated Investors some of the Funds in the Federated Fund company
Tower Complex; Vice Chairman, Federated Investors, in the Fund Complex
1001 Liberty Avenue Inc.; Vice President, Federated Investment
Pittsburgh, PA Management Company and Federated Investment
EXECUTIVE VICE PRESIDENT Counseling, Federated Global Investment
Management Corp. and Passport Research, Ltd.;
Executive Vice President and Director,
Federated Securities Corp.; Trustee,
Federated Shareholder Services Company.
JOHN W. MCGONIGLE Executive Vice President and Secretary of the $0 $0 for the
Birth Date: October 26, Federated Fund Complex; Executive Vice Corporation and
1938 President, Secretary, and Director, Federated 54 other investment
Federated Investors Investors, Inc.; Trustee, Federated companies
Tower Investment Management Company; Director, in the Fund Complex
1001 Liberty Avenue Federated Investment Counseling and Federated Pittsburgh, PA
Global Investment Management Corp.; Director, EXECUTIVE VICE Federated Services
Company; Director, PRESIDENT AND SECRETARY Federated Securities Corp.
RICHARD J. THOMAS Treasurer of the Federated Fund Complex; Vice $0 $0 for the
Birth Date: June 17, President - Funds Financial Services Corporation and
1954 Division, Federated Investors, Inc.; 54 other investment
Federated Investors formerly: various management positions within companies
Tower Funds Financial Services Division of in the Fund Complex
1001 Liberty Avenue Federated Investors, Inc.
Pittsburgh, PA
TREASURER
RICHARD B. FISHER President or Vice President of some of the $0 $0 for the
Birth Date: May 17, 1923 Funds in the Federated Fund Complex; Director Corporation and
Federated Investors or Trustee of some of the Funds in the 6 other investment
Tower Federated Fund Complex; Executive Vice companies
1001 Liberty Avenue President, Federated Investors, Inc.; in the Fund Complex
Pittsburgh, PA Chairman and Director, Federated Securities
PRESIDENT Corp.
WILLIAM D. DAWSON, III Chief Investment Officer of this Fund and $0 $0 for the
Birth Date: March 3, various other Funds in the Federated Fund Corporation and
1949 Complex; Executive Vice President, Federated 41 other investment
Federated Investors Investment Counseling, Federated Global companies
Tower Investment Management Corp., Federated in the Fund Complex
1001 Liberty Avenue Investment Management Company and Passport
Pittsburgh, PA Research, Ltd.; Registered Representative,
CHIEF INVESTMENT OFFICER Federated Securities Corp.; Portfolio
Manager, Federated Administrative Services; Vice
President, Federated Investors, Inc.; formerly:
Executive Vice President and Senior Vice President,
Federated Investment Counseling Institutional
Portfolio Management Services Division; Senior Vice
President, Federated Investment Management Company
and Passport Research, Ltd.
DEBORAH A. CUNNINGHAM Deborah A. Cunningham has been the Fund's $0 $0 for the
Birth Date: September portfolio manager since August 1989. She is Corporation and
15, 1959 Vice President of the Corporation. Ms. 6 other investment
Federated Investors Cunningham joined Federated in 1981 and has companies
Tower been a Senior Portfolio Manager and a Senior in the Fund Complex
1001 Liberty Avenue Vice President of the Fund's Adviser since
Pittsburgh, PA 1997. Ms. Cunningham served as a Portfolio
VICE PRESIDENT Manager and a Vice President of the Adviser
from 1993 until 1996. Ms. Cunningham is a
Chartered Financial Analyst and received her
M.S.B.A. in Finance from Robert Morris
College.
MARY JO OCHSON Mary Jo Ochson is Vice President of the $0 $0 for the
Birth Date: September Corporation. Ms. Ochson joined Federated in Corporation and
12, 1953 1982 and has been a Senior Portfolio Manager 7 other investment
Federated Investors and a Senior Vice President of the Fund's companies
Tower Adviser since 1996. From 1988 through 1995, in the Fund Complex
1001 Liberty Avenue Ms. Ochson served as a Portfolio Manager and
Pittsburgh, PA a Vice President of the Fund's Adviser. Ms.
VICE PRESIDENT Ochson is a Chartered Financial Analyst and
received her M.B.A. in Finance from the
University of Pittsburgh.
</TABLE>
+ MR. DONAHUE IS THE FATHER OF J. CHRISTOPHER DONAHUE, EXECUTIVE VICE
PRESIDENT AND DIRECTOR OF THE CORPORATION.
++ MESSRS. CUNNINGHAM, MANSFIELD AND WALSH BECAME MEMBERS OF THE BOARD OF
DIRECTORS ON JANUARY 1, 1999. THEY DID NOT EARN ANY FEES FOR SERVING THE FUND
COMPLEX SINCE THESE FEES ARE REPORTED AS OF THE END OF THE LAST CALENDAR.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Corporation or any Fund shareholder for
any losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Corporation.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS OF THE FEDERATED
FEE FUNDS
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio. Federated Services Company may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountant for the Fund, Deloitte & Touche LLP, plans and
performs their audit so that they may provide an opinion as to whether the
Fund's financial statements and financial highlights are free of material
misstatement.
FEES PAID BY THE FUND FOR SERVICES
FOR THE YEAR ENDED MAY 31,
1999 1998 1997
Advisory Fee Earned $ $15,717,524 $10,596,936
Advisory Fee Reduction $ $5,759,049 $4,185,437
Administrative Fee $ $2,371,597 $1,601,019
12b-1 Fee $ -- --
Shareholder Services Fee $ -- --
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns given for the one-year, five-year and Start of Performance periods
ended May 31, 1999.
Yield and Effective Yield given for the 7-day period ended May 31, 1999.
7 DAY PERIOD 1 Year 5 Years Start of Performance
on 8/18/89
Total Return
Yield
Effective Yield
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o.......references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and
o information about the mutual fund industry from sources such as the Investment
Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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.
IBC/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.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
MUNICIPAL FUNDS
In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
EQUITY FUNDS
In the equity sector, Federated has more than 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
CORPORATE BOND FUNDS
In the corporate bond sector, as of December 31, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
GOVERNMENT FUNDS
In the government sector, as of December 31, 1998, Federated managed 9 mortgage
backed, 5 government/agency and 19 government money market mutual funds, with
assets approximating $5.3 billion, $1.8 billion and $41.6 billion, respectively.
Federated trades approximately $425 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.2 billion in government funds within these
maturity ranges.
MONEY MARKET FUNDS
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,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated
advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
INSTITUTIONAL CLIENTS
Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, 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 advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.
BANK MARKETING
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Sales Division, Federated Securities Corp.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended May 31, 1999 are
incorporated herein by reference to the Annual Report to Shareholders of Prime
Cash Series dated May 31, 1999.
(Financial information to be filed by Amendment)
<PAGE>
107
ADDRESSES
PRIME CASH SERIES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
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 Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
PROSPECTUS
MUNICIPAL CASH SERIES
A Portfolio of Cash Trust Series, Inc.
