CALIFORNIA
MUNICIPAL
CASH
TRUST
ANNUAL REPORT
TO SHAREHOLDERS
SEPTEMBER 30, 1994
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
130482102
G00655-01 (11/94)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for California
Municipal Cash Trust (the "Fund"), a portfolio of Federated Municipal Trust,
which covers the 12-month period ended September 30, 1994. The report begins
with an interview with portfolio manager Mary Jo Ochson about economic factors
affecting the Fund, followed by the Fund's Portfolio of Investments and
Financial Statements.
The Fund gives California residents two ways to pursue tax-free income--its
earnings are free of federal regular income tax and California personal income
tax.* Its portfolio is diversified among high quality, short-term California
municipal securities of more than 30 issuers that use municipal bond financing
for projects as varied as housing, industrial development, education, and health
care.
Over the 12-month Report period, the Fund paid shareholders a total of $1.9
million in dividends, or $0.02 per share. At the end of the Report period, the
Fund's net assets stood at $74.7 million.
As a wise investor, you can count on the Fund to ease your tax burden by
pursuing competitive tax-free yields--with the additional advantages of daily
liquidity and stability of principal.**
Thank you for your confidence in California Municipal Cash Trust. We welcome
your comments and suggestions.
Sincerely,
Glen R. Johnson
President
November 15, 1994
* Income may be subject to the federal alternative minimum tax.
** As a money market mutual fund, the Fund is managed to pursue a stable share
price of $1.00, although there is no guarantee that it will do so. An
investment in the Fund is neither insured nor guaranteed by the U.S.
government.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
An Interview with the Fund's Portfolio Manager Mary Jo Ochson
Q
What happened to short-term interest rates over the period covered by this
Annual Report?
A
There was a dramatic shift in the monetary policy of the Federal Reserve
Board (the "Fed") during the 12-month reporting period that ended September
30, 1994.
Throughout the fourth quarter of 1993, the Fed seemed content to keep the
federal funds rate (the rate banks charge each other for overnight loans) steady
at 3.00%, where it had been for a year and a half. The Fed maintained short-term
interest rates at these low levels in order to stimulate the economy. However,
in early 1994 reports began to appear showing stronger-than-anticipated economic
growth. Real gross national product grew at a 7% annual rate in the fourth
quarter of 1993, with the national unemployment rate declining to 6%. Concerned
that these factors could lead to an increase in wages and prices, the Fed took
steps on February 4, 1994, to fight future inflation by raising its target
federal funds rate to 3.25%. Since then, the federal funds rate has been
increased five more times, moving the target from 3.25% to 5.5%.
Q
How did municipal money market yields--and the Fund's yield--react to these
rate increases?
A
Municipal money market interest rates followed the upward movement in
taxable rates, but to a slightly lesser degree, as they are more affected
by supply and demand imbalances.
Naturally, the Fund's yields increased in response to increased money market
rates. The Fund's conservative average maturities and high percentage in
variable rate demand securities--which automatically reset to current market
levels--also helped to accelerate its adjustment to higher market rates.
For the 12-month reporting period ended September 30, 1994, the Fund's
annualized seven-day net yield increased from 2.33% to 2.88%.* For a California
investor in the highest federal and state income tax brackets, the seven-day net
yield on September 30, 1994, was equivalent to a taxable yield of 5.36%. This
number illustrates the Fund's attractiveness to California investors relative to
comparable taxable investment opportunities.
* Performance quoted represents past performance and is not indicative of future
results. Yield will vary.
- --------------------------------------------------------------------------------
Q
In this rising rate atmosphere, did you make any strategic changes to the
Fund's portfolio?
A
In September 1993, the Fund's average maturity was 60 days, reflecting a
neutral interest rate outlook. Starting when the Fed initiated the first
move in early February, I let the average maturity roll down slowly to a
low of 35 days in mid-April. Beginning in June, when California local
governments came to market to issue their annual cash management notes, we
extended the average maturity back into the 50-to-60-day range because of
attractive yield opportunities on these fixed-rate notes. At the end of
September, the Fund's average maturity remained in this range, but is likely to
shorten further as I remain more bearish on the direction of interest rates.
Q
What is your outlook for the markets and the Fund?
A
The economy continues to show surprising resilience to the Fed's attempts
to bring growth under control. I believe the Fed is likely to raise the
federal funds rate target another .25% in the first quarter of 1995. At
that point, the federal funds rate target would be about 5.75%. In this
environment, stable net asset value money market funds like the Fund will
continue to be an important component in preserving capital, while attempting to
return a more competitive yield.