A money market mutual fund seeking current income exempt from federal regular
income tax consistent with stability of principal by investing in a portfolio of
tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.
CONTENTS
Risk/Return Summary
What are the Fund's Fees and Expenses?
What are the Fund's Investment Strategies?
What are the Principal Securities in Which the Fund Invests?
What are the Specific Risks of Investing in the Fund?
What do Shares Cost?
How is the Fund Sold?
How to Purchase Shares
How to Redeem Shares
Account and Share Information
Who Manages the Fund?
Financial Information
September 30, 1999
<PAGE>
RISK/RETURN SUMMARY
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is current income exempt
from federal regular income tax consistent with stability of principal. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the strategies and policies described in this
prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in tax exempt securities maturing in 397 days or less. At least
80% of the Fund's annual interest income will be exempt from federal regular
income tax. Interest from the Fund's investments may be subject to the federal
alternative minimum tax for individuals and corporations (AMT). The Fund will
have an average portfolio maturity of 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund. 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.
<PAGE>
RISK/RETURN BAR CHART AND TABLE
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Municipal Cash Series as of the calendar year-end for
each of nine years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1.00% up to 7.00%.
The `x' axis represents calculation periods from the earliest first full
calendar year end of the Fund's start of business through the calendar year
ended December 31, 1998. The light gray shaded chart features nine distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Fund for each calendar year is
stated directly at the top of each respective bar, for the calendar years 1990
through 1998. The percentages noted are: 5.69%, 4.28%, 2.51%, 1.88%, 2.21%,
3.24%, 2.80%, 2.90% and 2.75%, respectively.
Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's total returns on a
calendar year-end basis.
The Fund's shares are not sold subject to a sales charge (load). The total
returns displayed above are based upon net asset value.
The Fund's total return from January 1, 1999 to June 30, 1999 was 1.21%.
Within the period shown in the Chart, the Fund's highest quarterly return was
1.43% (quarter ended June 30, 1990). Its lowest quarterly return was 0.41%
(quarter ended March 31, 1994).
<PAGE>
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Fund's Average Annual Total Returns for the
calendar periods ended December 31, 1998.
CALENDAR PERIOD FUND
1 Year 2.75%
5 Years 2.78%
Start of 3.25%
Performance1
1 The Fund's start of performance date was August 15, 1989.
The Fund's 7-Day Net Yield as of December 31, 1998 was 2.93%. Investors may
call the Fund at 1-800-341-7400 to acquire the current 7-Day Net Yield.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
rewards.
<PAGE>
WHAT ARE THE FUND'S FEES AND EXPENSES?
MUNICIPAL CASH SERIES
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
SHAREHOLDER FEES
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a None
percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of None
original purchase price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and None
other Distributions) (as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if None
applicable)
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (Before Waivers)(1) Expenses That are Deducted
From Fund Assets (as a percentage of average net assets) Management Fee (2)
0.50% Distribution (12b-1) Fee 0.35% Shareholder Services Fee 0.25% Other
Expenses 0.28% Total Annual Fund Operating Expenses 1.13% 1 Although not
contractually obligated to do so, the adviser waived
certain amounts. These are shown below along with the net expenses the
Fund actually paid for the fiscal year ended May 31, 1999.
Total Waivers of Fund Expenses 0.12%
Total Actual Annual Fund Operating Expenses (after waivers) 1.01%
2 The adviser voluntarily waived a portion of the management fee. The adviser
can terminate this voluntary waiver at any time. The management fee paid by
the Fund's Shares (after the voluntary waiver) was 0.38% for the fiscal year
ended May 31, 1999.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Shares for the time
periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Shares operating expenses are before waivers as shown in the
table and remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
$115 $359 $622 $1,375
<PAGE>
WHAT ARE THE FUND'S INVESTMENT STRATEGIES?
The Fund invests in a portfolio of high-quality tax exempt securities maturing
in 397 days or less. At least 80% of the Fund's annual interest income will be
exempt from federal regular income tax. Interest from the Fund's investments may
be subject to AMT. The Fund will have an average portfolio maturity of 90 days
or less. The Fund's investment adviser (Adviser) actively manages the fund's
portfolio, seeking to limit the credit risk taken by the Fund and select
investments with enhanced yields. The Adviser performs a fundamental credit
analysis to develop an approved list of issuers and securities that meet the
Adviser's standard for minimal credit risk. The Adviser monitors the credit
risks of all portfolio securities on an ongoing basis by reviewing periodic
financial data and ratings of nationally recognized rating services. The Adviser
targets an average portfolio maturity based upon its interest rate outlook and
the tax exempt securities available. The Adviser formulates its interest rate
outlook by analyzing a variety of factors such as current and expected U.S.
economic growth; current and expected interest rates and inflation; and the
Federal Reserve's monetary policy. The Adviser structures the portfolio by
investing primarily in variable rate demand instruments and municipal notes. The
Adviser generally shortens the portfolio's maturity when it expects interest
rates to rise and extends the maturity when it expects interest rates to fall.
This strategy seeks to enhance the returns from favorable interest rate changes
and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal income tax. It may do this
to minimize potential losses and maintain liquidity to meet shareholder
redemptions during adverse market conditions. This may cause the Fund to receive
and distribute taxable income to investors.
WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time. Typically, states, counties, cities and other
political subdivisions and authorities issue tax exempt securities. The market
categorizes tax exempt securities by their source of repayment. VARIABLE RATE
DEMAND INSTRUMENTS Variable rate demand instruments are tax exempt securities
that require the issuer or a third party, such as a dealer or bank, to
repurchase the security for its face value upon demand. The securities also pay
interest at a variable rate intended to cause the securities to trade at their
face value. The Fund treats demand instruments as short-term securities, because
their variable interest rate adjusts in response to changes in market rates,
even though their stated maturity may extend beyond thirteen months.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds. CREDIT ENHANCEMENT Credit enhancement consists of
an arrangement in which a company agrees to pay amounts due on a fixed income
security if the issuer defaults. In some cases the company providing credit
enhancement makes all payments directly to the security holders and receives
reimbursement from the issuer. Normally, the credit enhancer has greater
financial resources and liquidity than the issuer. For this reason, the Adviser
usually evaluates the credit risk of a fixed income security based solely upon
its credit enhancement. DELAYED DELIVERY TRANSACTIONS Delayed delivery
transactions, including when issued transactions, are arrangements in which the
Fund buys securities for a set price, with payment and delivery of the
securities scheduled for a future time. During the period between purchase and
settlement, no payment is made by the Fund to the issuer and no interest accrues
to the Fund. The Fund records the transaction when it agrees to buy the
securities and reflects their value in determining the price of its shares.
Settlement dates may be a month or more after entering into these transactions
so that the market values of the securities bought may vary from the purchase
prices. Therefore, delayed delivery transactions create interest rate risks for
the Fund. Delayed delivery transactions also involve credit risks in the event
of a counterparty default.
INVESTMENT 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 rating
services or be of comparable quality to securities having such ratings.
WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities. Many fixed income securities receive credit ratings
from services such as Standard & Poor's and Moody's Investor Services, Inc.
These services assign ratings to securities by assessing the likelihood of
issuer default. Lower credit ratings correspond to higher credit risk. If a
security has not received a rating, the Fund must rely entirely on the Adviser's
credit assessment. INTEREST RATE RISKS Prices of fixed income securities rise
and fall in response to changes in the interest rate paid by similar securities.
Generally, when interest rates rise, prices of fixed income securities fall.
However, market factors, such as the demand for particular fixed income
securities, may cause the price of certain fixed income securities to fall while
the prices of other securities rise or remain unchanged. Interest rate changes
have a greater effect on the price of fixed income securities with longer
maturities. Money market funds try to minimize this risk by purchasing
short-term securities. SECTOR RISKS A substantial part of the Fund's portfolio
may be comprised of securities credit enhanced by banks or companies with
similar characteristics. As a result, the Fund will be more susceptible to any
economic, business, political or other developments which generally affect these
entities.
WHAT DO SHARES COST?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share. The
Fund does not charge a front-end sales charge.
NAV is determined at 12:00 noon and 3:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. The minimum
subsequent investment is $500.
An institutional investor's minimum investment is calculated by combining all
accounts it maintains with the Fund. Accounts established through investment
professionals may be subject to a smaller minimum investment amount. Keep in
mind that investment professionals may charge you fees for their services in
connection with your Share transactions.
HOW IS THE FUND SOLD?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to customers of financial institutions such as banks,
fiduciaries, custodians of public funds, investment advisers, and broker/dealers
or individuals, directly or through investment professionals. The Fund may not
be a suitable investment for retirement plans.
When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Shares. Because these Shares pay marketing fees
on an ongoing basis, your investment cost may be higher over time than other
shares with different sales charges and marketing fees.
<PAGE>
HOW TO PURCHASE SHARES
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
o.......Establish an account with the investment professional; and
o Submit your purchase order to the investment professional before 3:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
o Establish your account with the Fund by submitting a completed New Account
Form; and
o Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees the Fund or its transfer agent incurs.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone other
than you or The Federated Funds).
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.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
HOW TO REDEEM SHARES
You should redeem Shares:
o through an investment professional if you purchased Shares through an
investment professional; or
o directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund once you have completed the
appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time) your redemption will be wired to you
the following business day. You will receive that day's dividend. Under limited
circumstances, arrangements may be made with the Distributor for same-day
payment of redemption proceeds, without that day's dividend, for redemption
requests received before 2:00 p.m. (Eastern time).
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317 All requests must include:
o Fund Name and Share Class, account number and account registration;
o amount to be redeemed; and
o signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES Signatures must be guaranteed if:
o your redemption will be sent to an address other than the address of
record;
o your redemption will be sent to an address of record that was changed
within the last 30 days; or
o a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
o an electronic transfer to your account at a financial institution that is
an ACH member; or
o wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
o to allow your purchase to clear;
o during periods of market volatility; or
o when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
<PAGE>
ACCOUNT AND SHARE INFORMATION
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
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 pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes. Capital gains and non-exempt
dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
WHO MANAGES THE FUND?
The Board of Directors governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 175 mutual
funds and separate accounts, which totaled approximately $111 billion in assets
as of December 31, 1998. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees.
More than 4,000 investment professionals make Federated Funds available to their
customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
YEAR 2000 READINESS
The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999 or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Fund, that rely on computers.
While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.
The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.
Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase. The financial impact of these issues for the Fund is still being
determined. There can be no assurance that potential Year 2000 problems would
not have a material adverse effect on the Fund.
LAST MEETING OF SHAREHOLDERS
(To be filed by amendment)
FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Deloitte & Touche, LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
(Financial statements to be filed by amendment)
<PAGE>
MUNICIPAL CASH SERIES
A Portfolio of Cash Trust Series, Inc.
A Statement of Additional Information (SAI) dated September 30, 1999, is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is contained in the Fund's Annual and Semi-Annual Reports to
shareholders as they become available. The Annual Report discusses market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year. To obtain the SAI, the Annual Report,
Semi-Annual Report and other information without charge, and make inquiries,
call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.
INVESTMENT COMPANY ACT FILE NO. 811-5843
CUSIP 147551303
9080102A (9/99)
STATEMENT OF ADDITIONAL INFORMATION
MUNICIPAL CASH SERIES
A Portfolio of Cash Trust Series, Inc.
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Municipal Cash Series (Fund), dated
September 30, 1999. This SAI incorporates by reference the Fund's Annual Report.
Obtain the prospectus or the Annual Report without charge by calling
1-800-341-7400.
September 30, 1999
CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
CUSIP 147551303
9080102B (9/99)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Cash Trust Series, Inc. (Corporation).
The Corporation, an open-end, management investment company, was originally
organized as a Massachusetts business trust under the laws of the Commonwealth
of Massachusetts on May 16, 1989. It was reorganized under the laws of the State
of Maryland on February 1, 1993. The Corporation may offer separate series of
shares representing interests in separate portfolios of securities.
The Fund's investment adviser is Federated Investment Management Company
(Adviser). The Adviser, formerly known as Federated Advisers, changed its name
effective March 31, 1999.
SECURITIES IN WHICH THE FUND INVESTS
The Fund's principal securities are described in its prospectus. Additional
securities, and further information regarding the principal securities, are
outlined below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities. A security's yield measures the
annual income earned on a security as a percentage of its price. A security's
yield will increase or decrease depending upon whether it costs less (a
discount) or more (a premium) than the principal amount. If the issuer may
redeem the security before its scheduled maturity, the price and yield on a
discount or premium security may change based upon the probability of an early
redemption. Securities with higher risks generally have higher yields. The
following describes the types of fixed income securities in which the Fund
invests. TAX EXEMPT SECURITIES Tax exempt securities are fixed income securities
that pay interest that is not subject to regular federal income taxes.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
GENERAL OBLIGATION BONDS
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes sufficient
to pay principal and interest on the bonds. However, the issuer's authority
to impose additional taxes may be limited by its charter or state law.
<PAGE>
SPECIAL REVENUE BONDS
Special revenue bonds are payable solely from specific revenues received by
the issuer such as specific taxes, assessments, tolls, or fees. Bondholders
may not collect from the municipality's general taxes or revenues. For
example, a municipality may issue bonds to build a toll road, and pledge the
tolls to repay the bonds.
Therefore, a shortfall in the tolls normally would result in a default on
the bonds.
PRIVATE ACTIVITY BONDS
Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new
factory to improve its local economy. The municipality would lend the
proceeds from its bonds to the company using the factory, and the company
would agree to make loan payments sufficient to repay the bonds. The bonds
would be payable solely from the company's loan payments, not from any other
revenues of the municipality. Therefore, any default on the loan normally
would result in a default on the bonds. The interest on many types of
private activity bonds is subject to the federal alternative minimum tax
(AMT). The Fund may invest in bonds subject to AMT. CREDIT ENHANCEMENT
Common types of credit enhancement include guarantees, letters of credit,
bond insurance and surety bonds. Credit enhancement also includes
arrangements where securities or other liquid assets secure payment of a
fixed income security. If a default occurs, these assets may be sold and the
proceeds paid to security's holders. Either form of credit enhancement
reduces credit risks by providing another source of payment for a fixed
income security.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient
means of carrying out its investment policies and managing its uninvested
cash.