Q
Economic data suggest California's economy is slowly emerging from the
recession. In
July, however, Moody's Investors Service, Inc. ("Moody's"), Standard &
Poor's Ratings
Group ("S&P"), and Fitch Investors Service, Inc. downgraded the State's general
obligation debt to an "A1," "A," and "A" rating, respectively. Would you please
comment on this rating action?
A
California continues to experience ongoing budgetary problems, and even
strong economic growth is not likely to bail out the state government the
way it did in the early 1980s. California's budgetary problems are
structural, which will complicate any of the State's efforts to restore
finances. This factor and California's growing reliance on the short-term market
to finance its cash imbalance are why the State was downgraded. California's
two-year budget plan defers budget balancing actions into Fiscal Year 1995-96
and relies on overly optimistic revenue projections. Additionally, the budget is
being increasingly dominated by mandated spending for long-established state
programs such as low-cost public higher education and generous welfare and
health benefits. Structural reform to California's fiscal system will be
necessary to restore the stability it once held. Two fundamental changes that
need to be implemented are budget reforms that would give elected officials
greater discretion in setting spending priorities and a reduction in mandated
spending.
- --------------------------------------------------------------------------------
Q
Recently, there has been a lot of concern as well as news coverage about
the subject of derivatives. What are derivatives?
A
The term "derivative" has been applied to many different types of
investments. In the context of money market funds, derivatives generally
refer to adjustable rate securities designed for speculation on changes in
interest rates. These speculative derivatives provide above-market yields when
interest rates fall or remain stable, or when the yield curve is steep. They
provide below-market yields, however, when interest rates rise or become more
volatile, or when the yield curve flattens. All three of these conditions
occurred in 1994. As a result, many of these speculative securities lost a
significant part of their value, enough to threaten the $1 per share price of
some money market funds.
It's important to distinguish these speculative derivatives from adjustable rate
securities that are indexed to money market interest rates. These indexed
securities are designed to track changes in market rates, and should approximate
their par value in all reasonably foreseeable market conditions. Tax-exempt
money market funds like the Fund have the right to tender these securities for
purchase at their par value. Money market funds have used these securities for
decades, through several interest rate cycles, without jeopardizing their stable
net asset values.
Q
Do Federated Investors' money market funds invest in the derivatives that
have been in the headlines recently?
A
No. None of Federated Investors' money market funds have invested in any of
the types of derivatives that have been in the headlines lately. Our mutual
funds only invest in adjustable rate securities that track changes in money
market interest rates.
With respect to speculative derivatives, we determined from the outset that the
potential volatility of these securities was contrary to the intent of the rules
governing the use of variable rate securities by money market funds. We also
realized the potential for these securities to deviate significantly from par
and threaten the $1 per share price of a money market fund. We spoke out against
the use of these securities by money market funds at industry conferences
throughout 1993, when the securities still offered attractive yields. Our views
were vindicated when, in June 1994, the Securities and Exchange Commission sent
a letter to the Investment Company Institute requiring money market funds to
divest themselves of these securities in an orderly manner. This caused some
investment advisers to buy these securities from their funds.