SPECIAL TRANSACTIONS
ASSET COVERAGE
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the
underlying assets, enter into an offsetting transaction or set aside readily
marketable securities with a value that equals or exceeds the Fund's
obligations. Unless the Fund has other readily marketable assets to set
aside, it cannot trade assets used to secure such obligations without
entering into an offsetting transaction or terminating the special
transaction. This may cause the Fund to miss favorable trading opportunities
or to realize losses on special transactions.
RESTRICTED SECURITIES
The Fund may invest in restricted securities. Restricted securities are any
securities which are subject to restrictions on resale under the federal
securities laws.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may make temporary defensive investments in the following taxable
securities:
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the
lowest credit risks. AGENCY SECURITIES Agency securities are issued or
guaranteed by a federal agency or other government sponsored entity acting
under federal authority (a GSE). The United States supports some GSEs with
its full faith and credit. Other GSEs receive support through federal
subsidies, loans or other benefits. A few GSEs have no explicit financial
support, but are regarded as having implied support because the federal
government sponsors their activities. Agency securities are generally
regarded as having low
credit risks, but not as low as treasury securities.
The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does
not reduce the market and prepayment risks of these mortgage backed
securities. BANK INSTRUMENTS Bank instruments are unsecured interest bearing
deposits with banks. Bank instruments include bank accounts, time deposits,
certificates of deposit and banker's acceptances. Yankee instruments are
denominated in U.S. dollars and issued by U.S. branches of foreign banks.
Eurodollar instruments are denominated in U.S. dollars
and issued by non-U.S. branches of U.S. or foreign banks.
CORPORATE DEBT SECURITIES
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types
of corporate debt securities. The Fund may also purchase interests in bank
loans to companies. The credit risks of corporate debt securities vary
widely among issuers.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use
the proceeds (or bank loans) to repay maturing paper. If the issuer cannot
continue to obtain liquidity in this fashion, its commercial paper may
default. REPURCHASE AGREEMENTS Repurchase agreements are transactions in
which the Fund buys a security from a dealer or bank and agrees to sell the
security back at a mutually agreed upon time and price. The repurchase price
exceeds the sale price, reflecting the Fund's return on the transaction.
This return is unrelated to the interest rate on the underlying security.
The Fund will enter into repurchase agreements only with banks and other
recognized financial institutions, such as securities dealers, deemed
creditworthy by the Adviser. The Fund's custodian or subcustodian will take
possession of the securities subject to repurchase agreements. The Adviser
or subcustodian will monitor the value of the underlying security each day
to ensure that the value of the security always equals or exceeds the
repurchase price. Repurchase agreements are subject to credit risks. REVERSE
REPURCHASE AGREEMENTS Reverse repurchase agreements are repurchase
agreements in which the Fund is the seller (rather than the buyer) of the
securities, and agrees to repurchase them at an agreed upon time and price.
A reverse repurchase agreement may be viewed as a type of borrowing by the
Fund. Reverse repurchase agreements are subject to credit risks. In
addition, reverse repurchase agreements create leverage risks because the
Fund must repurchase the underlying security at a higher price, regardless
of the market value of the security at the time of repurchase.
INVESTMENT 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 ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc. ("Moody's"), or F-1+, F-1, or F-2 by Fitch IBCA, 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."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
CREDIT RISKS
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy. LEVERAGE RISKS Leverage risk is
created when an investment exposes the Fund to a level of risk that exceeds the
amount invested. Changes in the value of such an investment magnify the
Fund's risk of loss and potential for gain.
TAX RISKS
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
FUNDAMENTAL INVESTMENT POLICIES
The fund will invest its assets so that at least 80% of its annual interest
income is exempt from federal regular income tax.
INVESTMENT LIMITATIONS
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the 1940 Act.
LENDING CASH OR SECURITIES
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
INVESTING IN COMMODITIES
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
INVESTING IN REAL ESTATE
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
UNDERWRITING
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
CONCENTRATION OF INVESTMENTS
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
THE ABOVE LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE BOARD OF
DIRECTORS (BOARD) AND BY THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING
SECURITIES," AS DEFINED BY THE INVESTMENT COMPANY ACT. THE FOLLOWING
LIMITATIONS, HOWEVER, MAY BE CHANGED BY THE BOARD WITHOUT SHAREHOLDER APPROVAL.
SHAREHOLDERS WILL BE NOTIFIED BEFORE ANY MATERIAL CHANGE IN THESE LIMITATIONS
BECOMES EFFECTIVE.
BUYING ON MARGIN
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
INVESTING IN ILLIQUID SECURITIES
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
INVESTING IN OPTIONS
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 association 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.
In applying the Fund's concentration restriction, (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities. To conform to the current view of the SEC staff that only domestic
bank instruments may be excluded from industry concentration limitations, as a
matter of non-fundamental policy, the Fund will not exclude foreign bank
instruments from industry concentration tests as long as the policy of the SEC
remains in effect.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this 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. In particular, the Fund will comply
with the various requirements of Rule 2a-7 (the "Rule"), 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 the Rule. The Fund may
change these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
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 the Rule. 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.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
RULE 12B-1 PLAN
As a reimbursement-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.
The Fund reimburses the Distributor only for those payments made to investment
professionals up to the maximum Rule 12b-1 Plan fee. The Distributor may seek
reimbursement in following years for any unreimbursed expenses permitted under
the Plan. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.
The maximum Rule 12b-1 Plan fee that can be paid in any one year may not be
sufficient to cover the marketing-related expenses the Distributor has incurred.
Therefore, it may take the Distributor a number of years to recoup these
expenses.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
<PAGE>
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
ACCOUNT AND SHARE 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 the Corporation have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Directors may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Corporation's outstanding
shares of all series entitled to vote.
As of XXXX, 1999, the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Shares:
(To be filed by amendment.)
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Corporation's other portfolios will be separate from those realized by the Fund.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF DIRECTORS
The Board is responsible for managing the Corporation's business affairs and for
exercising all the Corporation's powers except those reserved for the
shareholders. Information about each Board member is provided below and includes
each person's: name, address, birth date, present position(s) held with the
Corporation, principal occupations for the past five years and positions held
prior to the past five years, total compensation received as a Director from the
Corporation for its most recent fiscal year, and the total compensation received
from the Federated Fund Complex for the most recent calendar year. The
Corporation is comprised of four funds and the Federated Fund Complex is
comprised of 54 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.
As of XXXX, 1999, the Fund's Board and Officers as a group owned less than 1% of
the Fund's outstanding Shares.