CALIFORNIA MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ------------------------------------------------------ -------- -----------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.3%
- -------------------------------------------------------------------------
$1,980,000 California Health Facilities Authority Weekly VRDNs
(O'Connor Hospital and St. Vincent's Medical Center,
Inc.)/(Daughters of Charity Health System Guaranty) VMIG1 $ 1,980,000
------------------------------------------------------
200,000 California Health Facilities Authority Weekly VRDNs
(Santa Barbara Hospital)/(Credit Suisse LOC) VMIG1 200,000
------------------------------------------------------
1,200,000 California Health Facilities Finance Authority Weekly
VRDNs (Pooled Loan Program)/(FGIC Insured) VMIG1 1,200,000
------------------------------------------------------
2,000,000 California HFA Multi-Unit Rental Housing, 3.40% Semi-
Annual TOBs (MBIA Insured)/(Citibank BPA), Optional
Tender 11/1/94 NR(1) 2,000,000
------------------------------------------------------
3,000,000 California Pollution Control Finance Authority, 3.45%
CP (Pacific Gas & Electric Co.)/(Morgan Guaranty Trust
Co. LOC), Mandatory Tender 10/24/94 A-1+ 3,000,000
------------------------------------------------------
3,000,000 California School Cash Reserve Program Authority,
4.50% TRANs (Series 1994A)/(Industrial Bank of Japan,
Ltd. LOC), 6/28/95 MIG1 3,013,892
------------------------------------------------------
2,000,000 California State, 5.00% RANs (Series A), 6/28/95 SP-1+ 2,011,604
------------------------------------------------------
4,000,000 California State, Monthly VRNs (Series C), 6/28/95 SP-1+ 4,000,000
------------------------------------------------------
5,000,000 (a) California VRDCs/IVRCs Trust (Series 1994C) Weekly
VRDNs/(Regents of the University of California)/
(AMBAC Insured) A-1 5,000,000
------------------------------------------------------
1,000,000 Golden Empire Schools Financing Authority Weekly VRDNs
(Kern High School District)/(Barclays Bank
PLC LOC) VMIG1 1,000,000
------------------------------------------------------
1,000,000 Golden Empire Schools Financing Authority Weekly
VRDNs (Series B)/(Kern High School District)/(Barclays
Bank PLC LOC) A-1+ 1,000,000
------------------------------------------------------
</TABLE>
CALIFORNIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ------------------------------------------------------ -------- -----------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------
$1,600,000 Irvine, CA, Public Facilities and Infrastructure
Authority Weekly VRDNs (Capital Improvements Program)/
(National Westminster Bank PLC LOC) A-1+ $ 1,600,000
------------------------------------------------------
900,000 Kern Community College District, CA, Weekly VRDNs
(Swiss Bank Corp. LOC) VMIG1 900,000
------------------------------------------------------
1,500,000 Kern County, CA, Public Facility Corp. Weekly VRDNs
(Sanwa Bank Ltd. LOC) VMIG1 1,500,000
------------------------------------------------------
3,000,000 Los Angeles County, CA, Transportation Commission,
3.40% CP (ABN AMRO Bank N.V., Banque Nationale de
Paris, Canadian Imperial Bank of Commerce, National
Westminster Bank PLC and Bank of California N.A.
LOCs), Mandatory Tender 10/21/94 A-1+ 3,000,000
------------------------------------------------------
1,000,000 Los Angeles, CA, IDA Weekly VRDNs (Series 1985A)/
(Mediatech)/(Chemical Bank LOC) P-1 1,000,000
------------------------------------------------------
3,000,000 Los Angeles, CA, Wastewater System, 3.30% CP,
Mandatory Tender 12/15/94 A-1+ 3,000,000
------------------------------------------------------
2,750,000 Metropolitan Water District, CA, 3.45% CP (Southern
California District), Mandatory Tender 12/21/94 A-1+ 2,750,000
------------------------------------------------------
2,000,000 Monterey Peninsula, CA, Water Management District
Weekly VRDNs (Series 1992)/(Wastewater
Reclamation)/(Sumitomo Bank Ltd. LOC) VMIG1 2,000,000
------------------------------------------------------
4,000,000 Orange County, CA, Monthly VRNs (Series B) SP-1+ 4,000,000
------------------------------------------------------
1,800,000 Orange County, CA, IDA Weekly VRDNs (Hon Development
Corp.)/(Series 1985B--Niguel Summit II)/(Bank of
America NT&SA LOC) VMIG1 1,800,000
------------------------------------------------------
1,900,000 Orange County, CA, IDA Weekly VRDNs (Series 1991A)/
(Apartment Development The Lakes)/(Citibank N.A. LOC) A-1 1,900,000
------------------------------------------------------
</TABLE>
CALIFORNIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ------------------------------------------------------ -------- -----------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------
$1,900,000 Orange County, CA, Municipal Water District Water
Facilities COPs Weekly VRDNs (Series B)/
(Allen-McColloch Pipeline, Inc.)/(National Westminster
Bank PLC LOC) A-1+ $ 1,900,000
------------------------------------------------------
1,000,000 Placerville, CA, 4.25% TRANs, 6/30/95 SP-1+ 1,000,716
------------------------------------------------------
1,000,000 Riverside County, CA, COPs Weekly VRDNs (Public
Facility Finance Program)/(Sanwa Bank Ltd. LOC) MIG1 1,000,000
------------------------------------------------------
1,000,000 Roseville, CA, Hospital Facilities Authority Weekly
VRDNs (Series 1989A)/(Roseville Hospital)/(Toronto
Dominion Bank LOC) VMIG1 1,000,000
------------------------------------------------------
1,600,000 Sacramento, CA, COPs Weekly VRDNs (Series 1990)/
(Administration Center & Courthouse)/(Union Bank of
Switzerland LOC) VMIG1 1,600,000
------------------------------------------------------
4,000,000 San Bernardino County, CA, 4.50% TRANs, 7/31/95 SP-1+ 4,019,063
------------------------------------------------------
1,700,000 San Bernardino County, CA, Weekly VRDNs (Series
1985)/(Woodview Apartments)/(Bank of America LOC) VMIG1 1,700,000
------------------------------------------------------
1,500,000 San Francisco, CA, City and County Redevelopment
Agency Weekly VRDNs (Series B1)/(Fillmore
Center)/(Bank of Nova Scotia LOC) A-1+ 1,500,000
------------------------------------------------------
1,000,000 Santa Clara County, CA, Housing Authority Weekly VRDNs
(Series 1985G)/(Benton Park Central
Apartments)/(Citibank N.A. LOC) P-1 1,000,000
------------------------------------------------------
900,000 Santa Clara County-El Comino Hospital District, CA,
Weekly VRDNs (Valley Medical Center)/(National
Westminster Bank LOC) A-1+ 900,000
------------------------------------------------------
400,000 Santa Clara, CA, Weekly VRDNs (Series 1985C)/(Santa
Clara Electric System)/(National Westminster Bank PLC
LOC) VMIG1 400,000
------------------------------------------------------
1,400,000 Selma, CA, 4.30% TRANs, 6/30/95 SP-1 1,400,493
------------------------------------------------------
1,000,000 Solano County, CA, 3.25% TRANs, 11/1/94 SP-1+ 1,000,413
------------------------------------------------------
</TABLE>
CALIFORNIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ------------------------------------------------------ -------- -----------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------
$ 885,000 Stockton, CA, IDR Refunding Weekly VRDNs (Series
1993)/(La Quinte Motor Inns, Inc.)/(Nationsbank of
Texas N.A. LOC) P-1 $ 885,000
------------------------------------------------------
1,000,000 Vallejo, CA, Commercial Development Refunding Weekly
VRDNs (Series 1994A)/(Vallejo Center Associates)/(Bank
of Tokyo Ltd. LOC) A-1 1,000,000
------------------------------------------------------
3,000,000 West Basin and Central Financing Authority, CA, 3.40%
CP (Municipal Water District)/(Toronto Dominion Bank
BPA), Mandatory Tender 11/28/94 A-1+ 3,000,000
------------------------------------------------------
3,000,000 Yuba, CA, Community College District, 3.00% TRANs,
12/7/94 MIG1 3,001,872
------------------------------------------------------ -----------
TOTAL INVESTMENTS, AT AMORTIZED COST $74,163,053+
------------------------------------------------------ -----------
</TABLE>
(a) Denotes restricted securities which are subject to resale under Federal
Securities laws. These securities have been determined to be liquid under
criteria established by the Board of Trustees.
+ Also represents cost for federal tax purposes.
* See Notes to Portfolio of Investments on page 10.
Note: The categories of investments are shown as a percentage of net assets
($74,707,347) at September 30, 1994.
CALIFORNIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
BPA -- Bond Purchase Agreement
COPs -- Certificates of Participation
CP -- Commercial Paper
FGIC -- Financial Guaranty Insurance Company
HFA -- Housing Finance Authority/Agency
IDA -- Industrial Development Authority
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
LOCs -- Letters of Credit
MBIA -- Municipal Bond Investors Assurance
PLC -- Public Limited Company
RANs -- Revenue Anticipation Notes
TOBs -- Tender Option Bonds
TRANs -- Tax and Revenue Anticipation Notes
VRDCs/IVRCs -- Variable Rate Demand Certificates/Inverse Variable Rate Certificates
VRDNs -- Variable Rate Demand Notes
VRNs -- Variable Rate Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CALIFORNIA MUNICIPAL CASH TRUST
NOTES TO PORTFOLIO OF INVESTMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
S&P
A Standard & Poor's 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 (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
MOODY'S
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
S&P
Standard & Poor's 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.)
MOODY'S
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
S&P
A Standard & Poor's 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 designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated "A-1."
MOODY'S
P-1 Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations.
P-2 Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations.
LONG-TERM DEBT RATINGS
S&P
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
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
AAA Bonds that 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 edge." Interest payments are protected by a large margin and
principal is secure. While the various protective elements are likely to
change, such changes which can be foreseen are most unlikely to impair the
fundamentally strong position of such issues.