An asterisk (*) denotes a Director who is deemed to be an interested person as
defined in the Investment Company Act of 1940. A pound sign (#) denotes a Member
of the Board's Executive Committee, which handles the Board's responsibilities
between its meetings.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
NAME AGGREGATE TOTAL
BIRTH DATE COMPENSATION COMPENSATION
ADDRESS FROM FROM CORPORATION
POSITION WITH PRINCIPAL OCCUPATIONS CORPORATION AND FUND COMPLEX
CORPORATION FOR PAST FIVE YEARS
<S> <C> <C> <C>
JOHN F. DONAHUE*+# Chief Executive Officer and Director or $0 $0 for the
Birth Date: July 28, Trustee of the Federated Fund Complex; Corporation and
1924 Chairman and Director, Federated Investors, 54 other investment
Federated Investors Inc.; Chairman and Trustee, Federated companies
Tower Investment Management Company; Chairman and in the Fund Complex
1001 Liberty Avenue Director, Federated Investment Counseling,
Pittsburgh, PA and Federated Global Investment Management
CHAIRMAN AND DIRECTOR Corp.; Chairman, Passport Research, Ltd.
THOMAS G. BIGLEY Director or Trustee of the Federated Fund $4,751.12 $113,860.22 for the
Birth Date: February 3, Complex; Director, Member of Executive Corporation and
1934 Committee, Children's Hospital of Pittsburgh; 54 other investment
15 Old Timber Trail Director, Robroy Industries, Inc. (coated companies
Pittsburgh, PA steel conduits/computer storage equipment); in the Fund Complex
DIRECTOR formerly: Senior Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc. (physician
practice management); Director, Member of
Executive Committee, University of Pittsburgh.
JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $5,227.03 $125,264.48 for the
Birth Date: June 23, Complex; President, Investment Properties Corporation and
1937 Corporation; Senior Vice President, 54 other investment
Wood/Commercial Dept. John R. Wood and Associates, Inc., Realtors; companies
John R. Wood Partner or Trustee in private real estate in the Fund Complex
Associates, Inc. ventures in Southwest Florida; formerly:
Realtors President, Naples Property Management, Inc.
3255 Tamiami Trail and Northgate Village Development Corporation.
North
Naples, FL
DIRECTOR
NICHOLAS CONSTANTAKIS Director or Trustee of the Federated Fund $4,751.22 $47,958.02for the
Birth Date: September Complex; formerly: Partner, Andersen Corporation and
3, 1939 Worldwide SC. 29 other investment
175 Woodshire Drive companies
Pittsburgh, PA in the Fund Complex
DIRECTOR
JOHN F. CUNNINGHAM++ Director or Trustee of some of the Federated $2,408.40 $0 for the
Birth Date: March 5, Fund Complex; Chairman, President and Chief Corporation and
1943 Executive Officer, Cunningham & Co., Inc. 40 other investment
353 El Brillo Way (strategic business consulting); Trustee companies
Palm Beach, FL Associate, Boston College; Director, EMC in the Fund Complex
DIRECTOR Corporation (computer storage systems);
formerly: Director, Redgate Communications.
Previous Positions: Chairman of the Board and
Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer,
Wang Laboratories; Director, First National
Bank of Boston; Director, Apollo Computer,
Inc.
LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $4,751.12 $113,860.22 for the
Birth Date: October 11, Complex; Professor of Medicine, University of Corporation and
1932 Pittsburgh; Medical Director, University of 54 other investment
3471 Fifth Avenue Pittsburgh Medical Center - Downtown; companies
Suite 1111 Hematologist, Oncologist, and Internist, in the Fund Complex
Pittsburgh, PA University of Pittsburgh Medical Center;
DIRECTOR Member, National Board of Trustees, Leukemia
Society of America.
PETER E. MADDEN Director or Trustee of the Federated Fund $4,209.51 $113,860.22 for the
Birth Date: March 16, Complex; formerly: Representative, Corporation and
1942 Commonwealth of Massachusetts General Court; 54 other investment
One Royal Palm Way President, State Street Bank and Trust companies
100 Royal Palm Way Company and State Street Corporation. in the Fund Complex
Palm Beach, FL
DIRECTOR Previous Positions: Director, VISA USA and
VISA International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.
CHARLES F. MANSFIELD, Director or Trustee of some of the Federated $2,408.31 $0 for the
JR.++ Fund Complex; Management Consultant. Corporation and
Birth Date: April 10, 43 other investment
1945 Previous Positions: Chief Executive Officer, companies
80 South Road PBTC International Bank; Partner, Arthur in the Fund Complex
Westhampton Beach, NY Young & Company (now Ernst & Young LLP);
DIRECTOR Chief Financial Officer of Retail Banking
Sector, Chase Manhattan Bank; Senior Vice
President, Marine Midland Bank; Vice
President, Citibank; Assistant Professor of
Banking and Finance, Frank G. Zarb School of
Business, Hofstra University.
JOHN E. MURRAY, JR., Director or Trustee of the Federated Fund $4,992.37 $113,860.22 for the
J.D., S.J.D.# Complex; President, Law Professor, Duquesne Corporation and
Birth Date: December University; Consulting Partner, Mollica & 54 other investment
20, 1932 Murray; Director, Michael Baker Corp. companies
President, Duquesne (engineering, construction, operations, and in the Fund Complex
University technical services).
Pittsburgh, PA
DIRECTOR Previous Positions: Dean and Professor of
Law, University of Pittsburgh School of Law;
Dean and Professor of Law, Villanova
University School of Law.
MARJORIE P. SMUTS Director or Trustee of the Federated Fund $4,751.12 $113,860.22 for the
Birth Date: June 21, Complex; Public Corporation and
1935 Relations/Marketing/Conference Planning. 54 other investment
4905 Bayard Street companies
Pittsburgh, PA Previous Positions: National Spokesperson, in the Fund Complex
DIRECTOR Aluminum Company of America; television
producer; business owner.
JOHN S. WALSH++ Director or Trustee of some of the Federated $2,408.40 $0 for the
Birth Date: November Fund Complex; President and Director, Heat Corporation and
28, 1957 Wagon, Inc. (manufacturer of construction 41 other investment
2007 Sherwood Drive temporary heaters); President and Director, companies
Valparaiso, IN Manufacturers Products, Inc. (distributor of in the Fund Complex
DIRECTOR portable construction heaters); President,
Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh
& Kelly, Inc. (heavy highway contractor);
formerly: Vice President, Walsh & Kelly, Inc.
J. CHRISTOPHER DONAHUE+* President or Executive Vice President of the $0 $0 for the
Birth Date: April 11, Federated Fund Complex; Director or Trustee Corporation and
1949 of some of the Funds in the Federated Fund 16 other investment
Federated Investors Complex; President and Director, Federated companies
Tower Investors, Inc.; President and Trustee, in the Fund Complex
1001 Liberty Avenue Federated Investment Management Company;
Pittsburgh, PA President and Director, Federated Investment
EXECUTIVE VICE Counseling and Federated Global Investment
PRESIDENT AND DIRECTOR Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director,
Federated Services Company.
EDWARD C. GONZALES Trustee or Director of some of the Funds in $0 $0 for the
Birth Date: October 22, the Federated Fund Complex; President, Corporation and
1930 Executive Vice President and Treasurer of 1 other investment
Federated Investors some of the Funds in the Federated Fund company
Tower Complex; Vice Chairman, Federated Investors, in the Fund Complex
1001 Liberty Avenue Inc.; Vice President, Federated Investment
Pittsburgh, PA Management Company and Federated Investment
EXECUTIVE VICE Counseling, Federated Global Investment
PRESIDENT Management Corp. and Passport Research, Ltd.;
Executive Vice President and Director,
Federated Securities Corp.; Trustee,
Federated Shareholder Services Company.
JOHN W. MCGONIGLE Executive Vice President and Secretary of the $0 $0 for the
Birth Date: October 26, Federated Fund Complex; Executive Vice Corporation and
1938 President, Secretary, and Director, Federated 54 other investment
Federated Investors Investors, Inc.; Trustee, Federated companies
Tower Investment Management Company; Director, in the Fund Complex
1001 Liberty Avenue Federated Investment Counseling and Federated Pittsburgh, PA
Global Investment Management Corp.; Director, EXECUTIVE VICE Federated Services
Company; Director, PRESIDENT AND SECRETARY Federated Securities Corp.
RICHARD J. THOMAS Treasurer of the Federated Fund Complex; Vice $0 $0 for the
Birth Date: June 17, President - Funds Financial Services Corporation and
1954 Division, Federated Investors, Inc.; 54 other investment
Federated Investors formerly: various management positions within companies
Tower Funds Financial Services Division of in the Fund Complex
1001 Liberty Avenue Federated Investors, Inc.
Pittsburgh, PA
TREASURER
RICHARD B. FISHER President or Vice President of some of the $0 $0 for the
Birth Date: May 17, 1923 Funds in the Federated Fund Complex; Director Corporation and
Federated Investors or Trustee of some of the Funds in the 6 other investment
Tower Federated Fund Complex; Executive Vice companies
1001 Liberty Avenue President, Federated Investors, Inc.; in the Fund Complex
Pittsburgh, PA Chairman and Director, Federated Securities
PRESIDENT Corp.
WILLIAM D. DAWSON, III Chief Investment Officer of this Fund and $0 $0 for the
Birth Date: March 3, various other Funds in the Federated Fund Corporation and
1949 Complex; Executive Vice President, Federated 41 other investment
Federated Investors Investment Counseling, Federated Global companies
Tower Investment Management Corp., Federated in the Fund Complex
1001 Liberty Avenue Investment Management Company and Passport
Pittsburgh, PA Research, Ltd.; Registered Representative,
CHIEF INVESTMENT OFFICER Federated Securities Corp.; Portfolio
Manager, Federated Administrative Services; Vice
President, Federated Investors, Inc.; formerly:
Executive Vice President and Senior Vice President,
Federated Investment Counseling Institutional
Portfolio Management Services Division; Senior Vice
President, Federated Investment Management Company
and Passport Research, Ltd.
DEBORAH A. CUNNINGHAM Deborah A. Cunningham is Vice President of $0 $0 for the
Birth Date: September the Corporation. Ms. Cunningham joined [Corporation and
15, 1959 Federated in 1981 and has been a Senior 6 other investment
Federated Investors Portfolio Manager and a Senior Vice President companies
Tower of the Fund's Adviser since 1997. Ms. in the Fund Complex
1001 Liberty Avenue Cunningham served as a Portfolio Manager and
Pittsburgh, PA a Vice President of the Adviser from 1993
VICE PRESIDENT until 1996. Ms. Cunningham is a Chartered
Financial Analyst and received her M.S.B.A.
in Finance from Robert Morris College.
MARY JO OCHSON Mary Jo Ochson has been the Fund's portfolio $0 $0 for the
Birth Date: September manager since August 1989. She is Vice Corporation and
12, 1953 President of the Corporation. Ms. Ochson 7 other investment
Federated Investors joined Federated in 1982 and has been a companies
Tower Senior Portfolio Manager and a Senior Vice in the Fund Complex
1001 Liberty Avenue President of the Fund's Adviser since 1996.
Pittsburgh, PA From 1988 through 1995, Ms. Ochson served as
VICE PRESIDENT a Portfolio Manager and a Vice President of
the Fund's Adviser. Ms. Ochson is a Chartered
Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
</TABLE>
+ MR. DONAHUE IS THE FATHER OF J. CHRISTOPHER DONAHUE, EXECUTIVE VICE
PRESIDENT AND DIRECTOR OF THE CORPORATION.
++ MESSRS. CUNNINGHAM, MANSFIELD AND WALSH BECAME MEMBERS OF THE BOARD OF
DIRECTORS ON JANUARY 1, 1999. THEY DID NOT EARN ANY FEES FOR SERVING THE FUND
COMPLEX SINCE THESE FEES ARE REPORTED AS OF THE END OF THE LAST CALENDAR YEAR.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Corporation or any Fund shareholder for
any losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Corporation.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS OF THE FEDERATED
FEE FUNDS
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio. Federated Services Company may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, Deloitte & Touche LLP, plans and performs
its audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
FOR THE YEAR ENDED MAY 31, 1999 1998 1997
Advisory Fee Earned $ $2,910,985 $2,782,055
Advisory Fee Reduction $ $605,529 $497,998
Brokerage Commissions $ $0 $0
Administrative Fee $ $439,247 $420,342
12b-1 Fee $ -- --
Shareholder Services Fee $ -- --
If the Fund's expenses are capped at a particular level, the cap does not
include reimbursement to the Fund of any expenses incurred by shareholders who
use the transfer agent's subaccounting facilities.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns given for the one-year, five-year, ten-year and Start of
Performance periods ended May 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield given for the 30-day period
ended May 31, 1999.
7-DAY PERIOD 1 Year 5 Years 10 Years Start of Performance
on August 25, 1989
Total Return NA
Yield NA
Effective Yield NA
Tax-Equivalent Yield NA
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result. The tax-equivalent yield
of Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming a specific tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
<PAGE>
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to the federal
alternative minimum tax and state and/or local taxes.
TAX EQUIVALENCY TABLE
TAXABLE YIELD EQUIVALENT FOR 1999 MULTISTATE MUNICIPAL FUND
FEDERAL INCOME
TAX BRACKET: 15.00% 28.00% 31.00% 36.00% 39.60%
Joint Return $1-43,050 $43,051-104,05$104,051-158,550$158,551-283,15Over 283,150
Single Return $1-25,750 $25,751-62,450$62,451-130,250 $130,251-283,15Over283,150
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.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and
o information about the mutual fund industry from sources such as the Investment
Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
<PAGE>
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
o 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.
o IBC/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.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
MUNICIPAL FUNDS
In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
EQUITY FUNDS
In the equity sector, Federated has more than 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
CORPORATE BOND FUNDS
In the corporate bond sector, as of December 31, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
GOVERNMENT FUNDS
In the government sector, as of December 31, 1998, Federated managed 9 mortgage
backed, 5 government/agency and 19 government money market mutual funds, with
assets approximating $5.3 billion, $1.8 billion and $41.6 billion, respectively.
Federated trades approximately $425 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.2 billion in government funds within these
maturity ranges.