AA Bonds that 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 that 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 that 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's 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" Moody's.
CALIFORNIA MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments, at amortized cost and value $74,163,053
- --------------------------------------------------------------------------------
Cash 330,509
- --------------------------------------------------------------------------------
Interest receivable 347,207
- --------------------------------------------------------------------------------
Receivable from adviser 36,500
- --------------------------------------------------------------------------------
Receivable for Fund shares sold 310
- -------------------------------------------------------------------------------- -----------
Total assets 74,877,579
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Dividends payable $141,678
- ---------------------------------------------------------------------
Payable for Fund shares redeemed 2,220
- ---------------------------------------------------------------------
Accrued expenses 26,334
- --------------------------------------------------------------------- --------
Total liabilities 170,232
- -------------------------------------------------------------------------------- -----------
NET ASSETS for 74,707,347 shares of beneficial interest outstanding $74,707,347
- -------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
($74,707,347 / 74,707,347 shares of beneficial interest outstanding) $1.00
- -------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CALIFORNIA MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest income $2,453,713
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $469,163
- ----------------------------------------------------------------------
Trustees' fees 9,277
- ----------------------------------------------------------------------
Administrative personnel and services 178,552
- ----------------------------------------------------------------------
Custodian and portfolio accounting fees 61,140
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 25,339
- ----------------------------------------------------------------------
Fund share registration costs 20,632
- ----------------------------------------------------------------------
Auditing fees 19,760
- ----------------------------------------------------------------------
Legal fees 22,741
- ----------------------------------------------------------------------
Printing and postage 22,548
- ----------------------------------------------------------------------
Insurance premiums 6,782
- ----------------------------------------------------------------------
Shareholder services fee 74,107
- ----------------------------------------------------------------------
Miscellaneous 8,568
- ---------------------------------------------------------------------- --------
Total expenses 918,609
- ----------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 370,160
- ---------------------------------------------------------------------- --------
Net expenses 548,449
- --------------------------------------------------------------------------------- ----------
Net investment income $1,905,264
- --------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CALIFORNIA MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
1994 1993
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------
Net investment income $ 1,905,264 $ 2,163,015
- --------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------
Dividends to shareholders from net investment income (1,905,264) (2,163,015)
- --------------------------------------------------------------- ------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS--
- ---------------------------------------------------------------
Proceeds from sale of shares 362,061,495 446,459,618
- ---------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of dividends declared 324,591 279,614
- ---------------------------------------------------------------
Cost of shares redeemed (392,000,668) (402,126,423)
- --------------------------------------------------------------- ------------- -------------
Change in net assets from Fund share transactions (29,614,582) 44,612,809
- --------------------------------------------------------------- ------------- -------------
Change in net assets (29,614,582) 44,612,809
- ---------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------
Beginning of period 104,321,929 59,709,120
- --------------------------------------------------------------- ------------- -------------
End of period $ 74,707,347 $ 104,321,929
- --------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CALIFORNIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------
1994 1993 1992 1991 1990 1989*
- ------------------------------------ ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------
Net investment income 0.02 0.02 0.03 0.04 0.05 0.03
- ------------------------------------ ----- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS
- ------------------------------------
Dividends to shareholders from net
investment income (0.02) (0.02) (0.03) (0.04) (0.05) (0.03)
- ------------------------------------ ----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------ ----- ----- ----- ----- ----- -----
TOTAL RETURN** 2.07% 2.03% 2.83% 4.30% 5.38% 2.95%
- ------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------
Expenses 0.58% 0.54% 0.45% 0.35% 0.38% 0.40%(a)
- ------------------------------------
Net investment income 2.03% 2.00% 2.76% 4.19% 5.27% 5.86%(a)
- ------------------------------------
Expense waiver/reimbursement (b) 0.40% 0.35% 0.58% 0.75% 0.86% 0.89%(a)
- ------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------
Net assets, end of period (000
omitted) $74,707 $104,322 $59,709 $56,754 $50,391 $36,628
- ------------------------------------
</TABLE>
* Reflects operations for the period from March 15, 1989 (date of initial
public offering) to September 30, 1989.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
CALIFORNIA MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Effective August 13, 1994, California Municipal Cash Trust (the "Fund") was
reorganized into an investment portfolio of Federated Municipal Trust (the
"Trust"). The Trust is registered under the Investment Company Act of 1940, as
amended (the "Act"), as an open-end, management investment company. The Trust
consists of thirteen, non-diversified portfolios. The financial statements
included herein present only those of the Fund. The financial statements of the
other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
B. INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Distributions
to shareholders are recorded on the ex-dividend date.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its tax-exempt income.
Accordingly, no provisions for federal tax are necessary.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis
are marked to market daily and begin earning interest on the settlement date.
E. CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion of
its assets in issuers located in one state, it will be more susceptible to
factors adversely affecting issuers of that state than would be a comparable
general tax-exempt mutual fund. In order to reduce the credit risk associated
with such factors, at September 30, 1994, 64.7% of the securities in the
portfolio of investments are backed by letters of credit or bond insurance of
various financial institutions and financial guaranty assurance agencies. The
value of investments insured by or supported (backed) by a letter of credit
for any one institution or agency did not exceed 6.7% of total investments.
CALIFORNIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
F. RESTRICTED SECURITIES--Restricted securities are securities that may only be
resold upon registration under Federal securities laws or in transactions
exempt from such registration. Many restricted securities may be resold in
the secondary market in transactions exempt from registration. In some cases,
the restricted securities may be resold without registration upon exercise of
a demand feature. Such restricted securities may be determined to be liquid
under criteria established by the Board of Trustees. The Fund will not incur
any registration costs upon such resales. Restricted securities are valued at
amortized cost in accordance with Rule 2a-7 under the Act. Additional
information on each restricted security held at September 30, 1994 is as
follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
------------------------------------------------------------- ----------- -----------
<S> <C> <C>
California VRDCs/IVRCs Trust (Series 1994C) Weekly VRDNs 2/22/94 $5,000,000
</TABLE>
G. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
September 30, 1994, capital paid-in aggregated $74,707,347. Transactions in Fund
shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------
1994 1993
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 362,061,495 446,459,618
- ---------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 324,591 279,614
- ---------------------------------------------------------------
Shares redeemed (392,000,668) (402,126,423)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Fund share transactions (29,614,582) 44,612,809
- --------------------------------------------------------------- ------------ ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the FAS fee is based
on the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of shares.
CALIFORNIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund for the period. This fee is to obtain
certain personal services for shareholders and to maintain the shareholder
accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. The
FServ fee is based on the size, type and number of accounts and transactions
made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses of $32,354 were borne initially
by the Adviser. The Fund has agreed to reimburse the Adviser at an annual rate
of .005 of 1% of average daily net assets until expenses initially borne by the
Adviser are fully reimbursed or the expiration of five years after March 15,
1989, the date the Fund's registration statement first became effective,
whichever occurs earlier. For the year ended September 30, 1994, the Fund paid
the Adviser $2,492 pursuant to this agreement.
INTERFUND TRANSACTIONS--During the year ended September 30, 1994, the Fund
engaged in purchase and sale transactions with other affiliated funds pursuant
to Rule 17a-7 under the Act amounting to $178,300,000 and $207,670,000,
respectively. These purchases and sales were conducted on an arms length basis
and transacted for cash consideration only, at independent current market
prices, and without brokerage commissions, fees, or other remuneration.
Certain of the Officers and Trustees of the Fund are Officers and Directors or
Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
Federated Municipal Trust
(California Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of
California Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust, a Massachusetts business trust), including the schedule of portfolio
investments, as of September 30, 1994, and the related statements of operations,
changes in net assets, and the financial highlights for the year then ended.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit. The financial
statements referred to above for California Municipal Cash Trust as of September
30, 1993, as well as the financial highlights for the periods ended September
30, 1989, through September 30, 1993, were audited by other auditors whose
report dated November 12, 1993, expressed an unqualified opinion on those
statements and financial highlights.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform our audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of September 30, 1994,
by correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
California Municipal Cash Trust, an investment portfolio of Federated Municipal
Trust, as of September 30, 1994, the results of its operations, changes in its
net assets and the financial highlights for the year then ended, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
November 8, 1994
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland Glen R. Johnson
James E. Dowd President
Lawrence D. Ellis, M.D. J. Christopher Donahue
Edward L. Flaherty, Jr. Vice President
Glen R. Johnson Richard B. Fisher
Peter E. Madden Vice President
Gregor F. Meyer Edward C. Gonzales
Wesley W. Posvar Vice President and Treasurer
Marjorie P. Smuts John W. McGonigle
Vice President and Secretary
John A. Staley, IV
Vice President
David M. Taylor
Assistant Treasurer
G. Andrew Bonnewell
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