MONEY MARKET FUNDS
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,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated
advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
INSTITUTIONAL CLIENTS
Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, 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 advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.
BANK MARKETING
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Sales Division, Federated Securities Corp.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended May 31, 1999 are
incorporated herein by reference to the Annual Report to Shareholders of
Municipal Cash Series dated May 31, 1999.
(To be filed by amendment.)
<PAGE>
INVESTMENT RATINGS
STANDARD & POOR'S SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
LONG-TERM DEBT RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
MOODY'S INVESTORS SERVICE, INC., SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
LONG-TERM DEBT RATINGS
AAA--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
FITCH INVESTORS SERVICE, L.P. SHORT-TERM DEBT RATING DEFINITIONS
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment, only slightly less in degree than issues rated
F-1+.
F-2--Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as for
issues assigned F-1+ and F-1 ratings.
<PAGE>
ADDRESSES
MUNICIPAL CASH SERIES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
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 Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT AUDITORS
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
PART C. OTHER INFORMATION.
Item 23. Exhibits:
(a) Conformed copy of Articles of Incorporation of the
Registrant; (7) (b) (i) Copy of By-Laws of the Registrant;
(9)
(ii) Copy of Amendment #1 to the By-Laws of the
Registrant; (10) (iii) Copy of Amendment #2 to the
By-Laws of the Registrant; (10) (iv) Copy of
Amendment #3 to the By-Laws of the Registrant; (10)
(c) Not applicable;
(d) Conformed copy of Investment Advisory Contract of the
Registrant; (7) (e) (i) Conformed copy of Distributor's
Contract and Exhibits A, B, C, and D; (10)
(ii) The Registrant hereby incorporates the
conformed copy of the specimen Mutual Funds
Sales and Service Agreement; Mutual Funds
Service Agreement; and Plan Trustee/Mutual
Funds Service Agreement from Item 24(b)(6)
of the Cash Trust Series II Registration
Statement on Form N-1A, filed with the
Commission on July 24, 1995. (File Nos.
33-38550 and 811-6269).
(f) Not applicable;
(g) (i) Conformed copy of Custodian Contract of
the Registrant; (9)
(ii) Conformed copy of Custodian Fee
Schedule; (10)
(h) (i) Conformed copy of Amended and Restated
Agreement for Fund Accounting Services,
Administrative Services, Transfer Agency
Services and Custody Services
Procurement; (10)
(ii) Conformed copy of Amended and Restated
Shareholder Services Agreement; (10) (iii) The
responses described in Item 24(b)6(ii) are hereby
incorporated by reference.
(i) Conformed copy of Opinion and Consent of Counsel
as to legality of shares being registered; (3)
+ Exhibits have been filed electronically
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed December 6, 1989 (File Nos. 33-29838 and
811-5843).
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed September 23, 1993 (File Nos. 33-29838
and 811-5843).
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 filed September 27, 1995 (File Nos. 33-29838 and
811-5843).
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 filed September 28, 1998 (File Nos. 33-29838 and 811-
5843).
<PAGE>
(j) Not applicable;
(k) Not applicable;
(l) Conformed copy of Initial Capital Understanding; (2)
(m) (i) Conformed copy of Distribution Plan and
Exhibits A, B, and C; (7)
(ii) Conformed copy of Exhibit D to the Distribution Plan (8);
(ii) The responses described in Item 24(b)6(ii) are
hereby incorporated by reference. (n) Not applicable; (o)
Conformed copy of Power of Attorney; +
(i) Conformed copy of Power of Attorney of
Chief Investment Officer of the
Registrant; +
(ii) Conformed copy of Power of Attorney of
Trustee John F. Cunningham; +
(iii) Conformed copy of Power of Attorney of
Trustee Charles F. Mansfield, Jr.; +
(iv) Conformed copy of Power of Attorney of
John S. Walsh; +
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT:
None
Item 25. INDEMNIFICATION: (1)
+ Exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed July 13, 1989 (File Nos. 33-29838 and 811-5843). 2.
Response is incorporated by reference to Registrant's Pre-Effective Amendment
No. 1 on Form N-1A filed August 14, 1989 (File Nos. 33-29838 and 811-5843). 7.
Response is incorporated by reference to Registrant's Post-Effective Amendment
No. 9 on Form N-1A filed September 23, 1993 (File Nos. 33-29838 and 811-5843).
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed September 29, 1994 (File Nos. 33-29838 and
811-5843).
<PAGE>
Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:
For a description of the other business of the investment adviser,
see the section entitled "Who Manages the Fund?" in Part A. The
affiliations with the Registrant of four of the Trustees and one of
the Officers of the investment adviser are included in Part B of this
Registration Statement under "Who Manages and Provides Services to
the Fund?" The remaining Trustee of the investment adviser, his
position with the investment adviser, and, in parentheses, his
principal occupation is: Mark D. Olson (Partner, Wilson, Halbrook &
Bayard), 107 W. Market Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are:
Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden
Senior Vice Presidents: Joseph M. Balestrino
David A. Briggs
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Michael P. Donnelly
Mark E. Durbiano
Jeffrey A. Kozemchak
Sandra L. McInerney
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
Randall S. Bauer
G. Andrew Bonnewell
David A. Briggs
Micheal W. Casey
Robert E. Cauley
Kenneth J. Cody
Alexandre de Bethmann
B. Anthony Delserone, Jr.
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Marc Halperin
Patricia L. Heagy
Susan R. Hill
William R. Jamison
Constantine J. Kartsonas
Stephen A. Keen
Robert M. Kowit
Richard J. Lazarchic
Steven Lehman
Marian R. Marinack
William M. Painter
Jeffrey A. Petro
Keith J. Sabol
Frank Semack
Aash M. Shah
Michael W. Sirianni, Jr.
Christopher Smith
Tracy P. Stouffer
Edward J. Tiedge
Peter Vutz
Paige M. Wilhelm
George B. Wright
Jolanta M. Wysocka
Assistant Vice Presidents: Nancy J. Belz
Lee R. Cunningham, II
James H. Davis, II
Jacqueline A. Drastal
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
Gary E. Farwell
Eamonn G. Folan
John T. Gentry
John W. Harris
Nathan H. Kehm
John C. Kerber
Grant K. McKay
Natalie F. Metz
Joseph M. Natoli
Ihab Salib
James W. Schaub
John Sheehy
Matthew K. Stapen
Diane Tolby
Timothy G. Trebilcock
Leonardo A. Vila
Steven J. Wagner
Lori A. Wolff
Secretary: G. Andrew Bonnewell
Treasurer: Thomas R. Donahue
Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Assistant Treasurer: Richard B. Fisher
The business address of each of the Officers of the investment
adviser is Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779. These individuals are also
officers of a majority of the investment advisers to the investment
companies in the Federated Fund Complex described in Part B of this
Registration Statement.
<PAGE>
Item 27. PRINCIPAL UNDERWRITERS:
(a) Federated Securities Corp. the Distributor for shares
of the Registrant, acts as principal underwriter for
the following open-end investment companies, including
the Registrant:
Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Stock and Bond Fund, Inc.; 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: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; Fixed Income
Securities, Inc.; ; Hibernia Funds; Independence One Mutual Funds; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Liberty U.S. Government Money Market Trust; Managed Series Trust; Marshall
Funds, Inc.; Money Market Management, Inc.; Money Market Obligations Trust;
Money Market Obligations Trust II; Money Market Trust; Municipal Securities
Income Trust; Newpoint Funds; Regions Funds; RIGGS Funds; SouthTrust Funds;
Tax-Free Instruments Trust; The Planters Funds; The Wachovia Funds; The Wachovia
Municipal Funds; Vision Group of Funds, Inc.; World Investment Series, Inc.;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; DG Investor Series; High
Yield Cash Trust; Investment Series Trust; Star Funds; Targeted Duration Trust;
The Virtus Funds; Trust for Financial Institutions;
Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.
<TABLE>
<CAPTION>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
<S> <C> <C>
Richard B. Fisher Chairman, Chief Executive President
Federated Investors Tower Officer, Chief Operating
1001 Liberty Avenue Officer, Asst. Secretary
Pittsburgh, PA 15222-3779 and Asst. Treasurer,
Federated Securities Corp.
Arthur L. Cherry Director --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales --
Federated Investors Tower and Director
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Director, Assistant Secretary --
Federated Investors Tower and Assistant Treasurer
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer and --
Federated Investors Tower Director
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward C. Gonzales Executive Vice President Executive Vice
Federated Investors Tower Federated Securities Corp. President
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Matthew S. Hardin Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Leslie K. Ross Assistant Secretary, Assistant Secretary
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
</TABLE>
(c) Not applicable.
Item 28. LOCATION OF ACCOUNTS AND RECORDS:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
REGISTRANT Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
FEDERATED SHAREHOLDER Federated Investors Tower
SERVICES COMPANY 1001 Liberty Avenue
Transfer Agent and Dividend Pittsburgh, PA 15222-3779
Disbursing Agent
FEDERATED SERVICES Federated Investors Tower
COMPANY 1001 Liberty Avenue
Administrator Pittsburgh, PA 15222-3779
FEDERATED INVESTMENT Federated Investors Tower
MANAGEMENT COMPANY 1001 Liberty Avenue
Investment Adviser Pittsburgh, PA 15222-3779
STATE STREET BANK AND P.O. Box 8600
---------------------
TRUST COMPANY Boston, MA 02266-8600
Custodian
Item 29. MANAGEMENT SERVICES: Not applicable.
Item 30. UNDERTAKINGS:
Registrant hereby undertakes to comply with the provisions of Section 16(c)
of the 1940 Act with respect to the removal of Directors and the calling of
special shareholder meetings by shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, CASH TRUST SERIES, INC., has
duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of Pittsburgh
and Commonwealth of Pennsylvania, on the 27th day of July, 1999.
CASH TRUST SERIES, INC.
BY: /s/ Leslie K. Ross
Leslie K. Ross, Assistant Secretary
Attorney in Fact for John F. Donahue
July 27, 1999
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Leslie K. Ross
Leslie K. Ross Attorney In Fact July 27, 1999
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Director
(Chief Executive Officer)
Richard B. Fisher* President
J. Christopher Donahue* Executive Vice President and
Director
Richard J. Thomas* Treasurer
(Principal Financial and
Accounting Officer)
William D. Dawson, III* Chief Investment Officer
Thomas G. Bigley* Director
John T. Conroy, Jr.* Director
Nicholas P. Constantakis* Director
John F. Cunningham* Director
Lawrence D. Ellis, M.D.* Director
Peter E. Madden* Director
Charles F. Mansfield, Jr.* Director
John E. Murray, Jr., J.D., S.J.D.* Director
Marjorie P. Smuts* Director
John S. Walsh* Director
* By Power of Attorney
Exhibit (o) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretaries of CASH TRUST SERIES, INC. and
each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
the Securities Exchange Act of 1934 and the Investment Company Act of 1940, by
means of the Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/S/JOHN F. DONAHUE Chairman and Director July 6, 1999
- ----------------------------------------
John F. Donahue (Chief Executive Officer)
/S/RICHARD B. FISHER President July 6, 1999
Richard B. Fisher
/S/J. CHRISTOPHER DONAHUE Executive Vice President July 6, 1999
- ----------------------------------------
J. Christopher Donahue and Director
/S/RICHARD J. THOMAS Treasurer July 6, 1999
- ----------------------------------------
Richard J. Thomas (Principal Financial and
Accounting Officer)
/S/THOMAS G. BIGLEY Director July 6, 1999
Thomas G. Bigley
/S/JOHN T. CONROY, JR. Director July 6, 1999
- ----------------------------------------
John T. Conroy, Jr.
<PAGE>
SIGNATURES TITLE DATE
/S/NICHOLAS P. CONSTANTAKIS Director July 6, 1999
Nicholas P. Constantakis
/S/LAWRENCE D. ELLIS, M.D. Director July 6, 1999
- ----------------------------------------
Lawrence D. Ellis, M.D.
/S/PETER E. MADDEN Director July 6, 1999
Peter E. Madden
/S/JOHN E. MURRAY, JR. Director July 6, 1999
- ----------------------------------------
John E. Murray, Jr.
/S/MARJORIE P. SMUTS Director July 6, 1999
Marjorie P. Smuts
Sworn to and subscribed before me this 6th day of July, 1999
/S/ CHERI S. GOOD
Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries
Exhibit (o)(i) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretaries of CASH TRUST SERIES, INC. and
each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
the Securities Exchange Act of 1934 and the Investment Company Act of 1940, by
means of the Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/S/ WILLIAM D. DAWSON, III Chief Investment Officer July 6, 1999
- ---------------------------------
William D. Dawson, III
Sworn to and subscribed before me this 6th day of July, 1999
/S/ CHERI S. GOOD
Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries
Exhibit (o)(ii) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretaries of CASH TRUST SERIES, INC. and
each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
the Securities Exchange Act of 1934 and the Investment Company Act of 1940, by
means of the Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/S/ JOHN F. CUNNINGHAM Director July 6, 1999
- ----------------------------------------
John F. Cunningham
Sworn to and subscribed before me this 6th day of July, 1999
/S/ CHERI S. GOOD
Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries
Exhibit (o)(iii) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretaries of CASH TRUST SERIES, INC. and
each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
the Securities Exchange Act of 1934 and the Investment Company Act of 1940, by
means of the Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/S/ CHARLES F. MANSFIELD, JR. Director July 6, 1999
- ----------------------------------------
Charles F. Mansfield, Jr.
Sworn to and subscribed before me this 6th day of July, 1999
/S/ CHERI S. GOOD
Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries
Exhibit (o)(iv) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretaries of CASH TRUST SERIES, INC. and
each of them, their true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
the Securities Exchange Act of 1934 and the Investment Company Act of 1940, by
means of the Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
SIGNATURES TITLE DATE
/S/ JOHN S. WALSH Director July 6, 1999
- ----------------------------------------
John S. Walsh
Sworn to and subscribed before me this 6th day of July, 1999
/S/ CHERI S. GOOD
Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries
