1933 Act File No. 33-31259
1940 Act File No. 811-5911
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. 33 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 33 X
FEDERATED MUNICIPAL TRUST
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
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)
X on February 21, 1995 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on pursuant to paragraph (a) of Rule 485.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on December 15, 1994; or
intends to file the Notice required by that Rule on or about
____________; or
during the most recent fiscal year did not sell any securities
pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant
to
Rule 24f-2(b)(2), need not file the Notice.
Copies to:
Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of FEDERATED
MUNICIPAL TRUST, which consists of thirteen portfolios: (1) Connecticut
Municipal Cash Trust, (a) Institutional Service Shares; (2) Pennsylvania
Municipal Cash Trust, (a) Cash Series Shares and (b) Institutional
Service Shares; (3) Minnesota Municipal Cash Trust, (a) Cash Series
Shares and (b) Institutional Shares; (4) New Jersey Municipal Cash
Trust, (a) Institutional Shares and (b) Institutional Service Shares;
(5) Ohio Municipal Cash Trust, (a) Cash II Shares and (b) Institutional
Shares; (6) Virginia Municipal Cash Trust, (a) Institutional Shares and
(b) Institutional Service Shares; (7) Alabama Municipal Cash Trust; (8)
North Carolina Municipal Cash Trust; (9) Maryland Municipal Cash Trust;
(10) California Municipal Cash Trust; (11) New York Municipal Cash
Trust, (a) Cash II Shares and (b) Institutional Service Shares; (12)
Florida Municipal Cash Trust; and (13) Massachusetts Municipal Cash
Trust, (a) Institutional Service Shares and (b) BayFunds Shares, relates
to all of the above except the BayFunds Shares class of Massachusetts
Municipal Cash Trust and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1-13) Cover Page.
Item 2. Synopsis (1-13) Summary of Fund
Expenses.
Item 3. Condensed Financial
Information (8,9,10) Financial Highlights;
(1-10) Performance
Information; (3b) Tax-
Equivalent Yield.
Item 4. General Description of
Registrant (1-13) General Information;
(1-13a) Investment
Information;
(1-13a) Investment Objective;
(1-
13a) Investment Policies;
(13b)
Investment Objective and
Policies; (1) Connecticut
Municipal Securities;
(2) Pennsylvania Municipal
Securities; (3) Minnesota
Municipal Securities; (4) New
Jersey Municipal Securities;
(5)
Ohio Municipal Securities;
(6) Virginia Municipal
Securities; (7) Alabama
Municipal Securities; (8)
North Carolina Municipal
Securities; (9) Maryland
Municipal Securities; (10)
California Municipal
Securities;
(11) New York Municipal
Securities; (12) Florida
Municipal Securities;
(13) Massachusetts Municipal
Securities; (1) Connecticut
Investment Risks; (2)
Pennsylvania Investment Risks;
(3) Minnesota Investment
Risks;
(4) New Jersey Investment
Risks;
(5) Ohio Investment Risks;
(6) Virginia Investment Risks;
(7) Alabama Investment Risks;
(8) North Carolina Investment
Risks; (9) Maryland Investment
Risks; (10) California
Investment Risks; (12) New
York
Investment Risks;
(13) Massachusetts Investment
Risks; (1-13) Non-
Diversification;
(1-13a) Investment
Limitations;
(1-13) Regulatory Compliance.
Item 5. Management of the Fund (1-13a) Federated Municipal
Trust Information; (1-13a)
Management of Federated
Municipal Trust; (13b)
Management, Distribution and
Administration; (1-7, 12)
Distribution of Cash Series,
Institutional, Institutional
Service, or Cash II Shares;
(10,11,13a) Distribution of
Fund Shares; (1-13a)
Administration of the Fund;
(7,11,12) Expenses of the Fund
and Institutional,
Institutional Service, or Cash
II Shares; (8-13) Expenses of
the Fund.
Item 6. Capital Stock and Other
Securities (1-13a) Dividends; (1-13a)
Capital Gains; (13b) dividends
and Distributions; (1-13a)
Shareholder Information; (1-
13) Voting Rights; (1-13a)
Massachusetts Partnership Law;
(1-13) Tax Information; (1-12)
Federal Income Tax; (1)
Connecticut Tax
Considerations; (2)
Pennsylvania Tax
Considerations; (3) Minnesota
Tax Considerations; (4) New
Jersey Tax Considerations; (5)
Ohio Tax Considerations; (6)
Virginia Tax Considerations;
(7) Alabama Taxes; (8) North
Carolina Taxes; (9) Maryland
Tax Considerations; (10)
California State Income Taxes;
(11) New York State Tax
Considerations; (12) Florida
Tax Considerations; (13)
Massachusetts Tax
Considerations; (1-13) Other
State and Local Taxes;
(2,3,4,5,6,7,12) Other Classes
of Shares.
Item 7. Purchase of Securities Being
Offered (1-13) Net Asset Value;
(3a,4a,5a) Distribution Plan;
(12) Distribution and
Shareholder Servicing
Arrangements; (13a)
Distribution and Shareholder
Services Plan; (13b)
Distribution; (13b)
Shareholder Servicing
Arrangements; (7-12) Other
Payments to Financial
Institutions; (6b,9)
Shareholder Services Plan;
(13b) How to Buy Shares; (1-
7,9,11) Investing in Cash
Series, Institutional,
Institutional Services or Cash
II Shares; (7,8,9,10,12)
Investing in Fund Shares; (1-
5,10,11,12) Share Purchases;
(1-13) Minimum Investment
Required; (1-11) What Shares
Cost; (2a,3a,5a) Systematic
Investment Program; (2a,3a,5a)
Automatic Investments; (1-13)
Subaccounting Services; (1-13)
Certificates and
Confirmations.
Item 8. Redemption or Repurchase (1-6,11) Redeeming Cash
Series, Institutional,
Institutional Service or Cash
II Shares; (13b) How to Redeem
Shares; (7,8) Redeeming Fund
Shares; (10,13a) Redeeming
Shares; (2a,3a,5a,13) Through
a Financial Institution;
(2a,3a,5a,9) Directly from the
Fund; (1,2,3b,4,5b,6,10,11)
Telephone Redemption; (1-
8,10,11) Written Requests;
(11,12) By Mail; (9, 12) By
Writing a Check; (1-6)
Redemption Before Purchase
Instruments Clear; (1-12)
Accounts With Low Balances.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page (1-13) Cover Page.
Item 11. Table of Contents (1-13) Table of Contents.
Item 12. General Information and
History (1-13) General Information
About the Fund.
Item 13. Investment Objectives and
Policies (1-13) Investment Objective
and Policies; (1-13)
Investment Limitations.
Item 14. Management of the Fund (1-13) Federated Municipal
Trust Management.
Item 15. Control Persons and Principal
Holders of Securities Not applicable.
Item 16. Investment Advisory and Other
Services (1-13) Investment Advisory
Services; (1-13)
Administrative Services;
(3a,4a,5a,11) Distribution
Plan; (3b,7b,10) Shareholder
Services Plan; (12)
Distribution and Shareholder
Services Plan.
Item 17. Brokerage Allocation (1-13) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered (1-13) Purchasing Shares;
(1-13) Determining Net Asset
Value; (1-13) Redeeming
Shares.
Item 20. Tax Status (1-13) Tax Status.
Item 21. Underwriters Not applicable.
Item 22. Calculation of Performance
Data (1-13) Yield; (1-13) Effective
Yield; (1,2,3a,4-13) Tax-
Equivalent Yield; (1-13)
Performance Comparisons.
Item 23. Financial Statements (1-13) Filed in Part A.
ALABAMA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
PROSPECTUS
The shares of Alabama Municipal Cash Trust (the "Fund") offered by this
prospectus represent interests in a non-diversified portfolio of
Federated
Municipal Trust (the "Trust"), an open-end management investment company
(a
mutual fund). The Fund invests in short-term Alabama municipal
securities to
achieve current income exempt from federal regular income tax and the
income
taxes imposed by the State of Alabama consistent with stability of
principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated
February 28,
1995, with the Securities and Exchange Commission. The information
contained in
the Statement of Additional Information is incorporated by reference
into this
prospectus. You may request a copy of the Statement of Additional
Information
free of charge by calling 1-800-235-4669. To obtain other information,
or make
inquiries about the Fund, contact the Fund at the address listed in the
back of
this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
Alabama Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Shares
8
Administration of the Fund
9
NET ASSET VALUE
10
- ------------------------------------------------------
HOW TO PURCHASE SHARES
10
- ------------------------------------------------------
Special Purchase Features
11
HOW TO REDEEM SHARES
11
- ------------------------------------------------------
Special Redemption Features
12
ACCOUNT INFORMATION
13
- ------------------------------------------------------
Dividends
13
Capital Gains
13
Certificates and Confirmations
13
Accounts With Low Balances
13
SHAREHOLDER INFORMATION
13
- ------------------------------------------------------
Voting Rights
13
Massachusetts Partnership Law
14
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
15
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
ADDRESSES
16
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)..................................................................
.. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)..................................................................
.. None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as
applicable)...........................................................
None
Redemption Fee (as a percentage of amount redeemed, if
applicable)....................................... None
Exchange
Fee.....................................................................
........................ None
ANNUAL FUND OPERATING
EXPENSES
(As a percentage of average net
assets)
Management Fee (after waiver)
(1).....................................................................
... 0.00%
12b-1
Fee.....................................................................
........................... None
Total Other Expenses (after expense
reimbursement).......................................................
0.59%
Shareholder Services Fee (after waiver)
(2).............................................. 0.24%
Total Fund Operating Expenses
(3)..............................................................
0.59%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of the
management fee. The adviser can terminate this voluntary waiver at
any time
at its sole discretion. The maximum management fee is 0.50%.
(2) The maximum shareholder services fee is 0.25%.
(3) The Total Fund Operating Expenses in the table above are based on
expenses
expected during the fiscal year ending October 31, 1995. The Total
Fund
Operating Expenses were 0.36% for the fiscal year ended October 31,
1994
and were 0.98% absent the voluntary waiver of the management fee
and the
voluntary reimbursement of certain other operating expenses.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of the Fund will bear,
either
directly or indirectly. For more complete descriptions of the various
costs and
expenses, see "How to Purchase Shares" and "Trust Information." Wire-
transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years 5 years 10 years
<S>
<C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and
(2) redemption at the end of each time period.........................
$6 $19 $33 $74
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
ALABAMA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for the period presented, is included in the Annual
Report,
which is incorporated by reference. This table should be read in
conjunction
with the Fund's financial statements and notes thereto, which may be
obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994*
<S>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD
$ 1.00
- ------------------------------------------------------------------------
- -------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
- -------------------
Net investment income
0.02
- ------------------------------------------------------------------------
- -------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
- -------------------
Dividends to shareholders from net investment income
(0.02)
- ------------------------------------------------------------------------
- ------------------- -------
NET ASSET VALUE, END OF PERIOD
$ 1.00
- ------------------------------------------------------------------------
- ------------------- -------
TOTAL RETURN**
2.31%
- ------------------------------------------------------------------------
- -------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
- -------------------
Expenses
0.36%(b)
- ------------------------------------------------------------------------
- -------------------
Net investment income
2.67%(b)
- ------------------------------------------------------------------------
- -------------------
Expense waiver/reimbursement (a)
0.62%(b)
- ------------------------------------------------------------------------
- -------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
- -------------------
Net assets, end of period (000 omitted)
$142,804
- ------------------------------------------------------------------------
- -------------------
</TABLE>
* Reflects operations for the period from December 3, 1993 (date of
initial
public investment) to October 31, 1994. For the period from November
29,
1993 (start of business) to December 3, 1993 the Fund had no
investment
activity.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts Business Trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The Fund is designed for financial institutions acting in an
agency
or fiduciary capacity as a convenient means of accumulating an interest
in a
professionally managed, non-diversified portfolio investing primarily in
short-term Alabama municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Alabama taxpayers because it
invests
in municipal securities of Alabama. A minimum initial investment of
$10,000 over
a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the income tax imposed by the State of Alabama
consistent
with stability of principal. This investment objective cannot be changed
without
shareholder approval. While there is no assurance that the Fund will
achieve its
investment objective, it endeavors to do so by following the investment
policies
described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Alabama
municipal securities (as defined below) maturing in 13 months or less.
As a
matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be
exempt from
federal regular income tax and Alabama state income tax or at least 80%
of its
net assets will be invested in obligations, the interest income from
which is
exempt from federal regular and Alabama state income tax. (Federal
regular
income tax does not include the federal individual alternative minimum
tax or
the federal alternative minimum tax for corporations.) The average
maturity of
the securities in the Fund's portfolio, computed on a dollar-weighted
basis,
will be 90 days or less. Unless indicated otherwise, the investment
policies may
be changed by the Trustees without shareholder approval. Shareholders
will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by
or on behalf of Alabama and its political subdivisions and financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and Alabama state income tax
("Alabama municipal securities"). Examples of Alabama municipal
securities
include, but are not limited to:
. tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
. bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
. municipal commercial paper and other short-term notes;
. variable rate demand notes;
. municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
. participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in
Alabama
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying Alabama
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local
governments or authorities to finance the acquisition of equipment and
facilities. They may take the form of a lease, an installment purchase
contract,
a conditional sales contract, or a participation interest in any of the
above.
Lease obligations may be subject to periodic appropriation.
RATINGS. The Alabama municipal securities in which the Fund invests must
be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or
FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all considered
rated in one
of the two highest short-term rating categories. The Fund will follow
applicable
regulations in determining whether a security rated by more than one
NRSRO can
be treated as being in one of the two highest short-term rating
categories;
currently, such securities must be rated by two NRSROs in one of their
two
highest rating categories. See "Regulatory Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit
enhanced by a guaranty, letter of credit, or insurance. The Fund
typically
evaluates the credit quality and ratings of credit-enhanced securities
based
upon the financial condition and ratings of the party providing the
credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit
enhanced by the credit enhancer, in which case the securities will be
treated as
having been issued by both the issuer and the credit enhancer. The
bankruptcy,
receivership, or default of the credit enhancer will adversely affect
the
quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund
may
invest pursuant to its investment objective and policies but which are
subject
to restrictions on resale under federal securities laws. Under criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase, together with other illiquid
securities, to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines
that market conditions call for a temporary defensive posture, the Fund
may
invest in tax-exempt or taxable securities such as: obligations issued
by or on
behalf of municipal or corporate issuers having the same quality
characteristics
as described above; obligations issued or guaranteed by the U.S.
government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so. However, the interest from certain
Alabama
municipal securities is subject to the federal alternative minimum tax.
ALABAMA MUNICIPAL SECURITIES
Alabama municipal securities are generally issued to finance public
works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
Alabama municipal securities include industrial development bonds issued
by or
on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Alabama municipal securities are
"general
obligation" and "revenue" bonds. General obligation bonds are secured by
the
issuer's pledge of its full faith and credit and taxing power for the
payment of
principal and interest. Interest on and principal of revenue bonds,
however, are
payable only from the revenue generated by the facility financed by the
bond or
other specified sources of revenue. Revenue bonds do not represent a
pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Alabama municipal securities depend on a variety of factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of Alabama municipal securities and participation interests, or the
credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of
Alabama
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in Alabama municipal securities which are repayable
out of
revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
Alabama municipal securities could involve an increased risk to the Fund
should
any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Alabama municipal securities are subject to
the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase
agreements
(arrangements in which the Fund sells a money market instrument for a
percentage
of its cash value with an agreement to buy it back on a set date), or
pledge
securities except, under certain circumstances, the Fund may borrow up
to
one-third of the value of its total assets and pledge up to 15% of the
value of
total assets to secure such borrowings. This investment limitation
cannot be
changed without shareholder approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Statement of Additional Information, in order to
comply with
applicable laws and regulations, including the provisions of and
regulations
under the Investment Company Act of 1940, as amended. In particular, the
Fund
will comply with the various requirements of Rule 2a-7, which regulates
money
market mutual funds. The Fund will determine the effective maturity of
its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to
Rule 2a-7. The Fund may change these operational policies to reflect
changes in
the laws and regulations without the approval of its shareholders.
TRUST INFORMATION
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- --------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are
responsible for managing the Trust's business affairs and for exercising
all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .50 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of
the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is
the
principal distributor for a number of investment companies. Federated
Securities
Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services
Plan (the
"Services Plan") under which it will pay Federated Shareholder Services,
an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of the Fund to provide personal services
and/or
maintenance of shareholder accounts to the Fund and its shareholders.
From time
to time and for such periods as deemed appropriate, the amount stated
above may
be reduced voluntarily.
Federated Shareholder Services may elect to pay financial institutions
fees
based upon shares owned by their clients or customers for services
provided to
those clients or customers. The schedules of such fees and the basis
upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds,
investment
advisers, and broker/dealers to provide certain services to
shareholders. These
services may include, but are not limited to, distributing prospectuses
and
other information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of shares. Any fees paid for
these
services by the distributor will be reimbursed by the adviser and not
the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act, and therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary
of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian
for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
- ------------------------------------------------------------------------
- --------
The Fund attempts to stabilize the net asset value of its shares at
$1.00 by
valuing the portfolio securities using the amortized cost method. The
net asset
value per share is determined by subtracting total liabilities from
total assets
and dividing the remainder by the number of shares outstanding. The Fund
cannot
guarantee that its net asset value will always remain at $1.00 per
share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
HOW TO PURCHASE SHARES
- ------------------------------------------------------------------------
- --------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased as described below either through a financial institution
(such as
a bank or broker/dealer) or by wire or by check directly from the Fund,
with a
minimum initial investment of $10,000. (Financial institutions may
impose
different minimum investment requirements on their customers.)
In connection with any sale, Federated Securities Corp. may, from time
to time,
offer certain items of nominal value to any shareholder or investor. The
Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and
returning
the new account form available from the Fund before shares can be
purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may
purchase shares
through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives
payment by
wire or converts payment by check from the financial institution into
federal
funds. It is the financial institution's responsibility to transmit
orders
promptly. Financial institutions may charge additional fees for their
services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling
the Fund
before 1:00 p.m. (Eastern time). The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) in
order to begin earning dividends that same day. Federal funds should be
wired as
follows: Federated Services Company c/o State Street Bank and Trust
Company,
Boston, MA; Attention; EDGEWIRE; For Credit to: Alabama Municipal Cash
Trust;
(Fund Number) (this number can be found on the account statement or by
contacting the Fund) Group Number or Order Number; Nominee or
Institution Name;
and ABA Number 011000028. Shares cannot be purchased by wire on holidays
when
wire transfers are restricted.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check
made
payable to Alabama Municipal Cash Trust to: Federated Services Company,
c/o
State Street Bank and Trust Company, P.O. Box 8602, Boston, MA 02266-
8602.
Orders by mail are considered received when payment by check is
converted into
federal funds (normally the business day after the check is received)
and shares
begin earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM. A minimum of $100 can be automatically
withdrawn
periodically from the shareholder's checking account at an Automated
Clearing
House ("ACH") member and invested in Fund shares. Shareholders should
contact
their financial institution or the Fund to participate in this program.
HOW TO REDEEM SHARES
- ------------------------------------------------------------------------
- --------
Shares are redeemed at their net asset value next determined after the
Fund
receives the redemption request. Redemptions will be made on days on
which the
Fund computes its net asset value. Redemption requests must be received
in
proper form and can be made as described below.
REDEEMING SHARES THROUGH A FINANCIAL INSTITUTION. Shares may be redeemed
by
contacting the shareholder's financial institution. Shares will be
redeemed at
the net asset value next determined after Federated Services Company
receives
the redemption request. According to the shareholder's instructions,
redemption
proceeds can be sent to the financial institution or to the shareholder
by check
or by wire. The financial institution is responsible for promptly
submitting
redemption requests and providing proper written redemption
instructions.
Customary fees and commissions may be charged by the financial
institution for
this service.
REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by
calling
the Fund provided the Fund has a properly completed authorization form.
These
forms can be obtained from Federated Securities Corp. Proceeds from
redemption
requests received before 12:00 noon (Eastern time) will be wired the
same day to
the shareholder's account at a domestic commercial bank which is a
member of the
Federal Reserve System, but will not include that day's dividend.
Proceeds from
redemption requests received after that time will include that day's
dividends
but will be wired the following business day. Under limited
circumstances,
arrangements may be made with the distributor for same-day payment of
proceeds,
without that day's dividend, for redemption requests received before
2:00 p.m.
(Eastern time). Proceeds from redeemed shares purchased by check or
through ACH
will not be wired until that method of payment has cleared.
Telephone instructions may be recorded and if reasonable procedures are
not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares
By Mail"
should be considered. If at any time the Fund shall determine it
necessary to
terminate or modify the telephone redemption privilege, shareholders
would be
promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by
mailing a
written request together with properly endorsed certificates, if issued,
to:
Federated Services Company, c/o State Street Bank and Trust Company,
P.O. Box
8602, Boston, MA 02266-8602. The written request should state: Alabama
Municipal
Cash Trust; the account name as registered with the Fund; the account
number;
and the number of shares to be redeemed or the dollar amount requested.
All
owners of the account must sign the request exactly as the shares are
registered. Any share certificates should be sent by registered or
certified
mail with the written request. Normally, a check for the proceeds is
mailed
within one business day, but in no event more than seven days, after
receipt of
a proper written redemption request. Dividends are paid up to and
including the
day that a redemption request is processed.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by: a commercial or savings bank, trust company or
savings
and loan association whose deposits are insured by an organization which
is
administered by the Federal Deposit Insurance Corporation; a member of a
domestic stock exchange; or any other "eligible guarantor institution,"
as
defined in the Securities Exchange Act of 1934. The Fund does not accept
signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to
allow
shareholders to redeem their Fund shares. A fee will be charged for this
service. The check writing service allows the shareholder to receive the
daily
dividend declared on the shares to be redeemed until the check is
presented to
State Street Bank for payment. However, checks should never be made
payable or
sent to State Street Bank or the Fund to redeem shares, and a check may
not be
written to close an account. Canceled checks are sent to the shareholder
each
month.
DEBIT CARD. Upon request, a debit account will be established. This
account
allows shareholders to redeem shares by using a debit card. A fee will
be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of
at
least $10,000, a systematic withdrawal program may be established
whereby
automatic redemptions are made from the account and transferred
electronically
to any commercial bank, savings bank, or credit union that is an ACH
member.
Shareholders may apply for participation in this program through their
financial
institution or the Fund.
ACCOUNT INFORMATION
- ------------------------------------------------------------------------
- --------
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing. Monthly
confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, if an
account
balance falls below $10,000 due to shareholder redemptions, the Fund may
redeem
all of the remaining shares in that account and pay the proceeds to the
shareholder. Before shares are redeemed to close an account, the
shareholder
will be notified in writing and allowed 30 days to purchase additional
shares to
meet the minimum requirement.
SHAREHOLDER INFORMATION
- ------------------------------------------------------------------------
- --------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of each
portfolio
in the Trust have equal voting rights, except that in matters affecting
only a
particular portfolio, only shares of that portfolio are entitled to
vote. As a
Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for
certain
changes in the Trust's or the Fund's operation and for the election of
Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
As of January 10, 1995, Lynspen & Co., Birmingham, Alabama, owned 28.95%
and
Hubco, Birmingham, Alabama, owned 39.14% of the voting securities of the
Fund,
and, therefore, may, for certain purposes, be deemed to control the Fund
and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
Alabama. Shareholders are urged to consult their own tax advisers
regarding the
status of their accounts under state and local tax laws.
ALABAMA TAXES. Under existing Alabama laws, distributions made by the
Fund will
be not be subject to Alabama personal income taxes to the extent that
such
distributions are attributable to interest earned on obligations that
would be
exempt from Alabama personal income taxes if held directly by
shareholders (such
as obligations of Alabama or its political subdivisions, of the United
States or
of certain territories or possessions of the United States). Conversely,
to the
extent that distributions made by the Fund are derived from other types
of
obligations, such distributions will be subject to Alabama personal
income
taxes.
Shareholders may exclude from the share value of the Fund, for purpose
of the
Alabama personal property tax, that portion of the total share value
which is
attributable to the value of obligations of Alabama or its political
subdivisions, of the United States or of certain territories or
possessions of
the United States.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time, the Fund advertises its yield, effective yield, and
tax-equivalent yield.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
the Fund's tax-exempt yield, assuming a specific tax rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is
expressed as
a percentage.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C>
<C>
Alabama Municipal Cash Trust
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Investment Adviser
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 8602
Boston, MA 02266-8602
- ------------------------------------------------------------------------
- -----------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Independent Public Accountants
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
- ------------------------------------------------------------------------
- -----------------------------------------------
</TABLE>
ALABAMA MUNICIPAL
CASH TRUST
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated February 28, 1995
Logo
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314229790
3090802A (2/95)
Alabama Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of Alabama Municipal Cash Trust (the "Fund") dated
February 28, 1995. This Statement is not a prospectus. To receive a
copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
Alabama Investment Risks 2
Investment Limitations 2
Brokerage Transactions 4
Federated Municipal Trust
Management 5
Officers and Trustees 5
The Funds 8
Share Ownership 9
Trustees Compensation 9
Trustee Liability 10
Investment Adviser 10
Advisory Fees 10
Fund Administration 10
Shareholder Services Plan 11
Determining Net Asset Value 11
Redemption in Kind 11
The Fund's Tax Status 11
Performance Information 12
Yield 12
Effective Yield 12
Tax-Equivalent Yield 12
Tax-Equivalency Table 13
Total Return 13
Performance Comparisons 14
Investment Policies
Unless indicated otherwise, the policies described below may be changed
by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the
security, the issuer of any demand feature applicable to the security,
or
any guarantor of either the security or any demand feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution
irrevocable letters of credit or guarantees and give the Fund the right
to
demand payment of the principal amounts of the participation interests
plus
accrued interest on short notice (usually within seven days). The
municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation
interests
include the right to demand payment from the issuers of those interests.
By
purchasing participation interests having a seven day demand feature,
the
Fund is buying a security meeting the maturity and quality requirements
of
the Fund and also is receiving the tax-free benefits of the underlying
securities.
Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the
nature of the appropriation for the lease. Furthermore, a lease may
provide
that the participants cannot accelerate lease obligations upon default.
The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the
investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be
terminated
by the lessee; the potential recovery, if any, from a sale of the leased
property upon termination of the lease; the lessee's general credit
strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit
enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other
than normal transaction costs, are incurred. However, liquid assets of
the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are
marked
to market daily and are maintained until the transaction has been
settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than
20%
of the total value of its assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant
to
repurchase agreements. Repurchase agreements are arrangements in which
banks, brokers/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at
a mutually agreed upon time and price. To the extent that the seller
does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. The Fund or
its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund
will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by
the
Trustees.
Alabama Investment Risks
The State of Alabama has experienced some diversification of its economy
primarily centered around its metropolitan areas. Agriculture, once
dominant prior to World War II, gave way to the manufacturing of
textiles,
chemicals, paper and metals. Manufacturing comprises roughly 23% of
Alabama's non-agricultural employment, slightly higher than the rest of
the
U.S. Other major non-agricultural sectors include government (20%),
wholesale and retail trade (22%), and services including finance,
insurance, and real estate (24%). Over the last decade, the economy has
further diversified with the addition of high-tech firms to the
Huntsville
area and healthcare services in the Birmingham area. During the 1982
recession Alabama's unemployment rate climbed to the double digits.
However, the recent recession has not been quite as severe to the
Alabama
economy. The State's unemployment rate has reflected the national trends
and was recently below the national average (6.5%, November 30, 1992).
However, the signing of The North American Free Trade Agreement could
result in job losses in some of Alabama's traditional industries as
Mexico
offers a lower-cost environment.
Alabama's overall debt structure is more complex than most states, due
to
the many issuing authorities. Roughly 60% of Alabama's debts are special
or
limited tax obligations, payable from designated sources. Debt service
as a
percentage of budget revenues is currently 5.5%, which is among the ten
highest in the nation. However, because Alabama generally taxes and
spends
less than most states, debt service appears as a larger part of its
revenue
in relation to other states. Debt service on a per capita basis is
moderate. The State has a strong balanced budget act that allows
spending
only from moneys on hand. The Governor has the ability to prorate
budgeted
expenditures during the fiscal year in order to balance the budget. The
proration ability of the Governor is currently being challenged in
court.
The outcome may adversely affect the mechanism by which the budget is
balanced.
The Fund's concentration in securities issued by the State and its
political subdivisions provides a greater level of risk than a fund
whose
assets are diversified across numerous states and municipal issuers. The
ability of the State or its municipalities to meet their obligations
will
depend on the availability of tax and other revenues; economic,
political,
and demographic conditions within the State; and the underlying fiscal
condition of the State, its counties, and its municipalities.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as are
necessary for the clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements in
amounts up to one-third of the value of its total assets,
including
the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of
the portfolio by enabling the Fund to meet redemption requests
when
the liquidation of portfolio securities is deemed to be
inconvenient
or disadvantageous. The Fund will not purchase any securities
while
borrowings in excess of 5% of the value of its total assets are
outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except
as necessary to secure permitted borrowings. In those cases, it
may
pledge assets having a market value not exceeding the lesser of
the
dollar amounts borrowed or 15% of the value of its total assets at
the time of the pledge.
Lending Cash or Securities
The Fund will not lend any of its assets, except that it may
acquire
publicly or nonpublicly issued Alabama municipal securities or
temporary investments or enter into repurchase agreements in
accordance with its investment objective, policies, limitations,
or
Declaration of Trust.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts,
or commodity futures contracts.
Investing in Real Estate
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in securities of
issuers whose business involves the purchase or sale of real
estate
or in securities which are secured by real estate or interests in
real estate.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
Concentration of Investments
The Fund will not purchase securities, if, as a result of such
purchase 25% or more of the value of its total assets would be
invested in any one industry, or in industrial development bonds
or
other securities, the interest upon which is paid from revenues of
similar types of projects. However, the Fund may invest as
temporary
investments more than 25% of the value of its assets in cash or
cash
items, securities issued or guaranteed by the U.S. government, its
agencies, or instrumentalities, or instruments secured by these
money
market instruments, such as repurchase agreements.
The above limitations cannot be changed without shareholder approval.
The
following investment limitations, however, may be changed by the
Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Investing in Restricted Securities
The Fund will not invest more than 10% of its total assets in
securities subject to restrictions on resale under the Securities
Act
of 1933.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its net
assets
in illiquid securities.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment
companies,
except as part of a merger, consolidation, or other acquisition.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers (including companies responsible
for
paying principal and interest on industrial development bonds)
which
have records of less than three years of continuous operations,
including the operation of any predecessor.
Investing for Control
The Fund will not invest in securities of a company for the
purpose
of exercising control or management.
Investing in Issuers Whose Securities Are Owned by Officers and
Trustees
of the Trust
The Fund will not purchase or retain the securities of any issuer
if
the Officers and Trustees of the Trust or its investment adviser,
owning individually more than .50 of 1% of the issuer's
securities,
together own more than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or
any
combination of them.
Investing in Minerals
The Fund will not purchase or sell interests in oil, gas, or other
mineral exploration or development programs or leases, although it
may purchase the securities of issuers which invest in or sponsor
such programs.
For purposes of the above limitations, the Fund considers certificates
of
deposit and demand and time deposits issued by a U.S. branch of a
domestic
bank or savings and loan having capital, surplus, and undivided profits
in
excess of $100,000,000 at the time of investment to be "cash items."
Except
with respect to borrowing money, if a percentage limitation is adhered
to
at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a
violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of
the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order
at a favorable price. In working with dealers, the adviser will
generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Trustees. The adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the
Fund
or to the adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic
studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may
be
used by the adviser or its affiliates in advising the Fund and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid,
it would tend to reduce their expenses. The adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. During the period from November 29, 1993 (start of
business) to October 31, 1994, the Fund paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type
the Fund may make may also be made by those other accounts. When the
Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
Federated Municipal Trust Management
Officers and Trustees
Officers and Trustees are listed with their addresses, present positions
with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Center
Pittsburgh, PA
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner of
the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate
ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of
the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of
the
Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation
and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman,
Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds;
Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue
is
the son of John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.;
Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined
in
the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of
the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes
the
following investment companies: American Leaders Fund, Inc.; Annuity
Management Series; Arrow Funds; Automated Cash Management Trust;
Automated
Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.;
DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated
ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust;
Federated
Government Trust; Federated Growth Trust; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated
Index
Trust; Federated Institutional Trust; Federated Intermediate Government
Trust; Federated Master Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock
Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First
Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate
U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.;
Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government
Income Securities, Inc.; High Yield Cash Trust; Insight Institutional
Series, Inc.; Insurance Management Series; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond
Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S.
Government Money Market Trust; Liberty Term Trust, Inc. - 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; The
Medalist
Funds; Money Market Management, Inc.; Money Market Obligations Trust;
Money
Market Trust; Municipal Securities Income Trust; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; Portage Funds; RIMCO Monument
Funds;
The Shawmut Funds; Short-Term Municipal Trust; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust
for Financial Institutions; Trust For Government Cash Reserves; Trust
for
Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations;
World Investment Series, Inc.
Share Ownership
Officers and Trustees own less than 1% of the Trust's outstanding
shares.
As of January 10, 1995, the following shareholders of record owned 5% or
more of the outstanding shares of Alabama Municipal Cash Trust: McGriff
&
Seibels, Birmingham, AL, owned approximately 8,948,000 shares (5.76%);
Lynspen & Co., Birmingham, AL, owned approximately 44,975,580 shares
(28.95%); and Hubco, Birmingham, AL, owned approximately 60,802,407
shares
(39.14%).
Trustees Compensation
AGGREGATE TOTAL COMPENSATION PAID
NAME, COMPENSATION TO TRUSTEES FROM
POSITION WITH FROM TRUST
TRUST TRUST# AND FUND COMPLEX
John F. Donahue, $ -0- $ -0- for the Trust and
Chairman and Trustee 69 other investment companies in the
Fund Complex
Thomas G. Bigley, $ 719.00 $ 24,991 for the Trust and
Trustee 50 other investment companies in the
Fund Complex
John T. Conroy, Jr., $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
William J. Copeland, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
James E. Dowd, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $ 4,308.00 $ 123,600 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $ 4,757.00 $ 136,100 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Glen R. Johnson, $ -0- $ -0- for the Trust and
President and Trustee 9 other investment companies in the
Fund Complex
Peter E. Madden, $ 4,308.00 $ 104,880 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Gregor F. Meyer, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Wesley W. Posvar, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Marjorie P. Smuts, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
#The aggregate compensation is provided for the Trust which is comprised
of
13 portfolios.
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable
for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject
by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated Management. It is a
subsidiary
of Federated Investors. All the voting securities of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue, his
wife
and his son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder
of
the Fund for any losses that may be sustained in the purchase, holding,
or
sale of any security or for anything done or omitted by it, except for
acts
or omissions involving willful misfeasance, bad faith, gross negligence,
or
reckless disregard of the duties imposed upon it by its contract with
the
Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the period from November 29, 1993 (start of business) to October 31,
1994, the adviser earned $243,579, all of which was voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and
extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of
average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets,
the
adviser will reimburse the Fund for its expenses over the
limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the
amount of the excess, subject to an annual adjustment. If the
expense
limitation is exceeded, the amount to be reimbursed by the adviser
will be limited, in any single fiscal year, by the amount of the
investment advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred
to
as the "Administrators".) For the period from November 29, 1993 (start
of
business) to October 31, 1994, the Administrators earned $52,411. Dr.
Henry
J. Gailliot, an officer of Federated Management, the adviser to the
Fund,
holds approximately 20% of the outstanding common stock and serves as a
director of Commercial Data Services, Inc., a company which provides
computer processing services to Federated Administrative Services.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust
Company,
Boston, MA is custodian for the securities and cash of the Fund. It also
provides certain accounting and recordkeeping services with respect to
the
Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains
all necessary shareholder records. For its services, the transfer agent
receives a fee based on size, type, and number of accounts and
transactions
made by shareholders.
Shareholder Services Plan
This arrangement permits the payment of fees to Federated Shareholder
Services and financial institutions to cause services to be provided
which
are necessary for the maintenance of shareholder accounts and to
encourage
personal services to shareholders by a representative who has knowledge
of
the shareholder's particular circumstances and goals. These activities
and
services may include, but are not limited to: providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish
and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balance; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses. By
adopting
the Shareholder Services Plan, the Board of Trustees expects that the
Fund
will benefit by: (1) providing personal services to shareholders;
(2) investing shareholder assets with a minimum of delay and
administrative
detail; (3) enhancing shareholder recordkeeping systems; and (4)
responding
promptly to shareholders' requests and inquiries concerning their
accounts.
For the fiscal period from November 29, 1993 (start of business) to
October
31, 1994, payments in the amount of $85,320 were made pursuant to the
Shareholder Services Plan.
Determining Net Asset Value
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.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or
1%
of the Fund's net asset value, whichever is less, for any one
shareholder
within a 90-day period. Any redemption beyond this amount will also be
in
cash unless the Trustees determine that further payments should be in
kind.
In such cases, the Fund will pay all or a portion of the remainder of
the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not
as liquid as a cash redemption. If redemption is made in kind,
shareholders
who sell these securities could receive less than the redemption value
and
could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated
investment
companies, the Fund must, among other requirements: derive at least 90%
of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested;
changes in interest rates; changes in expenses; and the relative amount
of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for
those
shareholders paying those fees.
Yield
The Fund calculates its yield based upon the seven days ending on the
day
of the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional
shares purchased with dividends earned from the original one share and
all
dividends declared on the original and any purchased shares; dividing
the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
The Fund's yield for the seven-day period ended October 31, 1994, was
3.12%.
Effective Yield
The Fund calculates its effective yield by compounding the unannualized
base period return by: adding 1 to the base period return; raising the
sum
to the 365/7th power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended October 31,
1994,
was 3.16%.
Tax-Equivalent Yield
The tax-equivalent yield of the Fund is calculated similarly to the
yield
but is adjusted to reflect the taxable yield that the Fund would have
had
to earn to equal its actual yield, assuming a 39.6% tax rate (the
maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
The Fund's tax-equivalent yield for the seven-day period ended October
31,
1994, was 5.63%.
Tax-Equivalency Table
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free
from state and local taxes as well. As the table below indicates, a "tax-
free" investment can be an attractive choice for investors, particularly
in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF ALABAMA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
20.00% 33.00% 36.00% 41.00% 44.60%
JOINT $1- $39,001- $94,251- $143,601- OVER
RETURN: 39,000 94,250 143,600 256,500
$256,500
SINGLE $1- $23,351- $56.551- $117,951- OVER
RETURN: 23,350 56,550 117,950 256,500
$256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
2.50% 3.13% 3.73% 3.91% 4.24% 4.51%
3.00 3.75 4.48 4.69 5.08 5.42
3.50 4.38 5.22 5.47 5.93 6.32
4.00 5.00 5.97 6.25 6.78 7.22
4.50 5.63 6.72 7.03 7.63 8.12
5.00 6.25 7.46 7.81 8.47 9.03
5.50 6.88 8.21 8.59 9.32 9.93
6.00 7.50 8.96 9.38 10.17 10.83
6.50 8.13 9.70 10.16 11.02 11.73
7.00 8.75 10.45 10.94 11.86 12.64
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
STATE AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENTS WERE
NOT
USED TO INCREASE FEDERAL DEDUCTIONS.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Fund shares.
* Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
Total Return
Average annual total return is the average compounded rate of return for
a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the
period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, adjusted over the
period by any additional shares, assuming the monthly reinvestment of
all
dividends and distributions.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
- Lipper Analytical Services, Inc. ranks funds in various fund
categories based on total return, which assumes the reinvestment
of
all income dividends and capital gains distributions, if any.
- Donoghue's Money Fund Report publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the
same
money funds.
- Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day
effective
yield.
314229790
3090802B (2/95)
CONNECTICUT MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares of Connecticut Municipal Cash Trust
(the
"Fund") offered by this prospectus represent interests in a non-
diversified
portfolio of Federated Municipal Trust (the "Trust"), an open-end
management
investment company (a mutual fund). The Fund invests in short-term
Connecticut
municipal securities to achieve current income exempt from federal
regular
income tax and the Connecticut personal income tax consistent with
stability of
principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated
February 28,
1995, with the Securities and Exchange Commission. The information
contained in
the Statement of Additional Information is incorporated by reference
into this
prospectus. You may request a copy of the Statement of Additional
Information
free of charge by calling 1-800-235-4669. To obtain other information,
or make
inquiries about the Fund, contact the Fund at the address listed in the
back of
this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
Connecticut Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Institutional
Service Shares
8
Administration of the Trust
9
NET ASSET VALUE
10
- ------------------------------------------------------
HOW TO PURCHASE SHARES
10
- ------------------------------------------------------
Special Purchase Features
11
HOW TO REDEEM SHARES
11
- ------------------------------------------------------
Special Redemption Features
12
ACCOUNT INFORMATION
12
- ------------------------------------------------------
Dividends
12
Capital Gains
13
Certificates and Confirmations
13
Accounts With Low Balances
13
SHAREHOLDER INFORMATION
13
- ------------------------------------------------------
Voting Rights
13
Massachusetts Partnership Law
13
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
14
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
ADDRESSES
16
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)................................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)................................................. None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as
applicable)............................... None
Redemption Fee (as a percentage of amount redeemed, if
applicable).................... None
Exchange
Fee.....................................................................
..... None
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING
EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)
(1)..................................................... 0.27%
12b-1
Fee.....................................................................
........ None
Total Other
Expenses................................................................
.. 0.32%
Shareholder Services Fee (after waiver)
(2).................................. 0.12%
Total Institutional Service Shares Operating Expenses
(3)........................ 0.59%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of a
portion of the management fee. The adviser can terminate this voluntary
waiver
at any time at its sole discretion. The maximum management fee is 0.50%.
(2) The maximum shareholder services fee is 0.25%.
(3) The Total Institutional Service Shares Operating Expenses in the
table above
are based on expenses expected during the fiscal year ending October 31,
1995.
The Total Institutional Service Shares Operating Expenses were 0.59% for
the
fiscal year ended October 31, 1994 and were 0.77% absent the voluntary
waiver of
a portion of the management fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of Institutional Service
Shares
will bear, either directly or indirectly. For more complete descriptions
of the
various costs and expenses, see "How to Purchase Shares" and "Trust
Information." Wire-transferred redemptions of less than $5,000 may be
subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
5 years 10 years
- ------------------------------------------------------------------------
- -----------------
<S> <C> <C>
<C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period........... $ 6 $ 19 $
33 $ 74
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
CONNECTICUT MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER
31,
---------------------------------
- --------------------
1994 1993 1992
1991 1990*
----- ----- -----
- ----- -----
<S> <C> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
$1.00 $1.00
- ------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------
Net investment income 0.02 0.02 0.03
0.04 0.05
- ------------------------------------ ----- ----- -----
- ----- ----
LESS DISTRIBUTIONS
- ------------------------------------
Dividends to shareholders from net
investment income (0.02) (0.02) (0.03)
(0.04) (0.05)
- ------------------------------------ ----- ----- -----
- ----- ----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
$1.00 $1.00
- ------------------------------------ ----- ----- -----
- ----- ----
TOTAL RETURN** 2.12% 1.96% 2.68%
4.04% 5.54 %
- ------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------
Expenses 0.59% 0.57% 0.56%
0.56% 0.48 %(b)
- ------------------------------------
Net investment income 2.11% 1.95% 2.66%
3.94% 5.32 %(b)
- ------------------------------------
Expense waiver/reimbursement (a) 0.18% 0.25% 0.30%
0.21% 0.28 %(b)
- ------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------
Net assets, end of period
(000 omitted) $190,423 $140,446 $140,118
$140,113 $138,378
- ------------------------------------
</TABLE>
* Reflects operations for the period from November 1, 1989 (date of
initial
public investment), to October 31, 1990.
** Based on net asset value, which does not reflect the sales load or
contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The shares in any one portfolio may be offered in separate
classes.
The Fund is designed for financial institutions acting in an agency or
fiduciary
capacity as a convenient means of accumulating an interest in a
professionally
managed, non-diversified portfolio investing primarily in short-term
Connecticut
municipal securities. The Fund may not be a suitable investment for
retirement
plans or for non-Connecticut taxpayers because it invests in municipal
securities of Connecticut. A minimum initial investment of $25,000 over
a 90-day
period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the Connecticut Dividend and Interest Income Tax
consistent with stability of principal. This investment objective cannot
be
changed without shareholder approval. While there is no assurance that
the Fund
will achieve its investment objective, it endeavors to do so by
following the
investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Connecticut municipal securities (as defined below) maturing in 13
months or
less. As a matter of investment policy, which cannot be changed without
shareholder approval, at least 80% of the Fund's annual interest income
will be
exempt from federal regular income tax and the Connecticut personal
income tax
(Federal regular income tax does not include the federal individual
alternative
minimum tax or the federal alternative minimum tax for corporations).
The
average maturity of the securities in the Fund's portfolio, computed on
a
dollar-weighted basis, will be 90 days or less. Unless indicated
otherwise, the
investment policies may be changed by the Trustees without shareholder
approval.
Shareholders will be notified before any material change in these
policies
becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued
by or on behalf of Connecticut and its political subdivisions and
financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and the Connecticut personal income tax ("Connecticut municipal
securities").
Examples of Connecticut municipal securities include, but are not
limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
- bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in
Connecticut
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying Connecticut
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The Connecticut municipal securities in which the Fund invests
must be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating
categories. The Fund will follow applicable regulations in determining
whether a
security rated by more than one NRSRO can be treated as being in one of
the two
highest short-term rating categories; currently, such
securities must be rated by two NRSROs in one of their two highest
rating
categories. See "Regulatory Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit
enhanced by a guaranty, letter of credit, or insurance. The Fund
typically
evaluates the credit quality and ratings of credit-enhanced securities
based
upon the financial condition and ratings of the party providing the
credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit
enhanced by the credit enhancer, in which case the securities will be
treated as
having been issued by both the issuer and the credit enhancer. The
bankruptcy,
receivership, or default of the credit enhancer will adversely affect
the
quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED SECURITIES. As a matter of fundamental policy, the Fund may
invest
in restricted securities. Restricted securities are any securities in
which the
Fund may invest pursuant to its investment objective and policies but
which are
subject to restrictions on resale under federal securities laws. Under
criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines that market conditions call for a temporary defensive
posture, the
Fund may invest in tax-exempt or taxable
securities such as: obligations issued by or on behalf of municipal or
corporate
issuers having the same quality characteristics as described above;
obligations
issued or guaranteed by the U.S. government, its agencies, or
instrumentalities;
instruments issued by a U.S. branch of a domestic bank or other deposit
institution having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment; and repurchase agreements
(arrangements
in which the organization selling the Fund a temporary investment agrees
at the
time of sale to repurchase it at a mutually agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so. However, the interest from certain
Connecticut
municipal securities is subject to the federal alternative minimum tax.
CONNECTICUT MUNICIPAL SECURITIES
Connecticut municipal securities are generally issued to finance public
works,
such as airports, bridges, highways, housing, hospitals, mass
transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
Connecticut municipal securities include industrial development bonds
issued by
or on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Connecticut municipal securities
are
"general obligation" and "revenue" bonds. General obligation bonds are
secured
by the issuer's pledge of its full faith and credit and taxing power for
the
payment of principal and interest. Interest on and principal of revenue
bonds,
however, are payable only from the revenue generated by the facility
financed by
the bond or other specified sources of revenue. Revenue bonds do not
represent a
pledge of credit or create any debt of or charge against the general
revenues of
a municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Connecticut municipal securities depend on a variety of
factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of Connecticut municipal securities and participation interests, or the
credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of
Connecticut
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in Connecticut municipal securities which are
repayable out
of revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
Connecticut municipal securities could involve an increased risk to the
Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Connecticut municipal securities are subject
to the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under
certain
circumstances, the Fund may borrow up to one-third of the value of its
total
assets and pledge up to 15% of the value of total assets to secure such
borrowings. These investment limitations cannot be changed without
shareholder
approval.
As a matter of nonfundamental policy, the Fund will not invest more than
10% of
its net assets in illiquid securities.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Statement of Additional Information, in order to
comply with
applicable laws and regulations, including the provisions of and
regulations
under the Investment Company Act of 1940, as amended. In particular, the
Fund
will comply with the various requirements of Rule 2a-7, which regulates
money
market mutual funds. The Fund will determine the effective maturity of
its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
- ------------------------------------------------------------------------
- --------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees
are responsible for managing the Trust's business affairs and for
exercising all
the Trust's powers except those reserved for the shareholders. An
Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .50 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for
Institutional
Service shares of the Fund. It is a Pennsylvania corporation organized
on
November 14, 1969, and is the principal distributor for a number of
investment
companies. Federated Securities Corp. is a subsidiary of Federated
Investors.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services
Plan
(the "Services Plan") under which it will pay Federated Shareholder
Services, an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of the Institutional Service Shares
to provide personal services and/or maintenance of shareholder accounts
to the
Fund and its shareholders. From time to time and for such periods as
deemed
appropriate, the amount stated above may be reduced voluntarily.
Federated Shareholder Services may elect to pay financial institutions
fees
based upon shares owned by their clients or customers for services
provided to
those clients or customers. The schedules of such fees and the basis
upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds,
investment
advisers, and broker/dealers to provide certain services to
shareholders. These
services may include, but are not limited to, distributing prospectuses
and
other information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of shares. Any fees paid for
these
services by the distributor will be reimbursed by the adviser and not
the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, a
subsidiary of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
-------------------------------- ---------------------------
- -----
<S> <C>
.15 of 1% on the first $250
million
.125 of 1% on the next $250
million
.10 of 1% on the next $250
million
on assets in excess of
$750
.075 of 1% million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is
custodian for
the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
- ------------------------------------------------------------------------
- --------
The Fund attempts to stabilize the net asset value of its shares at
$1.00 by
valuing the portfolio securities using the amortized cost method. The
net asset
value per share is determined by subtracting total liabilities from
total assets
and dividing the remainder by the number of shares outstanding. The Fund
cannot
guarantee that its net asset value will always remain at $1.00 per
share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
HOW TO PURCHASE SHARES
- ------------------------------------------------------------------------
- --------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased as described below either through a financial institution
(such as
a bank or broker/dealer) or by wire or by check directly from the Fund,
with a
minimum initial investment of $25,000. (Financial institutions may
impose
different minimum investment requirements on their customers.)
In connection with any sale, Federated Securities Corp. may, from time
to time,
offer certain items of nominal value to any shareholder or investor. The
Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and
returning
the new account form available from the Fund before shares can be
purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may
purchase
shares through a financial institution which has a sales agreement with
the
distributor. Orders are considered received when the Fund receives
payment by
wire or converts payment by check from the financial institution into
federal
funds. It is the financial institution's responsibility to transmit
orders
promptly. Financial institutions may charge additional fees for their
services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling
the Fund
before 1:00 p.m. (Eastern time). The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) in
order to begin earning dividends that same day. Federal funds should be
wired as
follows: Federated Services Company c/o State Street Bank and Trust
Company,
Boston, MA; Attention; EDGEWIRE; For Credit to: Connecticut Municipal
Cash
Trust; (Fund
Number) (this number can be found on the account statement or by
contacting the
Fund); Group Number or Order Number; Nominee or Institution Name; and
ABA Number
011000028. Shares cannot be purchased by wire on holidays when wire
transfers
are restricted.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check
made
payable to Connecticut Municipal Cash Trust to: Federated Services
Company, c/o
State Street Bank and Trust Company, P.O. Box 8602, Boston, MA 02266-
8602.
Orders by mail are considered received when payment by check is
converted into
federal funds (normally the business day after the check is received)
and shares
begin earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM. A minimum of $100 can be automatically
withdrawn
periodically from the shareholder's checking account at an Automated
Clearing
House ("ACH") member and invested in Fund shares. Shareholders should
contact
their financial institution or the Fund to participate in this program.
HOW TO REDEEM SHARES
- ------------------------------------------------------------------------
- --------
Shares are redeemed at their net asset value next determined after the
Fund
receives the redemption request. Redemptions will be made on days on
which the
Fund computes its net asset value. Redemption requests must be received
in
proper form and can be made as described below.
REDEEMING SHARES THROUGH A FINANCIAL INSTITUTION. Shares may be
redeemed by
contacting the shareholder's financial institution. Shares will be
redeemed at
the net asset value next determined after Federated Services Company
receives
the redemption request. According to the shareholder's instructions,
redemption
proceeds can be sent to the financial institution or to the shareholder
by check
or by wire. The financial institution is responsible for promptly
submitting
redemption requests and providing proper written redemption
instructions.
Customary fees and commissions may be charged by the financial
institution for
this service.
REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by
calling
the Fund provided the Fund has a properly completed authorization form.
These
forms can be obtained from Federated Securities Corp. Proceeds from
redemption
requests received before 12:00 noon (Eastern time) will be wired the
same day to
the shareholder's account at a domestic commercial bank which is a
member of the
Federal Reserve System, but will not include that day's dividend.
Proceeds from
redemption requests received after that time will include that day's
dividends
but will be wired the following business day. Under limited
circumstances,
arrangements may be made with the distributor for same-day payment of
proceeds,
without that day's dividend, for redemption requests received before
2:00 p.m.
(Eastern time). Proceeds from redeemed shares purchased by check or
through ACH
will not be wired until that method of payment has cleared.
Telephone instructions may be recorded and if reasonable procedures are
not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares
By Mail"
should be considered. If at any
time the Fund shall determine it necessary to terminate or modify the
telephone
redemption privilege, shareholders would be promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by
mailing a
written request together with properly endorsed certificates, if issued,
to:
Federated Services Company, c/o State Street Bank and Trust Company,
P.O. Box
8602, Boston, MA 02266-8602. The written request should state:
Connecticut
Municipal Cash Trust; the account name as registered with the Fund; the
account
number; and the number of shares to be redeemed or the dollar amount
requested.
All owners of the account must sign the request exactly as the shares
are
registered. Any share certificates should be sent by registered or
certified
mail with the written request. Normally, a check for the proceeds is
mailed
within one business day, but in no event more than seven days, after
receipt of
a proper written redemption request. Dividends are paid up to and
including the
day that a redemption request is processed.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by: a commercial or savings bank, trust company or
savings
and loan association whose deposits are insured by an organization which
is
administered by the Federal Deposit Insurance Corporation; a member of a
domestic stock exchange; or any other "eligible guarantor institution,"
as
defined in the Securities Exchange Act of 1934. The Fund does not accept
signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to
allow
shareholders to redeem their Fund shares. A fee will be charged for this
service. The check writing service allows the shareholder to receive the
daily
dividend declared on the shares to be redeemed until the check is
presented to
State Street Bank for payment. However, checks should never be made
payable or
sent to State Street Bank or the Fund to redeem shares, and a check may
not be
written to close an account. Canceled checks are sent to the shareholder
each
month.
DEBIT CARD. Upon request, a debit account will be established. This
account
allows shareholders to redeem shares by using a debit card. A fee will
be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value
of at
least $10,000, a systematic withdrawal program may be established
whereby
automatic redemptions are made from the account and transferred
electronically
to any commercial bank, savings bank, or credit union that is an ACH
member.
Shareholders may apply for participation in this program through their
financial
institution or the Fund.
ACCOUNT INFORMATION
- ------------------------------------------------------------------------
- --------
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing. Monthly
confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, if an
account
balance falls below $25,000 due to shareholder redemptions, the Fund may
redeem
all of the remaining shares in that account and pay the proceeds to the
shareholder. Before shares are redeemed to close an account, the
shareholder
will be notified in writing and allowed 30 days to purchase additional
shares to
meet the minimum requirement.
SHAREHOLDER INFORMATION
- ------------------------------------------------------------------------
- --------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of each
portfolio
in the Trust have equal voting rights, except that in matters affecting
only a
particular portfolio, only shares of that portfolio are entitled to
vote. As a
Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for
certain
changes in the Trust's or the Fund's operation and for the election of
Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
As of January 10, 1995, Fleet Securities Corp., Rochester, New York,
owned
29.83% of the voting securities of the Fund, and, therefore, may, for
certain
purposes, be deemed to control the Fund and be able to affect the
outcome of
certain matters presented for a vote of shareholders.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
Connecticut. Shareholders are urged to consult their own tax advisers
regarding
the status of their accounts under state and local tax laws.
CONNECTICUT TAXES. Under existing Connecticut laws, distributions made
by the
Fund will not be subject to Connecticut income taxes on individuals,
estates and
trusts to the extent that such distributions qualify as exempt-interest
dividends under the Internal Revenue Code, and represent (i) interest on
obligations issued by or on behalf of the State of Connecticut, any
political
subdivision thereof, or public instrumentality, state or local
authority,
district, or similar public entity created under the laws of the State
of
Connecticut, and (ii) interest on obligations, the income of which may
not, by
federal law, be taxed by a state, such as bonds issued by the government
of
Puerto Rico. Conversely, to the extent that distributions by the Fund
are
derived from other types of obligations, such distributions will be
subject to
Connecticut income taxes.
Distributions from the Fund to a shareholder subject to the Connecticut
corporation business tax are not eligible for the dividends received
deduction
under the Connecticut corporation business tax and therefore are
included in the
taxable income of a taxpayer to the extent such distributions are
treated as
either exempt-interest dividends or capital gains dividends for federal
income
tax purposes. All other distributions from the Fund are eligible for the
Connecticut corporation business tax dividends received deduction.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time, the Fund advertises its yield, effective yield, and
tax-equivalent yield.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
the Fund's tax-exempt yield, assuming a specific tax rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is
expressed as
a percentage.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C> <C>
Connecticut Municipal Cash Trust
Institutional Service Shares Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Distributor
Federated Securities Corp. Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Investment Adviser
Federated Management Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Custodian
State Street Bank and Trust Company P.O. Box 8602
Boston, MA
02266-8602
- ------------------------------------------------------------------------
- ----------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG
Place
Pittsburgh, PA
15222
- ------------------------------------------------------------------------
- ----------------------
</TABLE>
CONNECTICUT MUNICIPAL
CASH TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated
Municipal Trust, an Open-End,
Management
Investment Company
Prospectus dated February 28, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314229105
9101004A-SS (2/95)
Connecticut Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Institutional Service Shares
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of Connecticut Municipal Cash Trust (the "Fund") dated
February 28, 1995. This Statement is not a prospectus. To receive a
copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
Connecticut Investment Risks 2
Investment Limitations 2
Brokerage Transactions 4
Federated Municipal Trust
Management 5
Officers and Trustees 5
The Funds 8
Share Ownership 9
Trustees Compensation 9
Trustee Liability 10
Investment Adviser 10
Advisory Fees 10
Fund Administration 10
Shareholder Services Plan 11
Determining Net Asset Value 11
Redemption in Kind 11
The Fund's Tax Status 11
Performance Information 12
Yield 12
Effective Yield 12
Tax-Equivalent Yield 12
Tax-Equivalency Table 13
Total Return 13
Performance Comparisons 14
Investment Policies
Unless indicated otherwise, the policies described below may be changed
by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the
security, the issuer of any demand feature applicable to the security,
or
any guarantor of either the security or any demand feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution
irrevocable letters of credit or guarantees and give the Fund the right
to
demand payment of the principal amounts of the participation interests
plus
accrued interest on short notice (usually within seven days). The
municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation
interests
include the right to demand payment from the issuers of those interests.
By
purchasing participation interests having a seven day demand feature,
the
Fund is buying a security meeting the maturity and quality requirements
of
the Fund and also is receiving the tax-free benefits of the underlying
securities.
Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the
nature of the appropriation for the lease. Furthermore, a lease may
provide
that the participants cannot accelerate lease obligations upon default.
The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the
investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be
terminated
by the lessee; the potential recovery, if any, from a sale of the leased
property upon termination of the lease; the lessee's general credit
strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit
enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other
than normal transaction costs, are incurred. However, liquid assets of
the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are
marked
to market daily and are maintained until the transaction has been
settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than
20%
of the total value of its assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant
to
repurchase agreements. Repurchase agreements are arrangements in which
banks, brokers/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at
a mutually agreed upon time and price. To the extent that the seller
does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. The Fund or
its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund
will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by
the
Trustees.
Connecticut Investment Risks
The Fund invests in obligations of Connecticut issuers which results in
the
Fund's performance being subject to risks associated with the overall
conditions present within Connecticut (the "State"). The following
information
is a brief summary of the recent prevailing economic conditions and a
general
summary of the State's financial status. This information is based on
official
statements relating to securities that have been offered by Connecticut
issuers
and from other sources believed to be reliable but should not be relied
upon as
a complete description of all relevant information.
The State has maintained relative fiscal balance for the last few fiscal
years
after several years of deficits in the late 1980's when the State and
national
economy entered a recession. The State enacted an individual income tax
while
decreasing the sales tax in 1991 in an attempt to provide better
stability to
the State's revenue sources. The State also benefits from a level of per
capital income that is among the highest in the country and a highly
educated
and skilled work force.
The Connecticut economy is largely composed of manufacturing
(concentrated in
defense and aircraft) and service industries (such as insurance and
finance)
that were robust and growing for much of the past two decades. Beginning
in the
late 1980's, the national economy slowed down and entered a recession
that has
affected several areas of the State's economy. Specifically, the
cutbacks in
the defense and insurance industries and general corporate restructuring
have
resulted in the loss of over 9% of the labor force.
The overall financial condition of the State can also be illustrated by
changes
of its debt ratings. During the period in which the State has
experienced
financial difficulties in the late 1980's, its general obligation long-
term
debt ratings as determined by Moody's and S&P decreased from Aa1 and
AA+,
respectively, to Aa and AA-.
The Fund's concentration in securities issued by the State and its
political
subdivisions provides a greater level of risk than a fund which is
diversified
across numerous states and municipal entities. The ability of the State
or its
municipalities to meet their obligations will depend on the availability
of tax
and other revenues; economic, political, and demographic conditions
within the
State; and the underlying fiscal condition of the State and its
municipalities.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as are
necessary for the clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money in amounts up to one-third of the value of its total
assets, including the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather
as
a temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet
redemption
requests when the liquidation of portfolio securities is deemed to
be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of the value of its
total
assets are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except
as necessary to secure permitted borrowings.
In those cases, it may pledge assets having a market value not
exceeding the lesser of the dollar amounts borrowed or 15% of the
value of its total assets at the time of the pledge.
Diversification of Investments
At the close of each quarter of each fiscal year, no more than 25%
of
the Fund's total assets will be invested in the securities of a
single issuer, but, with regard to at least 50% of the Fund's
total
assets, no more than 5% of the Fund's total assets are to be
invested
in securities of a single issuer.
Under this limitation, each governmental subdivision, including
states, territories, possessions of the United States, or their
political subdivisions, agencies, authorities, instrumentalities,
or
similar entities, will be considered a separate issuer if its
assets
and revenues are separate from those of the governmental body
creating it and the security is backed only by its own assets and
revenues.
Industrial development bonds backed only by the assets and
revenues
of a non-governmental issuer are considered to be issued solely by
that issuer. If, in the case of an industrial development bond or
government-issued security, a governmental or other entity
guarantees
the security, such guarantee would be considered a separate
security
issued by the guarantor, as well as the other issuer, subject to
limited exclusions allowed by the Investment Company Act of 1940.
Lending Cash or Securities
The Fund will not lend any of its assets, except that it may
acquire
publicly or nonpublicly issued Connecticut municipal securities or
temporary investments or enter into repurchase agreements in
accordance with its investment objective, policies, limitations,
or
Declaration of Trust.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts,
or commodity futures contracts.
Investing in Real Estate
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in securities of
issuers whose business involves the purchase or sale of real
estate
or in securities which are secured by real estate or interests in
real estate.
Investing in Restricted Securities
The Fund will not invest more than 10% of its net assets in
securities subject to restrictions on resale under the Securities
Act
of 1933.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
Concentration of Investments
The Fund will not purchase securities, if, as a result of such
purchase, 25% or more of the value of its total assets would be
invested in any one industry, or in industrial development bonds
or
other securities the interest upon which is paid from revenues of
similar types of projects. However, the Fund may invest as
temporary
investments more than 25% of the value of its assets in cash or
cash
items, securities issued or guaranteed by the U.S. government, its
agencies, or instrumentalities, or instruments secured by these
money
market instruments, such as repurchase agreements.
The above limitations cannot be changed without shareholder approval.
The
following investment limitations, however, may be changed by the
Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its net
assets
in illiquid securities.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment
companies,
except as part of a merger, consolidation, or other acquisition.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers (including companies responsible
for
paying principal and interest on industrial development bonds)
which
have records of less than three years of continuous operations,
including the operation of any predecessor.
Investing for Control
The Fund will not invest in securities of a company for the
purpose
of exercising control or management.
Investing in Issuers Whose Securities are Owned by Officers and
Trustees
of the Trust
The Fund will not purchase or retain the securities of any issuer
if
the Officers and Trustees of the Trust or its investment adviser,
owning individually more than .50 of 1% of the issuer's
securities,
together own more than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or
any
combination of them.
Investing in Minerals
The Fund will not purchase or sell interests in oil, gas, or other
mineral exploration or development programs or leases, although it
may purchase the securities of issuers which invest in or sponsor
such programs.
For purposes of the above limitations, the Fund considers certificates
of
deposit and demand and time deposits issued by a U.S. branch of a
domestic
bank or savings and loan having capital, surplus, and undivided profits
in
excess of $100,000,000 at the time of investment to be "cash items."
Except
with respect to borrowing money, if a percentage limitation is adhered
to
at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a
violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of
the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order
at a favorable price. In working with dealers, the adviser will
generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Trustees. The adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the
Fund
or to the adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic
studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may
be
used by the adviser or its affiliates in advising the Fund and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid,
it would tend to reduce their expenses. The adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. During the fiscal years ended October 31, 1994 ,
1993,
and 1992, the Fund paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type
the Fund may make may also be made by those other accounts. When the
Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
Federated Municipal Trust Management
Officers and Trustees
Officers and Trustees are listed with their addresses, present positions
with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Center
Pittsburgh, PA
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner of
the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate
ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of
the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of
the
Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation
and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman,
Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds;
Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue
is
the son of John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.;
Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined
in
the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of
the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes
the
following investment companies: American Leaders Fund, Inc.; Annuity
Management Series; Arrow Funds; Automated Cash Management Trust;
Automated
Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.;
DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated
ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust;
Federated
Government Trust; Federated Growth Trust; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated
Index
Trust; Federated Institutional Trust; Federated Intermediate Government
Trust; Federated Master Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock
Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First
Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate
U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.;
Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government
Income Securities, Inc.; High Yield Cash Trust; Insight Institutional
Series, Inc.; Insurance Management Series; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond
Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S.
Government Money Market Trust; Liberty Term Trust, Inc. - 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; The
Medalist
Funds; Money Market Management, Inc.; Money Market Obligations Trust;
Money
Market Trust; Municipal Securities Income Trust; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; Portage Funds; RIMCO Monument
Funds;
The Shawmut Funds; Short-Term Municipal Trust; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust
for Financial Institutions; Trust For Government Cash Reserves; Trust
for
Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations;
World Investment Series, Inc.
Share Ownership
Officers and Trustees own less than 1% of the Trust's outstanding
shares.
As of January 10, 1995, the following shareholders of record owned 5% or
more of the outstanding shares of the Connecticut Municipal Cash Trust:
State Street Bank and Trust Company, North Quincy, MA, owned
approximately
18,432,019 shares (7.83%); Anderson & Co., Philadelphia, PA, owned
approximately 31,118,968 shares (13.22%); Putnam Trust Company,
Greenwich,
CT, owned approximately 37,846,600 shares (16.08%); and Fleet Securities
Corp., Rochester, NY, owned approximately 70,226,178 shares (29.83%).
Trustees Compensation
AGGREGATE TOTAL COMPENSATION PAID
NAME, COMPENSATION TO TRUSTEES FROM
POSITION WITH FROM TRUST
TRUST TRUST# AND FUND COMPLEX
John F. Donahue, $ -0- $ -0- for the Trust and
Chairman and Trustee 69 other investment companies in the
Fund Complex
Thomas G. Bigley, $ 719.00 $ 24,991 for the Trust and
Trustee 50 other investment companies in the
Fund Complex
John T. Conroy, Jr., $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
William J. Copeland, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
James E. Dowd, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $ 4,308.00 $ 123,600 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $ 4,757.00 $ 136,100 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Glen R. Johnson, $ -0- $ -0- for the Trust and
President and Trustee 9 other investment companies in the
Fund Complex
Peter E. Madden, $ 4,308.00 $ 104,880 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Gregor F. Meyer, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Wesley W. Posvar, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Marjorie P. Smuts, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
#The aggregate compensation is provided for the Trust which is comprised
of
13 portfolios.
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable
for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject
by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated Management. It is a
subsidiary
of Federated Investors. All the voting securities of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue, his
wife
and his son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder
of
the Fund for any losses that may be sustained in the purchase, holding,
or
sale of any security or for anything done or omitted by it, except acts
or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with
the
Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the fiscal years ended October 31, 1994, 1993, and 1992, the adviser
earned $961,837, $666,093, and $648,508, respectively, of which
$334,838,
$337,400, and $388,530, respectively, was voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and
extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of
average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets,
the
adviser will reimburse the Fund for its expenses over the
limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the
amount of the excess, subject to an annual adjustment. If the
expense
limitation is exceeded, the amount to be reimbursed by the adviser
will be limited, in any single fiscal year, by the amount of the
investment advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred
to
as the "Administrators".) For the fiscal years ended October 31, 1994,
1993
and 1992, the Administrators earned $198,789, $268,954, and $249,818,
respectively. Dr. Henry J. Gailliot, an officer of Federated Management,
the adviser to the Fund, holds approximately 20% of the outstanding
common
stock and serves as a director of Commercial Data Services, Inc., a
company
which provides computer processing services to Federated Administrative
Services.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust
Company,
Boston, MA, is custodian for the securities and cash of the Fund. It
also
provides certain accounting and recordkeeping services with respect to
the
Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains
all necessary shareholder records. For its services, the transfer agent
receives a fee based on size, type, and number of accounts and
transactions
made by shareholders.
Shareholder Services Plan
This arrangement permits the payment of fees to Federated Shareholder
Services and financial institutions to cause services to be provided
which
are necessary for the maintenance of shareholder accounts and to
encourage
personal services to shareholders by a representative who has knowledge
of
the shareholder's particular circumstances and goals. These activities
and
services may include, but are not limited to: providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish
and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balance; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses. By
adopting
the Shareholder Services Plan, the Board of Trustees expects that the
Fund
will benefit by: (1) providing personal services to shareholders;
(2) investing shareholder assets with a minimum of delay and
administrative
detail; (3) enhancing shareholder recordkeeping systems; and (4)
responding
promptly to shareholders' requests and inquiries concerning their
accounts.
For the fiscal period ending October 31,1994, payments in the amount of
$128,719 were made pursuant to the Shareholder Services Plan.
Determining Net Asset Value
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.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or
1%
of the Fund's net asset value, whichever is less, for any one
shareholder
within a 90-day period. Any redemption beyond this amount will also be
in
cash unless the Trustees determine that further payments should be in
kind.
In such cases, the Fund will pay all or a portion of the remainder of
the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not
as liquid as a cash redemption. If redemption is made in kind,
shareholders
who sell these securities could receive less than the redemption value
and
could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated
investment
companies, the Fund must, among other requirements: derive at least 90%
of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested;
changes in interest rates; changes in expenses; and the relative amount
of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for
those
shareholders paying those fees.
Yield
The yield is calculated based upon the seven days ending on the day of
the
calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional
shares purchased with dividends earned from the original one share and
all
dividends declared on the original and any purchased shares; dividing
the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
The Fund's yield for the seven-day period ended October 31, 1994, was
2.72%.
Effective Yield
The effective yield is calculated by compounding the unannualized base
period return by: adding 1 to the base period return; raising the sum to
the 365/7th power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended October 31,
1994,
was 2.76%.
Tax-Equivalent Yield
The tax-equivalent yield of the Fund is calculated similarly to the
yield
but is adjusted to reflect the taxable yield that the Fund would have
had
to earn to equal its actual yield, assuming a 39.6% tax rate (the
maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
The Fund's tax-equivalent yield for the seven-day period ended October
31,
1994, was 4.94%.
Tax-Equivalency Table
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free
from state and local taxes as well. As the table below indicates, a "tax-
free" investment can be an attractive choice for investors, particularly
in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF CONNECTICUT
TAX BRACKET:
FEDERAL 15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED
FEDERAL
AND STATE 19.50% 32.50% 35.50% 40.50% 44.10%
JOINT $1- $39,001- $94,251- $143,601- OVER
RETURN: 39,000 94,250 143,600 256,500
$256,500
SINGLE $1- $23,351- $56,551- $117,951- OVER
RETURN: 23,350 56,550 117,950 256,500
$256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
1.50% 1.86% 2.22% 2.33% 2.52% 2.68%
2.00 2.48 2.96 3.10 3.36 3.58
2.50 3.11 3.70 3.88 4.20 4.47
3.00 3.73 4.44 4.65 5.04 5.37
3.50 4.35 5.19 5.43 5.88 6.26
4.00 4.97 5.93 6.20 6.72 7.16
4.50 5.59 6.67 6.98 7.56 8.05
5.00 6.21 7.41 7.75 8.40 8.94
5.50 6.83 8.15 8.53 9.24 9.84
6.00 7.45 8.89 9.30 10.08 10.73
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
STATE AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENTS WERE
NOT
USED TO INCREASE FEDERAL DEDUCTIONS.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Fund shares.
* Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
Total Return
Average annual total return is the average compounded rate of return for
a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the
period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, adjusted over the
period by any additional shares, assuming the monthly reinvestment of
all
dividends and distributions.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
- Lipper Analytical Services, Inc. ranks funds in various fund
categories based on total return, which assumes the reinvestment
of
all income dividends and capital gains distributions, if any.
- Donoghue's Money Fund Report publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the
same
money funds.
- Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day
effective
yield.
314229105
9101004B (2/95)
FLORIDA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
PROSPECTUS
The shares of Florida Municipal Cash Trust (the "Fund") offered by this
prospectus represent interests in a non-diversified portfolio of
Federated
Municipal Trust (the "Trust"), an open-end management investment company
(a
mutual fund). The Fund invests in short-term Florida municipal
securities to
achieve current income exempt from federal regular income tax consistent
with
stability of principal and liquidity and to maintain an investment
portfolio
that will cause its shares to be exempt from the Florida intangibles
tax.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated
February 28,
1995, with the Securities and Exchange Commission. The information
contained in
the Statement of Additional Information is incorporated by reference
into this
prospectus. You may request a copy of the Statement of Additional
Information
free of charge by calling 1-800-235-4669. To obtain other information,
or make
inquiries about the Fund, contact the Fund at the address listed in the
back of
this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
Florida Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
7
- ------------------------------------------------------
Management of the Trust
7
Distribution of Shares
8
Administration of the Trust
9
Expenses of the Fund
10
NET ASSET VALUE
10
- ------------------------------------------------------
HOW TO PURCHASE SHARES
11
- ------------------------------------------------------
Special Purchase Features
11
HOW TO REDEEM SHARES
12
- ------------------------------------------------------
Special Redemption Features
13
ACCOUNT INFORMATION
13
- ------------------------------------------------------
Dividends
13
Capital Gains
13
Certificates and Confirmations
13
Accounts With Low Balances
13
SHAREHOLDER INFORMATION
14
- ------------------------------------------------------
Voting Rights
14
Massachusetts Partnership Law
14
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
15
Florida Intangibles Tax
15
Florida State Municipal Taxation
15
PERFORMANCE INFORMATION
16
- ------------------------------------------------------
ADDRESSES
17
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)................................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)................................................. None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as
applicable)............................... None
Redemption Fee (as a percentage of amount redeemed, if
applicable).................... None
Exchange
Fee.....................................................................
..... None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)
(1)..................................................... 0.00%
12b-1 Fee
(2).....................................................................
.... 0.00%
Total Other Expenses (after expense
reimbursement).................................... 0.49%
Shareholder Services
Fee................................................ 0.25%
Total Fund Operating Expenses
(3)........................................... 0.49%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of the
management fee. The adviser can terminate this voluntary waiver at any
time at
its sole discretion. The maximum management fee is 0.40%.
(2) The Fund has no present intention of paying or accruing the 12b-1
fee during
the fiscal year ending October 31, 1995. If the Fund were paying or
accruing the
12b-1 fee, the Fund would be able to pay up to 0.25% of its average
daily net
assets for the 12b-1 fee. See "Trust Information."
(3) The Total Fund Operating Expenses in the table above are based on
expenses
expected during the fiscal year ending October 31, 1995. The Total Fund
Operating Expenses were 0.28% for the fiscal year ended October 31, 1994
and
were 1.31% absent the voluntary waiver of the management fee and the
voluntary
reimbursement of certain other operating expenses.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of the Fund will bear,
either
directly or indirectly. For more complete descriptions of the various
costs and
expenses, see "How to Purchase Shares" and "Trust Information." Wire-
transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years
- ------------------------------------------------------------------------
- ----- ------ -------
<S>
<C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5%
annual return and (2) redemption at the end of each time
period............ $5 $16
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
FLORIDA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for the period presented, is included in the Annual
Report,
which is incorporated by reference. This table should be read in
conjunction
with the Fund's financial statements and notes thereto, which may be
obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994*
- -----------------
<S>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD
$ 1.000
- ---------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------
Net investment income
0.004
- ---------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------
Dividends to shareholders from net investment income
(0.004)
- ---------------------------------------------------------------------
- -----
NET ASSET VALUE, END OF PERIOD
$ 1.000
- ---------------------------------------------------------------------
- -----
TOTAL RETURN**
0.35%
- ---------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------
Expenses
0.28%(b)
- ---------------------------------------------------------------------
Net investment income
3.28%(b)
- ---------------------------------------------------------------------
Expense waiver/reimbursement (a)
1.03%(b)
- ---------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------
Net assets, end of period (000 omitted)
$53,966
- ---------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from September 21, 1994 (date of
initial
public investment) to October 31, 1994. For the period from September
12,
1994 (start of business) to September 21, 1994 the Fund had no
investment
activity.
** Based on net asset value, which does not reflect the sales load or
contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The Fund is designed for financial institutions acting in an
agency
or fiduciary capacity as a convenient means of accumulating an interest
in a
professionally managed, non-diversified portfolio investing primarily in
short-term Florida municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Florida taxpayers because it
invests
in municipal securities of Florida. A minimum initial investment of
$10,000 over
a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax consistent with stability of principal and liquidity
and to
maintain an investment portfolio that will cause its shares to exempt
from the
Florida intangibles tax. This investment objective cannot be changed
without
shareholder approval. While there is no assurance that the Fund will
achieve its
investment objective, it endeavors to do so by following the investment
policies
described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Florida
municipal securities (as defined below) maturing in 13 months or less.
As a
matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be
exempt from
federal regular income tax. (Federal regular income tax does not include
the
federal individual alternative minimum tax or the federal alternative
minimum
tax for corporations.) The average maturity of the securities in the
Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less.
Unless
indicated otherwise, the investment policies may be changed by the
Trustees
without shareholder approval. Shareholders will be notified before any
material
change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by
or on behalf of Florida and its political subdivisions and financing
authorities
(these will normally constitute at least 65% of the Fund's total
assets), and
obligations of other states, territories, and possessions of the United
States,
including the District of Columbia, and any political subdivision or
financing
authority of any of these, the income from which is, in the opinion of
qualified
legal counsel, exempt from federal regular
income tax ("Florida municipal securities"). Examples of Florida
municipal
securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
- bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in
Florida
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying Florida
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The Florida municipal securities in which the Fund invests
must be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating
categories. The Fund will follow applicable regulations in determining
whether a
security rated by more than one NRSRO
can be treated as being in one of the two highest short-term rating
categories;
currently, such securities must be rated by two NRSROs in one of their
two
highest rating categories. See "Regulatory Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit
enhanced by a guaranty, letter of credit, or insurance. The Fund
typically
evaluates the credit quality and ratings of credit-enhanced securities
based
upon the financial condition and ratings of the party providing the
credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit
enhanced by the credit enhancer, in which case the securities will be
treated as
having been issued by both the issuer and the credit enhancer. The
bankruptcy,
receivership, or default of the credit enhancer will adversely affect
the
quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund
may
invest pursuant to its investment objective and policies but which are
subject
to restrictions on resale under federal securities laws. Under criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase, together with other illiquid
securities, to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines that market conditions call for a temporary defensive
posture, the
Fund may invest in tax-exempt or taxable securities such as: obligations
issued
by or on behalf of municipal or corporate issuers having the same
quality
characteristics as described above; obligations issued or guaranteed by
the U.S.
government, its agencies, or instrumentalities; instruments issued by a
U.S.
branch of a domestic bank or other deposit institution having capital,
surplus,
and undivided profits in excess of $100,000,000 at the time of
investment; and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so. However, the interest from certain
Florida
municipal securities is subject to the federal alternative minimum tax.
FLORIDA MUNICIPAL SECURITIES
Florida municipal securities are generally issued to finance public
works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
Florida municipal securities include industrial development bonds issued
by or
on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Florida municipal securities are
"general
obligation" and "revenue" bonds. General obligation bonds are secured by
the
issuer's pledge of its full faith and credit and taxing power for the
payment of
principal and interest. Interest on and principal of revenue bonds,
however, are
payable only from the revenue generated by the facility financed by the
bond or
other specified sources of revenue. Revenue bonds do not represent a
pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Florida municipal securities depend on a variety of factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of Florida municipal securities and participation interests, or the
credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of
Florida
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in Florida municipal securities which are repayable
out of
revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
Florida municipal securities could involve an increased risk to the Fund
should
any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Florida municipal securities are subject to
the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under
certain
circumstances, the Fund may borrow up to one-third of the value of its
total
assets and pledge assets to secure such borrowings. This investment
limitation
cannot be changed without shareholder approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Statement of Additional Information, in order to
comply with
applicable laws and regulations, including the provisions of and
regulations
under the Investment Company Act of 1940, as amended. In particular, the
Fund
will comply with the various requirements of Rule 2a-7, which regulates
money
market mutual funds. The Fund will determine the effective maturity of
its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
- ------------------------------------------------------------------------
- --------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are
responsible for managing the Trust's business affairs and for exercising
all the
Trust's powers except those reserved for
the shareholders. An Executive Committee of the Board of Trustees
handles the
Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee equal
to .40 of 1% of the Fund's average daily net assets. The adviser
has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of
the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is
the
principal distributor for a number of investment companies. Federated
Securities
Corp. is a subsidiary of Federated Investors.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan
adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution
Plan"),
the Fund may pay to the distributor an amount, computed at an annual
rate of .25
of 1% of the average daily net asset value of the Fund to finance any
activity
which is principally intended to result in the sale of shares subject to
the
Distribution Plan. The distributor may select financial institutions
such as
banks, fiduciaries, custodians for public funds, investment advisers,
and
broker/dealers to provide sales support services as agents for their
clients or
customers. In addition, the Fund has adopted a Shareholder Services Plan
(the
"Services Plan") under which it will pay Federated Shareholder Services,
an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of the Fund to provide
personal services and/or maintenance of shareholder accounts to the Fund
and its
shareholders. From time to time and for such periods as it deems
appropriate,
the amounts stated above may be reduced voluntarily.
Financial institutions will receive fees based upon shares owned by
their
clients or customers. The schedules of such fees and the basis upon
which such
fees will be paid will be determined from time to time by the Fund, the
distributor, or Federated Shareholder Services, as appropriate.
The Distribution Plan is a compensation-type plan. As such, the Fund
makes no
payments to the distributor except as described above. Therefore, the
Fund does
not pay for unreimbursed expenses of the distributor, including amounts
expended
by the distributor in excess of amounts received by it from the Fund,
interest,
carrying or other financing charges in connection with excess amounts
expended,
or the distributor's overhead expenses. However, the distributor may be
able to
recover such amounts or may earn a profit from future payments made by
the Fund
under the Distribution Plan.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may also pay
financial
institutions a fee for providing certain services to shareholders. This
fee is
in addition to the amounts paid under the Plan and, if paid, will be
reimbursed
by the adviser and not the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary
of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
------------------------------------ --------------------------------
- ----
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750
million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust, Boston, MA, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
EXPENSES OF THE FUND
Holders of shares pay their allocable portion of Fund and Trust
expenses.
The Trust expenses for which holders of shares pay their allocable
portion
include, but are not limited to: the cost of organizing the Trust and
continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; the cost of meetings of
Trustees;
legal fees of the Trust; association membership dues; and such non-
recurring and
extraordinary items as may arise.
The Fund expenses for which holders of shares pay their allocable
portion
include, but are not limited to: registering the Fund and shares of the
Fund;
investment advisory services; taxes and commissions; custodian fees;
insurance
premiums; auditors' fees; and such non-recurring and extraordinary items
as may
arise.
At present, the only expenses allocated to the shares as a class are
expenses
under the Fund's Distribution Plan which relate to the shares. However,
the
Board of Trustees reserves the right to allocate certain other expenses
to
holders of shares as it deems appropriate ("Class Expenses"). In any
case, Class
Expenses would be limited to: transfer agent fees as identified by the
transfer
agent as attributable to holders of shares; printing and postage
expenses
related to preparing and distributing materials such as shareholder
reports,
prospectuses and proxies to current shareholders; registration fees paid
to the
Securities and Exchange Commission and registration fees paid to state
securities commissions; expenses related to administrative personnel and
services as required to support holders of shares; legal fees relating
solely to
shares; and Trustees' fees incurred as a result of issues relating
solely to
shares.
NET ASSET VALUE
- ------------------------------------------------------------------------
- --------
The Fund attempts to stabilize the net asset value of its shares at
$1.00 by
valuing the portfolio securities using the amortized cost method. The
net asset
value per share is determined by subtracting total liabilities from
total assets
and dividing the remainder by the number of shares outstanding. The Fund
cannot
guarantee that its net asset value will always remain at $1.00 per
share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
HOW TO PURCHASE SHARES
- ------------------------------------------------------------------------
- --------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased as described below either through a financial institution
(such as
a bank or broker/dealer) or by wire or by check directly from the Fund,
with a
minimum initial investment of $10,000. (Financial institutions may
impose
different minimum investment requirements on their customers.)
In connection with any sale, Federated Securities Corp. may, from time
to time,
offer certain items of nominal value to any shareholder or investor. The
Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and
returning
the new account form available from the Fund before shares can be
purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may
purchase shares
through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives
payment by
wire or converts payment by check from the financial institution into
federal
funds. It is the financial institution's responsibility to transmit
orders
promptly. Financial institutions may charge additional fees for their
services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling
the Fund
before 1:00 p.m. (Eastern time). The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) in
order to begin earning dividends that same day. Federal funds should be
wired as
follows: Federated Services Company c/o State Street Bank and Trust
Company,
Boston, MA; Attention; EDGEWIRE; For Credit to: Florida Municipal Cash
Trust;
(Fund Number) (this number can be found on the account statement or by
contacting the Fund) Group Number or Order Number; Nominee or
Institution Name;
and ABA Number 011000028. Shares cannot be purchased by wire on holidays
when
wire transfers are restricted.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check
made
payable to Florida Municipal Cash Trust to: Federated Services Company,
c/o
State Street Bank and Trust Company, P.O. Box 8602, Boston, MA 02266-
8602.
Orders by mail are considered received when payment by check is
converted into
federal funds (normally the business day after the check is received)
and shares
begin earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM. A minimum of $100 can be automatically
withdrawn
periodically from the shareholder's checking account at an Automated
Clearing
House ("ACH") member and invested in Fund shares. Shareholders should
contact
their financial institution or the Fund to participate in this program.
HOW TO REDEEM SHARES
- ------------------------------------------------------------------------
- --------
Shares are redeemed at their net asset value next determined after the
Fund
receives the redemption request. Redemptions will be made on days on
which the
Fund computes its net asset value. Redemption requests must be received
in
proper form and can be made as described below.
REDEEMING SHARES THROUGH A FINANCIAL INSTITUTION. Shares may be redeemed
by
contacting the shareholder's financial institution. Shares will be
redeemed at
the net asset value next determined after Federated Services Company
receives
the redemption request. According to the shareholder's instructions,
redemption
proceeds can be sent to the financial institution or to the shareholder
by check
or by wire. The financial institution is responsible for promptly
submitting
redemption requests and providing proper written redemption
instructions.
Customary fees and commissions may be charged by the financial
institution for
this service.
REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by
calling
the Fund provided the Fund has a properly completed authorization form.
These
forms can be obtained from Federated Securities Corp. Proceeds from
redemption
requests received before 12:00 noon (Eastern time) will be wired the
same day to
the shareholder's account at a domestic commercial bank which is a
member of the
Federal Reserve System, but will not include that day's dividend.
Proceeds from
redemption requests received after that time will include that day's
dividends
but will be wired the following business day. Under limited
circumstances,
arrangements may be made with the distributor for same-day payment of
proceeds,
without that day's dividend, for redemption requests received before
2:00 p.m.
(Eastern time). Proceeds from redeemed shares purchased by check or
through ACH
will not be wired until that method of payment has cleared.
Telephone instructions may be recorded and if reasonable procedures are
not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares
By Mail"
should be considered. If at any time the Fund shall determine it
necessary to
terminate or modify the telephone redemption privilege, shareholders
would be
promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by
mailing a
written request together with properly endorsed certificates, if issued,
to:
Federated Services Company, c/o State Street Bank and Trust Company,
P.O. Box
8602, Boston, MA 02266-8602. The written request should state: Florida
Municipal
Cash Trust; the account name as registered with the Fund; the account
number;
and the number of shares to be redeemed or the dollar amount requested.
All
owners of the account must sign the request exactly as the shares are
registered. Any share certificates should be sent by registered or
certified
mail with the written request. Normally, a check for the proceeds is
mailed
within one business day, but in no event more than seven days, after
receipt of
a proper written redemption request. Dividends are paid up to and
including the
day that a redemption request is processed.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by: a commercial or savings bank, trust company or
savings and loan association whose deposits are insured by an
organization which
is administered by the Federal Deposit Insurance Corporation; a member
of a
domestic stock exchange; or any other "eligible guarantor institution,"
as
defined in the Securities Exchange Act of 1934. The Fund does not accept
signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to
allow
shareholders to redeem their Fund shares. A fee will be charged for this
service. The check writing service allows the shareholder to receive the
daily
dividend declared on the shares to be redeemed until the check is
presented to
State Street Bank for payment. However, checks should never be made
payable or
sent to State Street Bank or the Fund to redeem shares, and a check may
not be
written to close an account. Canceled checks are sent to the shareholder
each
month.
DEBIT CARD. Upon request, a debit account will be established. This
account
allows shareholders to redeem shares by using a debit card. A fee will
be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of
at
least $10,000, a systematic withdrawal program may be established
whereby
automatic redemptions are made from the account and transferred
electronically
to any commercial bank, savings bank, or credit union that is an ACH
member.
Shareholders may apply for participation in this program through their
financial
institution or the Fund.
ACCOUNT INFORMATION
- ------------------------------------------------------------------------
- --------
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing. Monthly
confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, if an
account
balance falls below $10,000 due to shareholder redemptions, the Fund may
redeem
all of the remaining shares in that account and pay the proceeds to the
shareholder. Before shares are redeemed to close an account, the
shareholder will be notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- ------------------------------------------------------------------------
- --------
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of each
portfolio
in the Trust have equal voting rights, except that in matters affecting
only a
particular portfolio, only shares of that portfolio are entitled to
vote. As a
Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for
certain
changes in the Trust's or the Fund's operation and for the election of
Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act
of 1986, dividends representing net interest earned on certain "private
activity" bonds issued after August 7, 1986, may be included in
calculating the
federal individual alternative minimum tax or the federal alternative
minimum
tax for corporations. The Fund may purchase all types of municipal
bonds,
including private activity bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
Florida. Shareholders are urged to consult their own tax advisers
regarding the
status of their accounts under state and local tax laws.
FLORIDA INTANGIBLES TAX
Shareholders of the Fund that are subject to the Florida intangibles tax
will
not be required to include the value of their Fund shares in their
taxable
intangible property if all of the Fund's investments on the annual
assessment
date are obligations that would be exempt from such tax if held directly
by such
shareholders, such as Florida and U.S. government obligations. As
described
earlier, the Fund will normally attempt to invest substantially all of
its
assets in securities which are exempt from the Florida intangibles tax.
Accordingly, the value of the Fund shares held by a shareholder should
under
normal circumstances be exempt from the Florida intangibles tax.
However, if the portfolio consists of any assets which are not so exempt
on the
annual assessment date, only the portion of the shares of the Fund which
relate
to securities issued by the United States and its possessions and
territories
will be exempt from the Florida intangibles tax, and the remaining
portions of
such shares will be fully subject to the intangibles tax, even if they
partly
relate to Florida tax exempt securities.
FLORIDA STATE MUNICIPAL TAXATION
In a majority of states that have an income tax, dividends paid by a
mutual fund
attributable to investments in a particular state's municipal
obligations are
exempt from both federal and such state's income tax. If Florida were to
adopt
an income tax in the future, and assuming that its income tax policy
with
respect to mutual funds investing in Florida state and local municipal
obligations would be similar to the general tax policy of other states,
dividends paid by the Fund would be exempt from Florida state income
tax. A
constitutional amendment approved by referendum would be required before
an
individual income tax could be imposed.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time, the Fund advertises its yield, effective yield, and
tax-equivalent yield.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
the Fund's tax-exempt yield, assuming a specific tax rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is
expressed as
a percentage.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C> <C>
Florida Municipal Cash Trust
Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Distributor
Federated Securities Corp. Federated
Investors Tower
Pittsburgh,
Pennsylvania 15222-3779
- ------------------------------------------------------------------------
- ----------------------
Investment Adviser
Federated Management Federated
Investors Tower
Pittsburgh,
Pennsylvania 15222-3779
- ------------------------------------------------------------------------
- ----------------------
Custodian
State Street Bank and P.O. Box 8602
Trust Company Boston,
Massachusetts 02266-8602
- ------------------------------------------------------------------------
- ----------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated
Investors Tower
Pittsburgh,
Pennsylvania 15222-3779
- ------------------------------------------------------------------------
- ----------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG
Place
Pittsburgh,
Pennsylvania 15222
- ------------------------------------------------------------------------
- ----------------------
</TABLE>
FLORIDA MUNICIPAL
CASH TRUST
PROSPECTUS
A Non-Diversified Portfolio of
Federated
Municipal Trust, an Open-End
Management
Investment Company
Prospectus dated February 28, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314229758
005392 (2/95)
Florida Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of Florida Municipal Cash Trust (the "Fund") dated
February 28, 1995. This Statement is not a prospectus. To receive a
copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1995
Federated Securities
Corporation
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
Florida Investment Risks 2
Investment Limitations 2
Brokerage Transactions 4
Federated Municipal Trust
Management 5
Officers and Trustees 5
The Funds 8
Share Ownership 9
Trustees Compensation 9
Trustee Liability 10
Investment Adviser 10
Advisory Fees 10
Fund Administration 10
Distribution and Shareholder
Services Plans 11
Determining Net Asset Value 11
Redemption in Kind 11
The Fund's Tax Status 12
Performance Information 12
Yield 12
Effective Yield 12
Tax-Equivalent Yield 12
Tax-Equivalency Tables 13
Total Return 15
Performance Comparisons 15
Investment Policies
Unless indicated otherwise, the policies described below may be changed
by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the
security, the issuer of any demand feature applicable to the security,
or
any guarantor of either the security or any demand feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution
irrevocable letters of credit or guarantees and give the Fund the right
to
demand payment of the principal amounts of the participation interests
plus
accrued interest on short notice (usually within seven days). The
municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation
interests
include the right to demand payment from the issuers of those interests.
By
purchasing participation interests having a seven day demand feature,
the
Fund is buying a security meeting the maturity and quality requirements
of
the Fund and also is receiving the tax-free benefits of the underlying
securities.
Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the
nature of the appropriation for the lease. Furthermore, a lease may
provide
that the participants cannot accelerate lease obligations upon default.
The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the
investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be
terminated
by the lessee; the potential recovery, if any, from a sale of the leased
property upon termination of the lease; the lessee's general credit
strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit
enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other
than normal transaction costs, are incurred. However, liquid assets of
the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are
marked
to market daily and are maintained until the transaction has been
settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than
20%
of the total value of its assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant
to
repurchase agreements. Repurchase agreements are arrangements in which
banks, brokers/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at
a mutually agreed upon time and price. To the extent that the seller
does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. The Fund or
its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund
will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by
the
Trustees.
Florida Investment Risks
The Fund invests in obligations of Florida issuers which results in the
Fund's performance being subject to risks associated with the overall
conditions present within the state. The following information is a
brief
summary of the recent prevailing economic conditions and a general
summary
of the state's financial status. This information is based on official
statements relating to securities that have been offered by Florida
issuers
and from other sources believed to be reliable but should not be relied
upon
as a complete description of all relevant information.
Florida is the twenty-second largest state with an area of 54,136 square
miles and a water area of 4,424 square miles. The state is 447 miles
long
and 361 miles wide with a tidal shoreline of almost 2,300 miles.
According
to the U.S. Census Bureau, Florida moved past Illinois in 1986 to become
the
fourth most populous state, and as of 1990, had an estimated population
of
13.2 million.
Services and trade continue to be the largest components of the Florida
economy, reflecting the importance of tourism as well as the need to
serve
Florida's rapidly growing population. Agriculture is also an important
part
of the economy, particularly citrus fruits. Oranges have been the
principal
crop, accounting for 70% of the nation's output. Manufacturing, although
of
less significance, is a rapidly growing component of the economy. The
economy also has substantial insurance, banking, and export
participation.
Unemployment rates have historically been below national averages, but
have
recently risen above the national rate.
Section 215.32, Florida Statutes, provides that financial operations of
the
State of Florida covering all receipts and expenditures must be
maintained
through the use of three funds--the General Revenue Fund, the Trust
Fund,
and the Working Capital Fund. The General Revenue Fund receives the
majority
of State tax revenues. The Working Capital Fund receives revenues in
excess
of appropriations and its balances are freely transferred to the General
Revenue Fund as necessary. In November, 1992, Florida voters approved a
constitutional amendment requiring the state to fund a Budget
Stabilization
Fund to 5% of general revenues, with funding to be phased in over five
years
beginning in fiscal 1995. The Working Capital Fund will become the
Budget
Stabilization Fund. Major sources of tax revenues to the General Revenue
Fund are the sale and use tax, corporate income tax and beverage tax.
The over-dependence on the sensitive sales tax creates vulnerability to
recession. Accordingly, financial operations have been strained during
the
past few years, but the state has responded in a timely manner to
maintain
budgetary control.
Hurricane Andrew devastated portions of southern Florida in August 1992,
costing billions of dollars in emergency relief, damage, and repair
costs.
However, the overall financial condition of the major issuers of
municipal
bond debt in the state were relatively unaffected by Hurricane Andrew,
due
to federal disaster payments and the overall level of private insurance.
However, it is possible that single revenue-based local bond issues
could be
severely impacted by storm damage in certain circumstances.
Florida's debt structure is complex. Most state debt is payable from
specified taxes and additionally secured by the full faith and credit of
the
state. Under the general obligation pledge, to the extent specified
taxes
are insufficient, the state is unconditionally required to make payment
on
bonds from all non-dedicated taxes.
The Fund's concentration in securities issued by the state and its
political
subdivisions provides a greater level of risk than a fund which is
diversified across numerous states and municipal entities. The ability
of
the state or its municipalities to meet their obligations will depend on
the
availability of tax and other revenues; economic, political, and
demographic
conditions within the state; and the underlying condition of the state,
and
its municipalities.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as are
necessary for the clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money in amounts up to one-third of the value of its total
assets, including the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather
as
a temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet
redemption
requests when the liquidation of portfolio securities is deemed to
be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of the value of its
total
assets are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except
as necessary to secure permitted borrowings.
Lending Cash or Securities
The Fund will not lend any of its assets, except that it may
purchase
or hold portfolio securities permitted by its investment
objective,
policies, limitations, or Declaration of Trust.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts,
or commodity futures contracts.
Investing in Real Estate
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in securities of
issuers whose business involves the purchase or sale of real
estate
or in securities which are secured by real estate or interests in
real estate.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
Concentration of Investments
The Fund will not invest 25% or more of the value of its total
assets
in any one industry, or in industrial development bonds or other
securities the interest upon which is paid from revenues of
similar
types of projects, except that the Fund may invest 25% or more of
the
value of its total assets in cash, cash items, or securities
issued
or guaranteed by the government of the United States or its
agencies,
or instrumentalities and repurchase agreement collateralized by
such
U.S. government securities.
The above limitations cannot be changed without shareholder approval.
The
following investment limitations, however, may be changed by the
Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Investing in Restricted Securities
The Fund will not invest more than 10% of its total assets in
securities subject to restrictions on resale under the Securities
Act
of 1933.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its net
assets
in illiquid securities.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment
companies,
except as part of a merger, consolidation, or other acquisition.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers (including companies responsible
for
paying principal and interest on industrial development bonds)
which
have records of less than three years of continuous operations,
including the operation of any predecessor.
Investing for Control
The Fund will not invest in securities of a company for the
purpose
of exercising control or management.
Investing in Issuers Whose Securities are Owned by Officers and
Trustees
of the Trust
The Fund will not purchase or retain the securities of any issuer
if
the Officers and Trustees of the Trust or its investment adviser,
owning individually more than .50 of 1% of the issuer's
securities,
together own more than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or
any
combination of them.
Investing in Minerals
The Fund will not purchase or sell interests in oil, gas, or other
mineral exploration or development programs or leases, although it
may purchase the securities of issuers which invest in or sponsor
such programs.
For purposes of the above limitations, the Fund considers instruments
issued by a U.S. branch of a domestic bank or savings and loan having
capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items." Except with respect to borrowing
money, if a percentage limitation is adhered to at the time of
investment,
a later increase or decrease in percentage resulting from any change in
value or net assets will not result in a violation of such limitation.
The Fund does not intend to borrow money or pledge securities in excess
of
5% of the value of its net assets during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order
at a favorable price. In working with dealers, the adviser will
generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Trustees. The adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the
Fund
or to the adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic
studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may
be
used by the adviser or its affiliates in advising the Fund and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid,
it would tend to reduce their expenses. The adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. During the period from September 21, 1994 (date of
initial public investment) to October 31, 1994, the Fund paid no
brokerage
commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type
the Fund may make may also be made by those other accounts. When the
Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
Federated Municipal Trust Management
Officers and Trustees
Officers and Trustees are listed with their addresses, present positions
with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Center
Pittsburgh, PA
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner of
the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate
ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of
the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of
the
Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation
and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman,
Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds;
Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue
is
the son of John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.;
Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined
in
the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of
the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes
the
following investment companies: American Leaders Fund, Inc.; Annuity
Management Series; Arrow Funds; Automated Cash Management Trust;
Automated
Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.;
DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated
ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust;
Federated
Government Trust; Federated Growth Trust; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated
Index
Trust; Federated Institutional Trust; Federated Intermediate Government
Trust; Federated Master Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock
Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First
Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate
U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.;
Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government
Income Securities, Inc.; High Yield Cash Trust; Insight Institutional
Series, Inc.; Insurance Management Series; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond
Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S.
Government Money Market Trust; Liberty Term Trust, Inc. - 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; The
Medalist
Funds; Money Market Management, Inc.; Money Market Obligations Trust;
Money
Market Trust; Municipal Securities Income Trust; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; Portage Funds; RIMCO Monument
Funds;
The Shawmut Funds; Short-Term Municipal Trust; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust
for Financial Institutions; Trust For Government Cash Reserves; Trust
for
Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations;
World Investment Series, Inc.
Share Ownership
Officers and Trustees own less than 1% of the Trust's outstanding
shares.
As of January 10, 1995, the following shareholders of record owned 5% or
more of the outstanding shares of the Florida Municipal Cash Trust:
Doctors
Associates, Inc., Milford, CT, owned approximately 11,450,903 shares
(5.09%); Leonard Stuart, Ft. Lauderdale, FL, owned approximately
15,000,000
shares (6.67%); The Beach Bank of Vero Beach, Vero Beach, FL, owned
approximately 16,328,996 shares (7.26%); Maril & Co., Milwaukee, WI,
owned
approximately 23,785,514 shares (10.57%); and Publix Supermarkets, Inc.,
Lakeland, FL, owned approximately 35,050,000 shares (15.58%).
Trustees Compensation
AGGREGATE TOTAL COMPENSATION PAID
NAME, COMPENSATION TO TRUSTEES FROM
POSITION WITH FROM TRUST
TRUST TRUST# AND FUND COMPLEX
John F. Donahue, $ -0- $ -0- for the Trust and
Chairman and Trustee 69 other investment companies in the
Fund Complex
Thomas G. Bigley, $ 719.00 $ 24,991 for the Trust and
Trustee 50 other investment companies in the
Fund Complex
John T. Conroy, Jr., $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
William J. Copeland, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
James E. Dowd, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $ 4,308.00 $ 123,600 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $ 4,757.00 $ 136,100 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Glen R. Johnson, $ -0- $ -0- for the Trust and
President and Trustee 9 other investment companies in the
Fund Complex
Peter E. Madden, $ 4,308.00 $ 104,880 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Gregor F. Meyer, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Wesley W. Posvar, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Marjorie P. Smuts, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
#The aggregate compensation is provided for the Trust which is comprised
of
13 portfolios.
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable
for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject
by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated Management. It is a
subsidiary
of Federated Investors. All the voting securities of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue, his
wife
and his son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder
of
the Fund for any losses that may be sustained in the purchase, holding,
or
sale of any security or for anything done or omitted by it, except acts
or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with
the
Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the period from September 12, 1994 (start of business) to October
31,
1994, the adviser earned $20,127, all of which was voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and
extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of
average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets,
the
adviser will reimburse the Fund for its expenses over the
limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the
amount of the excess, subject to an annual adjustment. If the
expense
limitation is exceeded, the amount to be reimbursed by the adviser
will be limited, in any single fiscal year, by the amount of the
investment advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the period from September 12, 1994
(start
of business) to October 31, 1994, the Administrator earned $13,699. Dr.
Henry J. Gailliot, an officer of Federated Management, the adviser to
the
Fund, holds approximately 20% of the outstanding common stock and serves
as
a director of Commercial Data Services, Inc., a company which provides
computer processing services to Federated Administrative Services.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust,
Boston,
MA, is custodian for the securities and cash of the Fund. It also
provides
certain accounting and recordkeeping services with respect to the Fund's
portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains
all necessary shareholder records. For its services, the transfer agent
receives a fee based on size, type, and number of accounts and
transactions
made by shareholders.
Distribution and Shareholder Services Plans
These arrangements permit the payment of fees to financial institutions
to
stimulate distribution activities and services to shareholders provided
by
a representative who has knowledge of the shareholder's particular
circumstances and goals. These activities and services may include, but
are
not limited to, marketing efforts; providing office space, equipment,
telephone facilities, and various clerical, supervisory, computer, and
other personnel as necessary or beneficial to establish and maintain
shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Trustees expects that the Fund
will
be able to achieve a more predictable flow of cash for investment
purposes
and to meet redemptions. This will facilitate more efficient portfolio
management and assist the Fund in pursuing its investment objectives. By
identifying potential investors whose needs are served by the Fund's
objectives, and properly servicing these accounts, it may be possible to
curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail;
and
(3) enhancing shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning their
accounts.
For the period from September 12, 1994 (start of business) to October
31,
1994, no payments were made pursuant to the Distribution Plan. In
addition,
for this period, payments in the amount of $12,579 were made pursuant to
the Shareholder Services Plan.
Determining Net Asset Value
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.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or
1%
of the Fund's net asset value, whichever is less, for any one
shareholder
within a 90-day period. Any redemption beyond this amount will also be
in
cash unless the Trustees determine that further payments should be in
kind.
In such cases, the Fund will pay all or a portion of the remainder of
the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not
as liquid as a cash redemption. If redemption is made in kind,
shareholders
who sell these securities could receive less than the redemption value
and
could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated
investment
companies, the Fund must, among other requirements: derive at least 90%
of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested;
changes in interest rates; changes in expenses; and the relative amount
of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for
those
shareholders paying those fees.
Yield
The yield is calculated based upon the seven days ending on the day of
the
calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional
shares purchased with dividends earned from the original one share and
all
dividends declared on the original and any purchased shares; dividing
the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
The Fund's yield for the seven-day period ended October 31, 1994, was
3.12%.
Effective Yield
The effective yield is calculated by compounding the unannualized base
period return by: adding 1 to the base period return; raising the sum to
the 365/7th power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended October 31,
1994,
was 3.17%.
Tax-Equivalent Yield
The tax-equivalent yield of the Fund is calculated similarly to the
yield
but is adjusted to reflect the taxable yield that the Fund would have
had
to earn to equal its actual yield, assuming a 39.6% tax rate (the
maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
The Fund's tax-equivalent yield for the seven-day period ended October
31,
1994, was 5.17%.
Tax-Equivalency Tables
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free
from state and local taxes as well. As the tables below indicate, a "tax-
free" investment can be an attractive choice for investors, particularly
in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995***
FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
Joint $1- $39,001 - $94,251 - $143,601 - OVER
Return 39,000 94,250 143,600 256,500
256,500
Single Return $1- $23,351 - $56,551 - $117,951 - OVER
23,350 56,550 117,950 256,500
$256,500
Tax-Exempt
Yield** Taxable Yield Equivalent***
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
*For some investors, income may be subject to the federal
alternative minimum tax and state
and local taxes.
**These yields are for illustrative purposes only and are not
indicative of past or future
performance of the Fund.
Actual yields will vary.
***The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent.
TAXABLE YIELD EQUIVALENT FOR 1995***
STATE OF FLORIDA
FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
Joint $1- $39,001 - $94,251 - $143,601 - OVER
Return 39,000 94,250 143,600 256,500
256,500
Single Return $1- $23,351 - $56,551 - $117,951 - OVER
23,350 56,550 117,950 256,500
$256,500
Tax-Exempt
Yield** Taxable Yield Equivalent***
1.00% 1.38% 1.59% 1.65% 1.76% 1.86%
1.50% 1.96% 2.28% 2.37% 2.54% 2.68%
2.00% 2.55% 2.98% 3.10% 3.33% 3.51%
2.50% 3.14% 3.67% 3.82% 4.11% 4.34%
3.00% 3.73% 4.37% 4.55% 4.89% 5.17%
3.50% 4.32% 5.06% 5.27% 5.67% 5.99%
4.00% 4.91% 5.76% 6.00% 6.45% 6.82%
4.50% 5.49% 6.45% 6.72% 7.23% 7.65%
5.00% 6.08% 7.14% 7.45% 8.01% 8.48%
5.50% 6.67% 7.84% 8.17% 8.79% 9.31%
6.00% 7.26% 8.53% 8.90% 9.58% 10.13%
6.50% 7.85% 9.23% 9.62% 10.36% 10.96%
7.00% 8.44% 9.92% 10.34% 11.14% 11.79%
7.50% 9.02% 10.62% 11.07% 11.92% 12.62%
8.00% 9.61% 11.31% 11.79% 12.70% 13.45%
**These yields are for illustrative purposes only and are not
indicative of past or future
performance of the Fund.
Actual yield will vary.
***The state of Florida levies a tax on intangible personal
property,
such as stocks, bonds, and other evidences of indebtedness, at the
rate of $2.00 per $1,000 of the properties' market value as of
January 1st. Because this is a tax on the value of an investment as
opposed to the income generated therefrom, it becomes more
difficult
to include its effect in an income-derived equivalent yield table.
In
an effort to simplify your analysis, this table has been prepared
assuming an across-the-board 20 basis point incremental benefit
resulting from the avoidance of this tax.
Total Return
Average annual total return is the average compounded rate of return for
a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the
period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, adjusted over the
period by any additional shares, assuming the monthly reinvestment of
all
dividends and distributions.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
- Lipper Analytical Services, Inc., ranks funds in various fund
categories based on total return, which assumes the reinvestment
of
all income dividends and capital gains distributions, if any.
- Donoghue's Money Fund Report publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the
same
money funds.
- Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day
effective
yield.
314229758
G00537-01 (2/95)
NORTH CAROLINA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
PROSPECTUS
The shares of North Carolina Municipal Cash Trust (the "Fund") offered
by this
prospectus represent interests in a non-diversified portfolio of
Federated
Municipal Trust (the "Trust"), an open-end management investment company
(a
mutual fund). The Fund invests in short-term North Carolina municipal
securities
to achieve current income exempt from federal regular income tax and the
income
tax imposed by the State of North Carolina consistent with stability of
principal. In addition, the Fund intends to qualify as an investment
substantially exempt from the North Carolina Intangible Personal
Property Tax.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated
February 28,
1995, with the Securities and Exchange Commission. The information
contained in
the Statement of Additional Information is incorporated by reference
into this
prospectus. You may request a copy of the Statement of Additional
Information
free of charge by calling 1-800-235-4669. To obtain other information,
or make
inquiries about the Fund, contact the Fund at the address listed in the
back of
this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
North Carolina Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Shares
8
Administration of the Trust
9
NET ASSET VALUE
10
- ------------------------------------------------------
HOW TO PURCHASE SHARES
10
- ------------------------------------------------------
Special Purchase Features
11
HOW TO REDEEM SHARES
11
- ------------------------------------------------------
Special Redemption Features
12
ACCOUNT INFORMATION
12
- ------------------------------------------------------
Dividends
12
Capital Gains
13
Certificates and Confirmations
13
Accounts With Low Balances
13
SHAREHOLDER INFORMATION
13
- ------------------------------------------------------
Voting Rights
13
Massachusetts Partnership Law
13
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
14
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
ADDRESSES
16
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)................................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)................................................. None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as
applicable)............................... None
Redemption Fee (as a percentage of amount redeemed, as
applicable).................... None
Exchange
Fee.....................................................................
..... None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)
(1)..................................................... 0.10%
12b-1
Fees....................................................................
........ None
Total Other
Expenses................................................................
.. 0.49%
Shareholder Services
Fee..................................................... 0.25%
Total Fund Operating Expenses
(2)................................................ 0.59%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of a
portion of the management fee. The adviser can terminate this voluntary
waiver
at any time at its sole discretion. The maximum management fee is 0.50%.
(2) The Total Fund Operating Expenses in the table above are based on
expenses
expected during the fiscal year ending October 31, 1995. The Total Fund
Operating Expenses were 0.49% for the fiscal year ended October 31, 1994
and
were 0.93% absent the voluntary waiver of a portion of the management
fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of the Fund will bear,
either
directly or indirectly. For more complete descriptions of the various
costs and
expenses, see "How to Purchase Shares" and "Trust Information." Wire-
transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
5 years 10 years
- ------------------------------------------------------------------------
- -----------------
<S> <C> <C>
<C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period........... $ 6 $ 19 $
33 $ 74
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
NORTH CAROLINA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for the period presented, is included in the Annual
Report,
which is incorporated by reference. This table should be read in
conjunction
with the Fund's financial statements and notes thereto, which may be
obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1994*
- ------------------
<S>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD
$ 1.00
- ------------------------------------------------------------------------
- -
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
- -
Net investment income
0.02
- ------------------------------------------------------------------------
- - -----------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
- -
Dividends to shareholders from net investment income
(0.02)
- ------------------------------------------------------------------------
- - -----------
NET ASSET VALUE, END OF PERIOD
$ 1.00
- ------------------------------------------------------------------------
- - -----------
TOTAL RETURN**
2.06%
- ------------------------------------------------------------------------
- -
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
- -
Expenses
0.49%(b)
- ------------------------------------------------------------------------
- -
Net investment income
2.54%(b)
- ------------------------------------------------------------------------
- -
Expense waiver/reimbursement (a)
0.44%(b)
- ------------------------------------------------------------------------
- -
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
- -
Net assets, end of period (000 omitted)
$85,249
- ------------------------------------------------------------------------
- -
</TABLE>
* Reflects operations for the period from December 31, 1993 (date of
initial
public investment), to October 31, 1994. For the period from November
29,
1993 (start of business) to December 31, 1993 the Fund had no
investment
activity.
** Based on net asset value, which does not reflect the sales load or
contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts Business Trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The Fund is designed for financial institutions acting in an
agency
or fiduciary capacity as a convenient means of accumulating an interest
in a
professionally managed, non-diversified portfolio investing primarily in
short-term North Carolina municipal securities. The Fund may not be a
suitable
investment for retirement plans or for non-North Carolina taxpayers
because it
invests in municipal securities of North Carolina. A minimum initial
investment
of $10,000 over a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the income tax imposed by the State of North
Carolina
consistent with stability of principal. In addition, the Fund intends to
qualify
as an investment substantially exempt from the North Carolina Intangible
Personal Property Tax. This investment objective cannot be changed
without
shareholder approval. While there is no assurance that the Fund will
achieve its
investment objective, it endeavors to do so by following the investment
policies
described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
North
Carolina municipal securities (as defined below) maturing in 13 months
or less.
As a matter of investment policy, which cannot be changed without
shareholder
approval, at least 80% of the Fund's annual interest income will be
exempt from
federal regular income tax and North Carolina state income tax and
intangibles
tax or at least 80% of its net assets will be invested in obligations,
the
interest income from which is exempt from federal regular and North
Carolina
state income tax and intangibles tax. (Federal regular income tax does
not
include the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.) The average maturity of the
securities in the Fund's portfolio, computed on a dollar-weighted basis,
will be
90 days or less. Unless indicated otherwise, the investment policies may
be
changed by the Trustees without shareholder approval. Shareholders will
be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued
by or on behalf of North Carolina and its political subdivisions and
financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and North Carolina income tax and intangibles
tax ("North Carolina municipal securities"). Examples of North Carolina
municipal securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
- bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in North
Carolina
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying North Carolina
municipal securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The North Carolina municipal securities in which the Fund
invests must
be rated in one of the two highest short-term rating categories by one
or more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors
Service, Inc. ("Fitch") are all considered rated in one of the two
highest
short-term rating categories. The Fund will follow applicable
regulations in
determining whether a security rated by more than one NRSRO can be
treated as
being in one of the two highest short-term rating categories; currently,
such
securities must be rated by two NRSROs in one of their two highest
rating
categories. See "Regulatory Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit
enhanced by a guaranty, letter of credit, or insurance. The Fund
typically
evaluates the credit quality and ratings of credit-enhanced securities
based
upon the financial condition and ratings of the party providing the
credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit
enhanced by the credit enhancer, in which case the securities will be
treated as
having been issued by both the issuer and the credit enhancer. The
bankruptcy,
receivership, or default of the credit enhancer will adversely affect
the
quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund
may
invest pursuant to its investment objective and policies but which are
subject
to restrictions on resale under federal securities laws. Under criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that
restricted securities are not determined to be liquid, the Fund will
limit their
purchase, together with other illiquid securities, to 10% of its net
assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines that market conditions call for a temporary defensive
posture, the
Fund may invest in tax-exempt or taxable securities such as: obligations
issued
by or on behalf of municipal or corporate issuers having the same
quality
characteristics as described above; obligations issued or guaranteed by
the U.S.
government, its agencies, or instrumentalities; instruments issued by a
U.S.
branch of a domestic bank or other deposit institution having capital,
surplus,
and undivided profits in excess of $100,000,000 at the time of
investment; and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so. However, the interest from certain North
Carolina
municipal securities is subject to the federal alternative minimum tax.
NORTH CAROLINA MUNICIPAL SECURITIES
North Carolina municipal securities are generally issued to finance
public
works, such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works.
They are
also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.
North Carolina municipal securities include industrial development bonds
issued
by or on behalf of public authorities to provide financing aid to
acquire sites
or construct and equip facilities for privately or publicly owned
corporations.
The availability of this financing encourages these corporations to
locate
within the sponsoring communities and thereby increases local
employment.
The two principal classifications of North Carolina municipal securities
are
"general obligation" and "revenue" bonds. General obligation bonds are
secured
by the issuer's pledge of its full faith and credit and taxing power for
the
payment of principal and interest. Interest on and principal of revenue
bonds,
however, are payable only from the revenue generated by the facility
financed by
the bond or other specified sources of revenue. Revenue bonds do not
represent a
pledge of credit or create any debt of or charge against the general
revenues of
a municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on North Carolina municipal securities depend on a variety of
factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of North Carolina municipal securities and participation interests, or
the
credit enhancers of either, to meet their obligations for the payment of
interest and principal when due. In addition, from time to time, the
supply of
North Carolina municipal securities acceptable for purchase by the Fund
could
become limited.
The Fund may invest in North Carolina municipal securities which are
repayable
out of revenue streams generated from economically related projects or
facilities and/or whose issuers are located in the same state. Sizable
investments in these North Carolina municipal securities could involve
an
increased risk to the Fund should any of these related projects or
facilities
experience financial difficulties.
Obligations of issuers of North Carolina municipal securities are
subject to the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under
certain
circumstances, the Fund may borrow up to one-third of the value of its
total
assets and pledge up to 15% of the value of total assets to secure such
borrowings. This investment limitation cannot be changed without
shareholder
approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Statement of Additional Information, in order to
comply with
applicable laws and regulations, including the provisions of and
regulations
under the Investment Company Act of 1940, as amended. In particular, the
Fund
will comply with the various requirements of Rule 2a-7, which regulates
money
market mutual funds. The Fund will determine the effective maturity of
its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
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- --------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees
are responsible for managing the Trust's business affairs and for
exercising all
the Trust's powers except those reserved for the shareholders. An
Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .50 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of
the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is
the
principal distributor for a number of investment companies. Federated
Securities
Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services
Plan
(the "Services Plan") under which it will pay Federated Shareholder
Services, an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of the Fund to provide personal
services and/or maintenance of shareholder accounts to the Fund and its
shareholders. From time to time and for such periods as deemed
appropriate, the
amount stated above may be reduced voluntarily.
Federated Shareholder Services may elect to pay financial institutions
fees
based upon shares owned by their clients or customers for services
provided to
those clients or customers. The schedules of such fees and the basis
upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds,
investment
advisers, and broker/dealers to provide certain services to
shareholders. These
services may include, but are not limited to, distributing prospectuses
and
other information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of shares. Any fees paid for
these
services by the distributor will be reimbursed by the adviser and not
the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE TRUST
ADMINISTRATIVE SERVICES. Federated Administrative Services, a
subsidiary of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
------------------------------------ --------------------------------
- ----
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750
million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is
custodian for
the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
- ------------------------------------------------------------------------
- --------
The Fund attempts to stabilize the net asset value of its shares at
$1.00 by
valuing the portfolio securities using the amortized cost method. The
net asset
value per share is determined by subtracting total liabilities from
total assets
and dividing the remainder by the number of shares outstanding. The Fund
cannot
guarantee that its net asset value will always remain at $1.00 per
share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
HOW TO PURCHASE SHARES
- ------------------------------------------------------------------------
- --------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased as described below either through a financial institution
(such as
a bank or broker/dealer) or by wire or by check directly from the Fund,
with a
minimum initial investment of $10,000. (Financial institutions may
impose
different minimum investment requirements on their customers.)
In connection with any sale, Federated Securities Corp. may, from time
to time,
offer certain items of nominal value to any shareholder or investor. The
Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and
returning
the new account form available from the Fund before shares can be
purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may
purchase
shares through a financial institution which has a sales agreement with
the
distributor. Orders are considered received when the Fund receives
payment by
wire or converts payment by check from the financial institution into
federal
funds. It is the financial institution's responsibility to transmit
orders
promptly. Financial institutions may charge additional fees for their
services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling
the Fund
before 1:00 p.m. (Eastern time). The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) in
order to begin earning dividends that same day. Federal funds should be
wired as
follows: Federated Services Company c/o State Street Bank and Trust
Company,
Boston, MA; Attention; EDGEWIRE; For Credit to: North Carolina Municipal
Cash
Trust;
(Fund Number) (this number can be found on the account statement or by
contacting the Fund); Group Number or Order Number; Nominee or
Institution Name;
and ABA Number 011000028. Shares cannot be purchased by wire on holidays
when
wire transfers are restricted.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check
made
payable to North Carolina Municipal Cash Trust to: Federated Services
Company,
c/o State Street Bank and Trust Company, P.O. Box 8602, Boston, MA 02266-
8602.
Orders by mail are considered received when payment by check is
converted into
federal funds (normally the business day after the check is received)
and shares
begin earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM. A minimum of $100 can be automatically
withdrawn
periodically from the shareholder's checking account at an Automated
Clearing
House ("ACH") member and invested in Fund shares. Shareholders should
contact
their financial institution or the Fund to participate in this program.
HOW TO REDEEM SHARES
- ------------------------------------------------------------------------
- --------
Shares are redeemed at their net asset value next determined after the
Fund
receives the redemption request. Redemptions will be made on days on
which the
Fund computes its net asset value. Redemption requests must be received
in
proper form and can be made as described below.
REDEEMING SHARES THROUGH A FINANCIAL INSTITUTION. Shares may be
redeemed by
contacting the shareholder's financial institution. Shares will be
redeemed at
the net asset value next determined after Federated Services Company
receives
the redemption request. According to the shareholder's instructions,
redemption
proceeds can be sent to the financial institution or to the shareholder
by check
or by wire. The financial institution is responsible for promptly
submitting
redemption requests and providing proper written redemption
instructions.
Customary fees and commissions may be charged by the financial
institution for
this service.
REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by
calling
the Fund provided the Fund has a properly completed authorization form.
These
forms can be obtained from Federated Securities Corp. Proceeds from
redemption
requests received before 12:00 noon (Eastern time) will be wired the
same day to
the shareholder's account at a domestic commercial bank which is a
member of the
Federal Reserve System, but will not include that day's dividend.
Proceeds from
redemption requests received after that time will include that day's
dividends
but will be wired the following business day. Under limited
circumstances,
arrangements may be made with the distributor for same-day payment of
proceeds,
without that day's dividend, for redemption requests received before
2:00 p.m.
(Eastern time). Proceeds from redeemed shares purchased by check or
through ACH
will not be wired until that method of payment has cleared.
Telephone instructions may be recorded and if reasonable procedures are
not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares
By Mail"
should be considered. If at any
time the Fund shall determine it necessary to terminate or modify the
telephone
redemption privilege, shareholders would be promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by
mailing a
written request together with properly endorsed certificates, if issued,
to:
Federated Services Company, c/o State Street Bank and Trust Company,
P.O. Box
8602, Boston, MA 02266-8602. The written request should state: North
Carolina
Municipal Cash Trust; the account name as registered with the Fund; the
account
number; and the number of shares to be redeemed or the dollar amount
requested.
All owners of the account must sign the request exactly as the shares
are
registered. Any share certificates should be sent by registered or
certified
mail with the written request. Normally, a check for the proceeds is
mailed
within one business day, but in no event more than seven days, after
receipt of
a proper written redemption request. Dividends are paid up to and
including the
day that a redemption request is processed.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by: a commercial or savings bank, trust company or
savings
and loan association whose deposits are insured by an organization which
is
administered by the Federal Deposit Insurance Corporation; a member of a
domestic stock exchange; or any other "eligible guarantor institution,"
as
defined in the Securities Exchange Act of 1934. The Fund does not accept
signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to
allow
shareholders to redeem their Fund shares. A fee will be charged for this
service. The check writing service allows the shareholder to receive the
daily
dividend declared on the shares to be redeemed until the check is
presented to
State Street Bank for payment. However, checks should never be made
payable or
sent to State Street Bank or the Fund to redeem shares, and a check may
not be
written to close an account. Canceled checks are sent to the shareholder
each
month.
DEBIT CARD. Upon request, a debit account will be established. This
account
allows shareholders to redeem shares by using a debit card. A fee will
be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value
of at
least $10,000, a systematic withdrawal program may be established
whereby
automatic redemptions are made from the account and transferred
electronically
to any commercial bank, savings bank, or credit union that is an ACH
member.
Shareholders may apply for participation in this program through their
financial
institution or the Fund.
ACCOUNT INFORMATION
- ------------------------------------------------------------------------
- --------
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing. Monthly
confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, if an
account
balance falls below $10,000 due to shareholder redemptions, the Fund may
redeem
all of the remaining shares in that account and pay the proceeds to the
shareholder. Before shares are redeemed to close an account, the
shareholder
will be notified in writing and allowed 30 days to purchase additional
shares to
meet the minimum requirement.
SHAREHOLDER INFORMATION
- ------------------------------------------------------------------------
- --------
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of each
portfolio
in the Trust have equal voting rights, except that in matters affecting
only a
particular portfolio, only shares of that portfolio are entitled to
vote. As a
Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for
certain
changes in the Trust's or the Fund's operation and for the election of
Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify
shareholders
and pay judgments against them.
TAX INFORMATION
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- --------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
North Carolina. Shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.
NORTH CAROLINA TAXES. Under existing North Carolina laws, distributions
made by
the Fund will not be subject to North Carolina income taxes to the
extent that
such distributions qualify as exempt-interest dividends under the
Internal
Revenue Code, and represent (i) interest on obligations of the state of
North
Carolina or any of its political subdivisions; or (ii) interest of
obligations
of the United States or its possessions. Conversely, to the extent that
distributions made by the Fund are derived from other types of
obligations, such
distributions will be subject to North Carolina income taxes.
For purposes of the North Carolina Intangibles Personal Property Tax,
shareholders may exclude from the share value of the Fund that
proportion of the
total share value which is attributable to the value of
the direct obligations of the state of North Carolina, its political
subdivisions and the United States held in the Fund as of December 31 of
the
taxable year.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time, the Fund advertises its yield, effective yield, and
tax-equivalent yield.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
the Fund's tax-exempt yield, assuming a specific tax rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is
expressed as
a percentage.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
ADDRESSES
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- --------
<TABLE>
<S> <C> <C>
North Carolina Municipal Cash Trust
Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Distributor
Federated Securities Corp. Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Investment Adviser
Federated Management Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Custodian
State Street Bank and Trust Company P.O. Box 8602
Boston, MA
02266-8602
- ------------------------------------------------------------------------
- ----------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG
Place
Pittsburgh, PA
15222
- ------------------------------------------------------------------------
- ----------------------
</TABLE>
NORTH CAROLINA MUNICIPAL
CASH TRUST
PROSPECTUS
A Non-Diversified Portfolio of
Federated
Municipal Trust, an Open-End
Management
Investment Company
Prospectus dated February 28, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314229782
3090803A (2/95)
North Carolina Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of North Carolina Municipal Cash Trust (the "Fund") dated
February 28, 1995. This Statement is not a prospectus. To receive a
copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
North Carolina Investment Risks 2
Investment Limitations 2
Brokerage Transactions 4
Federated Municipal Trust
Management 5
Officers and Trustees 5
The Funds 8
Share Ownership 9
Trustees Compensation 9
Trustee Liability 10
Investment Adviser 10
Advisory Fees 10
Fund Administration 10
Shareholder Services Plan 11
Determining Net Asset Value 11
Redemption in Kind 11
The Fund's Tax Status 11
Performance Information 12
Yield 12
Effective Yield 12
Tax-Equivalent Yield 12
Tax-Equivalency Table 13
Total Return 13
Performance Comparisons 14
Investment Policies
Unless indicated otherwise, the policies described below may be changed
by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the
security, the issuer of any demand feature applicable to the security,
or
any guarantor of either the security or any demand feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution
irrevocable letters of credit or guarantees and give the Fund the right
to
demand payment of the principal amounts of the participation interests
plus
accrued interest on short notice (usually within seven days). The
municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation
interests
include the right to demand payment from the issuers of those interests.
By
purchasing participation interests having a seven day demand feature,
the
Fund is buying a security meeting the maturity and quality requirements
of
the Fund and also is receiving the tax-free benefits of the underlying
securities.
Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the
nature of the appropriation for the lease. Furthermore, a lease may
provide
that the participants cannot accelerate lease obligations upon default.
The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the
investment
adviser, under the authority delegated by the Board of Trustees, will
base
its determination on the following factors: whether the lease can be
terminated by the lessee; the potential recovery, if any, from a sale of
the leased property upon termination of the lease; the lessee's general
credit strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit
enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other
than normal transaction costs, are incurred. However, liquid assets of
the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are
marked
to market daily and are maintained until the transaction has been
settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than
20%
of the total value of its assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant
to
repurchase agreements. Repurchase agreements are arrangements in which
banks, brokers/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at
a mutually agreed upon time and price. To the extent that the seller
does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. The Fund or
its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund
will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by
the
Trustees.
North Carolina Investment Risks
The State of North Carolina's credit strength is derived from a
diversified
economy, relatively low unemployment rates, strong financial management,
and a low debt burden. In recent years, the State's economy has become
less
dependent on agriculture (primarily tobacco) and manufacturing (textiles
and furniture) and has experienced increased activity in financial
services, research, high technology manufacturing, and tourism. North
Carolina did not escape the effects of the economic slowdown; however,
the
State is now experiencing an increase in economic development. Long-term
personal income trends indicate gains; however, wealth levels still
continue to lag the national average. State unemployment rates
consistently
fall below the national level; for August 1994, North Carolina reported
an
unemployment rate of 4.9 percent.
North Carolina is a very conservative debt issuer and has maintained
debt
levels that are low due to constitutional debt limitations. Conservative
policies also dominate the State's financial operations. The State's
administration continually demonstrates its ability and willingness to
adjust financial planning and budgeting to preserve financial balance.
The
State's finances, which enjoyed surpluses and adequate reserves
throughout
the 1980's, began reflecting the economic downturn in fiscal 1990. To
close
the shortfalls that emerged because of weakening revenues, the State
increased its sales and corporate tax rates and implemented expenditure
reductions and restrictions. Management's actions resulted in budgetary
surpluses for fiscal 1992 and 1993, and another surplus is anticipated
for
fiscal 1994, which ended June 30. The financials of many North Carolina
municipalities are also strong, and over 25 percent of all Aaa-rated tax-
exempt bonds issued by local municipalities throughout the country are
issued by cities and towns located in the State.
The Fund's concentration in securities issued by the State and its
political subdivisions provides a greater level of risk than a fund
which
is diversified across numerous states and municipal entities. The
ability
of the State or its municipalities to meet their obligations will depend
on
the availability of tax and other revenues; economic, political, and
demographic conditions within the State; and the underlying fiscal
condition of the State, its counties, and its municipalities.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as are
necessary for the clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements in
amounts up to one-third of the value of its total assets,
including
the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather
as
a temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet
redemption
requests when the liquidation of portfolio securities is deemed to
be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of the value of its
total
assets are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except
as necessary to secure permitted borrowings. In those cases, it
may
pledge assets having a market value not exceeding the lesser of
the
dollar amounts borrowed or 15% of the value of its total assets at
the time of the pledge.
Lending Cash or Securities
The Fund will not lend any of its assets, except that it may
acquire
publicly or nonpublicly issued North Carolina municipal securities
or
temporary investments or enter into repurchase agreements in
accordance with its investment objective, policies, limitations,
or
Declaration of Trust.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts,
or commodity futures contracts.
Investing in Real Estate
The Fund will not purchase or sell real estate, including limited
partnerships, although it may invest in securities of issuers
whose
business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real
estate.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
Concentration of Investments
The Fund will not purchase securities, if, as a result of such
purchase 25% or more of the value of its total assets would be
invested in any one industry, or in industrial development bonds
or
other securities, the interest upon which is paid from revenues of
similar types of projects. However, the Fund may invest as
temporary
investments more than 25% of the value of its assets in cash or
cash
items, securities issued or guaranteed by the U.S. government, its
agencies, or instrumentalities, or instruments secured by these
money
market instruments, such as repurchase agreements.
The above limitations cannot be changed without shareholder approval.
The
following investment limitations, however, may be changed by the
Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Investing in Restricted Securities
The Fund will not invest more than 10% of its total assets in
securities subject to restrictions on resale under the Securities
Act
of 1933.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its net
assets
in illiquid securities.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment
companies,
except as part of a merger, consolidation, or other acquisition.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers (including companies responsible
for
paying principal and interest on industrial development bonds)
which
have records of less than three years of continuous operations,
including the operation of any predecessor.
Investing for Control
The Fund will not invest in securities of a company for the
purpose
of exercising control or management.
Investing in Issuers Whose Securities Are Owned by Officers and
Trustees
of the Trust
The Fund will not purchase or retain the securities of any issuer
if
the Officers and Trustees of the Trust or its investment adviser,
owning individually more than .50 of 1% of the issuer's
securities,
together own more than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or
any
combination of them.
Investing in Minerals
The Fund will not purchase or sell interests in oil, gas, or other
mineral exploration or development programs or leases, although it
may purchase the securities of issuers which invest in or sponsor
such programs.
For purposes of the above limitations, the Fund considers certificates
of
deposit and demand and time deposits issued by a U.S. branch of a
domestic
bank or savings and loan having capital, surplus, and undivided profits
in
excess of $100,000,000 at the time of investment to be "cash items."
Except
with respect to borrowing money, if a percentage limitation is adhered
to
at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a
violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of
the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order
at a favorable price. In working with dealers, the adviser will
generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Trustees. The adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the
Fund
or to the adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic
studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may
be
used by the adviser or its affiliates in advising the Fund and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid,
it would tend to reduce their expenses. The adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. During the period from December 31, 1993 to October
31,
1994, the Fund paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type
the Fund may make may also be made by those other accounts. When the
Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
Federated Municipal Trust Management
Officers and Trustees
Officers and Trustees are listed with their addresses, present positions
with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Center
Pittsburgh, PA
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner of
the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate
ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of
the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of
the
Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation
and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman,
Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds;
Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue
is
the son of John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.;
Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined
in
the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of
the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes
the
following investment companies: American Leaders Fund, Inc.; Annuity
Management Series; Arrow Funds; Automated Cash Management Trust;
Automated
Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.;
DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated
ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust;
Federated
Government Trust; Federated Growth Trust; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated
Index
Trust; Federated Institutional Trust; Federated Intermediate Government
Trust; Federated Master Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock
Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First
Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate
U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.;
Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government
Income Securities, Inc.; High Yield Cash Trust; Insight Institutional
Series, Inc.; Insurance Management Series; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond
Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S.
Government Money Market Trust; Liberty Term Trust, Inc. - 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; The
Medalist
Funds; Money Market Management, Inc.; Money Market Obligations Trust;
Money
Market Trust; Municipal Securities Income Trust; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; Portage Funds; RIMCO Monument
Funds;
The Shawmut Funds; Short-Term Municipal Trust; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust
for Financial Institutions; Trust For Government Cash Reserves; Trust
for
Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations;
World Investment Series, Inc.
Share Ownership
Officers and Trustees own less than 1% of the Trust's outstanding
shares.
As of January 10, 1995, the following shareholders of record owned 5% or
more of the outstanding shares of the North Carolina Municipal Cash
Trust:
Michael Wilson, Wilmington, NC, owned approximately 6,817,454 shares
(5.96%); Central Transport, Inc., Highpoint, NC, owned approximately
7,207,822 shares (6.30%); H. J. Faison, Charlotte, NC, owned
approximately
7,585,000 shares (6.63%); and Julius Blum, Inc., Stanley, NC, owned
approximately 9,195,100 shares (8.04%).
Trustees Compensation
AGGREGATE TOTAL COMPENSATION PAID
NAME, COMPENSATION TO TRUSTEES FROM
POSITION WITH FROM TRUST
TRUST TRUST# AND FUND COMPLEX
John F. Donahue, $ -0- $ -0- for the Trust and
Chairman and Trustee 69 other investment companies in the
Fund Complex
Thomas G. Bigley, $ 719.00 $ 24,991 for the Trust and
Trustee 50 other investment companies in the
Fund Complex
John T. Conroy, Jr., $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
William J. Copeland, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
James E. Dowd, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $ 4,308.00 $ 123,600 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $ 4,757.00 $ 136,100 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Glen R. Johnson, $ -0- $ -0- for the Trust and
President and Trustee 9 other investment companies in the
Fund Complex
Peter E. Madden, $ 4,308.00 $ 104,880 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Gregor F. Meyer, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Wesley W. Posvar, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Marjorie P. Smuts, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
#The aggregate compensation is provided for the Trust which is comprised
of
13 portfolios.
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable
for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject
by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated Management. It is a
subsidiary
of Federated Investors. All the voting securities of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue, his
wife
and his son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder
of
the Fund for any losses that may be sustained in the purchase, holding,
or
sale of any security or for anything done or omitted by it, except acts
or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with
the
Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the period from November 29, 1993 (start of business) to October 31,
1994, the adviser earned $296,066, of which $261,597 was voluntarily
waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and
extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of
average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets,
the
adviser will reimburse the Fund for its expenses over the
limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the
amount of the excess, subject to an annual adjustment. If the
expense
limitation is exceeded, the amount to be reimbursed by the adviser
will be limited, in any single fiscal year, by the amount of the
investment advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred
to
as the "Administrators".) For the period from November 29, 1993 (start
of
business) to October 31, 1994, the Administrators earned $52,447. Dr.
Henry
J. Gailliot, an officer of Federated Management, the adviser to the
Fund,
holds approximately 20% of the outstanding common stock and serves as a
director of Commercial Data Services, Inc., a company which provides
computer processing services to Federated Administrative Services.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust
Company,
Boston, MA is custodian for the securities and cash of the Fund. It also
provides certain accounting and recordkeeping services with respect to
the
Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains
all necessary shareholder records. For its services, the transfer agent
receives a fee based on size, type, and number of accounts and
transactions
made by shareholders.
Shareholder Services Plan
This arrangement permits the payment of fees to Federated Shareholder
Services and financial institutions to cause services to be provided
which
are necessary for the maintenance of shareholder accounts and to
encourage
personal services to shareholders by a representative who has knowledge
of
the shareholder's particular circumstances and goals. These activities
and
services may include, but are not limited to: providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish
and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balance; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses. By
adopting
the Shareholder Services Plan, the Board of Trustees expects that the
Fund
will benefit by: (1) providing personal services to shareholders;
(2) investing shareholder assets with a minimum of delay and
administrative
detail; (3) enhancing shareholder recordkeeping systems; and (4)
responding
promptly to shareholders' requests and inquiries concerning their
accounts.
For the fiscal period from November 29, 1993 (start of business) to
October
31, 1994, payments in the amount of $110,145 were made pursuant to the
Shareholder Services Plan, all of which was paid to financial
institutions.
Determining Net Asset Value
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.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or
1%
of the Fund's net asset value, whichever is less, for any one
shareholder
within a 90-day period. Any redemption beyond this amount will also be
in
cash unless the Trustees determine that further payments should be in
kind.
In such cases, the Fund will pay all or a portion of the remainder of
the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not
as liquid as a cash redemption. If redemption is made in kind,
shareholders
who sell these securities could receive less than the redemption value
and
could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated
investment
companies, the Fund must, among other requirements: derive at least 90%
of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested;
changes in interest rates; changes in expenses; and the relative amount
of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for
those
shareholders paying those fees.
Yield
The Fund calculates its yield based upon the seven days ending on the
day
of the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional
shares purchased with dividends earned from the original one share and
all
dividends declared on the original and any purchased shares; dividing
the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
The Fund's yield for the seven-day period ended October 31, 1994, was
2.94%.
Effective Yield
The Fund calculates its effective yield by compounding the unannualized
base period return by: adding 1 to the base period return; raising the
sum
to the 365/7th power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended October 31,
1994,
was 2.99%.
Tax-Equivalent Yield
The tax-equivalent yield of the Fund is calculated similarly to the
yield
but is adjusted to reflect the taxable yield that the Fund would have
had
to earn to equal its actual yield, assuming a 39.6% tax rate (the
maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
The Fund's tax-equivalent yield for the seven-day period ended October
31,
1994, was 5.58%.
Tax-Equivalency Table
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free
from state and local taxes as well. As the table below indicates, a "tax-
free" investment can be an attractive choice for investors, particularly
in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF NORTH CAROLINA
TAX BRACKET:
FEDERAL 15.00% 28.00% 31.00% 31.00% 36.00%
39.60%
COMBINED
FEDERAL
AND STATE 22.00% 35.00% 38.00% 38.75% 43.75%
47.35%
JOINT $1- $39,001- $94,251- $100,001- $143,601-
OVER
RETURN 39,000 94,250 100,000 143,600 256,500
$256,500
SINGLE $1- $23,351 $56,551 $60,001 $117,951
OVER
RETURN 23,350 56,550 60,000 117,950 256,500
$256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
3.50% 4.49% 5.38% 5.65% 5.71% 6.22%
6.65%
4.00% 5.13% 6.15% 6.45% 6.53% 7.11%
7.60%
4.50% 5.77% 6.92% 7.26% 7.35% 8.00%
8.55%
5.00% 6.41% 7.69% 8.06% 8.16% 8.89%
9.50%
5.50% 7.05% 8.46% 8.87% 8.98% 9.78%
10.45%
6.00% 7.69% 9.23% 9.68% 9.80% 10.67%
11.40%
6.50% 8.33% 10.00% 10.48% 10.61% 11.56%
12.35%
7.00% 8.97% 10.77% 11.29% 11.43% 12.44%
13.30%
7.50% 9.62% 11.54% 12.10% 12.24% 13.33%
14.25%
8.00% 10.26% 12.31% 12.90% 13.06% 14.22%
15.19%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
STATE AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENTS WERE
NOT
USED TO INCREASE FEDERAL DEDUCTIONS.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
Total Return
Average annual total return is the average compounded rate of return for
a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the
period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, adjusted over the
period by any additional shares, assuming the monthly reinvestment of
all
dividends and distributions.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
- Lipper Analytical Services, Inc. ranks funds in various fund
categories based on total return, which assumes the reinvestment
of
all income dividends and capital gains distributions, if any.
- Donoghue's Money Fund Report publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the
same
money funds.
- Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day
effective
yield.
314229782
3090803B (2/95)
CALIFORNIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
PROSPECTUS
The shares of California Municipal Cash Trust (the "Fund") offered by
this
prospectus represent interests in a non-diversified portfolio of
Federated
Municipal Trust (the "Trust"), an open-end management investment company
(a
mutual fund). The Fund invests in short-term California municipal
securities to
achieve current income exempt from federal regular income tax and the
personal
income taxes imposed by the State of California consistent with
stability of
principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated
February 28,
1995, with the Securities and Exchange Commission. The information
contained in
the Statement of Additional Information is incorporated by reference
into this
prospectus. You may request a copy of the Statement of Additional
Information
free of charge by calling 1-800-235-4669. To obtain other information,
or make
inquiries about the Fund, contact the Fund at the address listed in the
back of
this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
California Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Shares
8
Administration of the Fund
9
NET ASSET VALUE
10
- ------------------------------------------------------
HOW TO PURCHASE SHARES
10
- ------------------------------------------------------
Special Purchase Features
11
HOW TO REDEEM SHARES
11
- ------------------------------------------------------
Special Redemption Features
12
ACCOUNT INFORMATION
13
- ------------------------------------------------------
Dividends
13
Capital Gains
13
Certificates and Confirmations
13
Accounts with Low Balances
13
SHAREHOLDER INFORMATION
13
- ------------------------------------------------------
Voting Rights
13
Massachusetts Partnership Law
13
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
14
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
ADDRESSES
16
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)..................................................................
..... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as
applicable).............................................................
. None
Redemption Fee (as a percentage of amount redeemed, if
applicable).......................................... None
Exchange
Fee.....................................................................
........................... None
ANNUAL FUND OPERATING
EXPENSES
(As a percentage of average net
assets)
Management Fee (after waiver)
(1).....................................................................
...... 0.06%
12b-1
Fee.....................................................................
.............................. None
Total Other
Expenses................................................................
........................ 0.53%
Shareholder Services Fee (after waiver)
(2).................................................. 0.18%
Total Fund Operating Expenses
(3)..................................................................
0.59%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of a
portion of the management fee. The adviser can terminate this
voluntary
waiver at any time at its sole discretion. The maximum management
fee is
0.50%.
(2) The maximum shareholder services fee is 0.25%.
(3) The Total Fund Operating Expenses in the table above are based on
expenses
expected during the fiscal year ending October 31, 1995. The Total
Fund
Operating Expenses were 0.59% for the fiscal year ended October 31,
1994 and
were 1.03% absent the voluntary waiver of a portion of the
management fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of the Fund will bear,
either
directly or indirectly. For more complete descriptions of the various
costs and
expenses, see "How to Purchase Shares" and "Trust Information." Wire-
transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years 5 years 10 years
<S>
<C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1)
5% annual return and (2) redemption at the end of each time
period....... $6 $19 $33 $74
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
CALIFORNIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants, for the year ended September 30, 1994
and for
the period from October 1, 1994 to October 31, 1994. Their report, dated
December 14, 1994, on the Fund's financial statements for the year ended
September 30, 1994 and for the period from October 1, 1994 to October
31, 1994
is included in the Annual Report, which is incorporated by reference.
The
financial statements 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 is
also
incorporated by reference. This table should be read in conjunction with
the
Fund's financial statements and notes thereto, which may be obtained
free of
charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
SEPTEMBER 30,
1994* 1994
1993 1992 1991 1990 1989**
<S> <C> <C>
<C> <C> <C> <C> <C>
- ------------------------------------- ------- --------- ---
- ------ --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.000 $ 1.00 $
1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------
Net investment income 0.002 0.02
0.02 0.03 0.04 0.05 0.03
- ------------------------------------- ------- --------- ---
- ------ --------- --------- --------- ---------
LESS DISTRIBUTIONS
- -------------------------------------
Dividends to shareholders from net
investment income (0.002) (0.02)
(0.02) (0.03) (0.04) (0.05) (0.03)
- ------------------------------------- ------- --------- ---
- ------ --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.000 $ 1.00 $
1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------- ------- --------- ---
- ------ --------- --------- --------- ---------
TOTAL RETURN*** 0.23% 2.07%
2.03% 2.83% 4.30% 5.38% 2.95%
- -------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------
Expenses 0.59%(a) 0.58%
0.54% 0.45% 0.35% 0.38% 0.40%(a)
- -------------------------------------
Net investment income 2.71%(a) 2.03%
2.00% 2.76% 4.19% 5.27% 5.86%(a)
- -------------------------------------
Expense waiver/reimbursement (b) 0.44%(a) 0.40%
0.35% 0.58% 0.75% 0.86% 0.89%(a)
- -------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------
Net assets, end of period
(000 omitted) $81,563 $74,707
$104,322 $59,709 $56,754 $50,391 $36,628
- -------------------------------------
</TABLE>
* For the one month ended October 31, 1994.
** 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.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The Fund is designed for banks and other institutions that
hold
assets for individuals, trusts, estates, or partnerships as a convenient
means
of accumulating an interest in a professionally managed, non-diversified
portfolio investing primarily in short-term California municipal
securities. The
Fund may not be a suitable investment for retirement plans or for non-
California
taxpayers because it invests in municipal securities of California. A
minimum
initial investment of $25,000 over a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the personal income taxes imposed by the State of
California consistent with stability of principal. This investment
objective
cannot be changed without shareholder approval. While there is no
assurance that
the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
California municipal securities (as defined below) maturing in 13 months
or
less. As a matter of investment policy, which cannot be changed without
shareholder approval, at least 80% of the Fund's annual interest income
will be
exempt from federal regular income tax and California state income tax.
(Federal
regular income tax does not include the federal individual alternative
minimum
tax or the federal alternative minimum tax for corporations.) The
average
maturity of the securities in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated
otherwise, the
investment policies may be changed by the Trustees without shareholder
approval.
Shareholders will be notified before any material change in these
policies
becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by
or on behalf of California and its political subdivisions and financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and California state income tax imposed upon non-corporate taxpayers
("California municipal securities"). Examples of California municipal
securities
include, but are not limited to:
tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
municipal commercial paper and other short-term notes;
variable rate demand notes;
municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in
California
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying California
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The California municipal securities in which the Fund invests
must be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating
categories. The Fund will follow applicable regulations in determining
whether a
security rated by more than one NRSRO can be treated as being in one of
the two
highest short-term rating categories; currently, such securities must be
rated
by two NRSROs in one of their two highest rating categories. See
"Regulatory
Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit-enhanced
securities
based upon the financial condition and ratings of the party providing
the credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit-enhanced by the credit enhancer, in which case the securities
will be
treated as having been issued by both the issuer and the credit
enhancer. The
bankruptcy, receivership, or default of the credit enhancer will
adversely
affect the quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund
may
invest pursuant to its investment objective and policies but which are
subject
to restrictions on resale under federal securities laws. Under criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase, together with other illiquid
securities, to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines
that market conditions call for a temporary defensive posture, the Fund
may
invest in tax-exempt or taxable securities such as: obligations issued
by or on
behalf of municipal or corporate issuers having the same quality
characteristics
as described above; obligations issued or guaranteed by the U.S.
government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so.
CALIFORNIA MUNICIPAL SECURITIES
California municipal securities are generally issued to finance public
works,
such as airports, bridges, highways, housing, hospitals, mass
transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
California municipal securities include industrial development bonds
issued by
or on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of California municipal securities are
"general obligation" and "revenue" bonds. General obligation bonds are
secured
by the issuer's pledge of its full faith and credit and taxing power for
the
payment of principal and interest. Interest on and principal of revenue
bonds,
however, are payable only from the revenue generated by the facility
financed by
the bond or other specified sources of revenue. Revenue bonds do not
represent a
pledge of credit or create any debt of or charge against the general
revenues of
a municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on California municipal securities depend on a variety of
factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of California municipal securities and participation interests, or the
credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of
California
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in California municipal securities which are
repayable out
of revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
California municipal securities could involve an increased risk to the
Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of California municipal securities are subject to
the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under
certain
circumstances, the Fund may borrow up to one-third of the value of its
total
assets and pledge up to 15% of the value of those assets to secure such
borrowings. This investment limitation cannot be changed without
shareholder
approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Statement of Additional Information, in order to
comply with
applicable laws and regulations, including the provisions of and
regulations
under the Investment Company Act of 1940, as amended. In particular, the
Fund
will comply with the various requirements of Rule 2a-7, which regulates
money
market mutual funds. The Fund will determine the effective maturity of
its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
- ------------------------------------------------------------------------
- --------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are
responsible for managing the Fund's business affairs and for exercising
all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .50 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of
the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is
the
principal distributor for a number of investment companies. Federated
Securities
Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services
Plan (the
"Services Plan") under which it will pay Federated Shareholder Services,
an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of the Fund to provide personal services
and/or
maintenance of shareholder accounts to the Fund and its shareholders.
From time
to time and for such periods as it deems appropriate, Federated
Shareholder
Services may voluntarily reduce the amount stated above.
Federated Shareholder Services may elect to pay financial institutions
fees
based upon shares owned by their clients or customers for services
provided to
those clients or customers. The schedules of such fees and the basis
upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds,
investment
advisers, and broker/dealers to provide certain services to
shareholders. These
services may include, but are not limited to, distributing prospectuses
and
other information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of shares. Any fees paid for
these
services by the distributor will be reimbursed by the adviser and not
the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary
of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian
for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
- ------------------------------------------------------------------------
- --------
The Fund attempts to stabilize the net asset value of its shares at
$1.00 by
valuing the portfolio securities using the amortized cost method. The
net asset
value per share is determined by subtracting total liabilities from
total assets
and dividing the remainder by the number of shares outstanding. The Fund
cannot
guarantee that its net asset value will always remain at $1.00 per
share.
The net asset value is determined at 9:00 a.m. Pacific time (12:00 noon
Eastern
time), 10:00 a.m. Pacific time (1:00 p.m. Eastern time), and 1:00 p.m.
Pacific
time (4:00 p.m. Eastern time) Monday through Friday except on: (i) days
on which
there are not sufficient changes in the value of the Fund's portfolio
securities
that its net asset value might be materially affected; (ii) days during
which no
shares are tendered for redemption and no orders to purchase shares are
received; or (iii) the following holidays: New Year's Day, Presidents'
Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
HOW TO PURCHASE SHARES
- ------------------------------------------------------------------------
- --------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased as described below either through a financial institution
(such as
a bank or broker/dealer) or by wire or by check directly from the Fund,
with a
minimum initial investment of $25,000. (Financial institutions may
impose
different minimum investment requirements on their customers.)
In connection with any sale, Federated Securities Corp. may from time to
time
offer certain items of nominal value to any shareholder or investor. The
Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and
returning
the new account form available from the Fund before shares can be
purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may
purchase shares
through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives
payment by
wire or converts payment by check from the financial institution into
federal
funds. It is the financial institution's responsibility to transmit
orders
promptly. Financial institutions may charge additional fees for their
services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling
the Fund
before 10:00 a.m. Pacific time (1:00 p.m. Eastern time). The order is
considered
received immediately. Payment by federal funds must be received before
12:00
noon Pacific time (3:00 p.m. Eastern time) in order to begin earning
dividends
that same day. Federal funds should be wired as follows: Federated
Services
Company, c/o State Street Bank and Trust Company, Boston, MA; Attention;
EDGEWIRE; For Credit to: California Municipal Cash Trust; Fund Number
(this
number can be found on the account statement or by contacting the Fund);
Group
Number or Order Number; Nominee or Institution Name; and ABA Number
011000028.
Shares cannot be purchased by wire on holidays when wire transfers are
restricted.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check
made
payable to California Municipal Cash Trust to: Federated Services
Company, c/o
State Street Bank and Trust Company, P.O. Box 8604, Boston, MA 02266-
8604.
Orders by mail are considered received when payment by check is
converted into
federal funds (normally the business day after the check is received)
and shares
begin earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM. A minimum of $100 can be automatically
withdrawn
periodically from the shareholder's checking account at an Automated
Clearing
House ("ACH") member and invested in Fund shares. Shareholders should
contact
their financial institution or the Fund to participate in this program.
HOW TO REDEEM SHARES
- ------------------------------------------------------------------------
- --------
Shares are redeemed at their net asset value next determined after a
Fund
receives the redemption request. Redemptions will be made on days on
which the
Fund computes its net asset value. Redemption requests must be received
in
proper form and can be made as described below.
REDEEMING SHARES THROUGH A FINANCIAL INSTITUTION. Shares may be redeemed
by
contacting the shareholder's financial institution. Shares will be
redeemed at
the net asset value next determined after Federated Services Company
receives
the redemption request. According to the shareholder's instructions,
redemption
proceeds can be sent to the financial institution or to the shareholder
by check
or by wire. The financial institution is responsible for promptly
submitting
redemption requests and providing proper written redemption
instructions.
Customary fees and commissions may be charged by the financial
institution for
this service.
REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by
calling
the Fund provided the Fund has a properly completed authorization form.
These
forms can be obtained from Federated Securities Corp. Proceeds from
redemption
requests received before 9:00 a.m. Pacific time (12:00 noon Eastern
time) will
be wired the same day to the shareholder's account at a domestic
commercial bank
which is a member of the Federal Reserve System, but will not include
that day's
dividend. Proceeds from redemption requests received after that time
will
include that day's dividends but will be wired the following business
day. Under
limited circumstances, arrangements may be made with the distributor for
same-day payment of proceeds, without that day's dividend, for
redemption
requests received before 11:00 a.m. Pacific time (2:00 p.m. Eastern
time).
Proceeds from redeemed shares purchased by check or through ACH will not
be
wired until that method of payment has cleared.
Telephone instructions may be recorded and if reasonable procedures are
not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares
By Mail"
should be considered. If at any time the Fund shall determine it
necessary to
terminate or modify the telephone redemption privilege, shareholders
would be
promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by
mailing a
written request together with properly endorsed certificates, if issued,
to:
Federated Services Company, c/o State Street Bank and Trust Company,
P.O. Box
8604, Boston, MA 02266-8604. The written request should state:
California
Municipal Cash Trust; the account name as registered with the Fund; the
account
number; and the number of shares to be redeemed or the dollar amount
requested.
All owners of the account must sign the request exactly as the shares
are
registered. Any share certificates should be sent by registered or
certified
mail with the written request. Normally, a check for the proceeds is
mailed
within one business day, but in no event more than seven days, after
receipt of
a proper written redemption request. Dividends are paid up to and
including the
day that a redemption request is processed.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by: a commercial or savings bank, trust company or
savings
and loan association whose deposits are insured by an organization which
is
administered by the Federal Deposit Insurance Corporation; a member firm
of a
domestic stock exchange; or any other "eligible guarantor institution,"
as
defined in the Securities Exchange Act of 1934. The Fund does not accept
signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to
allow
shareholders to redeem their fund shares. A fee will be charged for this
service. The check writing service allows the shareholder to receive the
daily
dividend declared on the shares to be redeemed until the check is
presented to
State Street Bank for payment. However, checks should never be made
payable or
sent to State Street Bank or the Fund to redeem shares, and a check may
not be
written to close an account. Canceled checks are sent to the shareholder
each
month.
DEBIT CARD. Upon request, a debit account will be established. This
account
allows shareholders to redeem shares by using a debit card. A fee will
be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of
at
least $10,000, a systematic withdrawal program may be established
whereby
automatic redemptions are made from the account and transferred
electronically
to any commercial bank, savings bank, or credit union that is an ACH
member.
Shareholders may apply for participation in this program through their
financial
institution or the Fund.
ACCOUNT INFORMATION
- ------------------------------------------------------------------------
- --------
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing. Monthly
confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, if an
account
balance falls below $25,000 due to shareholder redemptions, the Fund may
redeem
all of the remaining shares in that account (except accounts maintained
by
retirement plans) and pay the proceeds to the shareholder. Before shares
are
redeemed to close an account, the shareholder will be notified in
writing and
allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- ------------------------------------------------------------------------
- --------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of each
portfolio
in the Trust have equal voting rights, except that in matters affecting
only a
particular portfolio, only shares of that portfolio are entitled to
vote. As a
Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for
certain
changes in the Trust's or the Fund's operation and for the election of
Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
California. Shareholders are urged to consult their own tax advisers
regarding
the status of their accounts under state and local tax laws.
CALIFORNIA TAXES. Under existing California laws, distributions made by
the Fund
will not be subject to California individual income taxes provided that
such
distributions qualify as exempt-interest dividends under the California
Revenue
and Taxation Code, and provided further that at the close of each
quarter, at
least 50 percent of the value of the total assets of the Fund consists
of
obligations the interest on which is exempt from California taxation
under
either the Constitution or laws of California or the Constitution or
laws of the
United States. The Fund will furnish its shareholders with a written
note
designating exempt-interest dividends within 60 days after the close of
its
taxable year. Conversely, to the extent that distributions made by the
Fund are
derived from other types of obligations, such distributions will be
subject to
California individual income taxes.
Dividends of the Fund are not exempt from the California taxes payable
by
corporations.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time the Fund advertises its yield, effective yield, and
tax-equivalent yield.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
the Fund's tax-exempt yield, assuming a specific tax rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is
expressed as
a percentage.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C>
<C>
California Municipal Cash Trust
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Investment Adviser
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 8604
Boston, MA 02266-8604
- ------------------------------------------------------------------------
- -----------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Independent Public Accountants
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
- ------------------------------------------------------------------------
- -----------------------------------------------
</TABLE>
CALIFORNIA MUNICIPAL
CASH TRUST
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated February 28, 1995
314229766
G00329-01 (2/95)
California Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of California Municipal Cash Trust (the "Fund") dated
February 28, 1995. This Statement is not a prospectus. To receive a
copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
General Information About the Fund 1
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
California Investment Risks 2
Investment Limitations 3
Brokerage Transactions 5
Federated Municipal Trust
Management 5
The Funds 9
Share Ownership 9
Trustee Liability 9
Investment Adviser 9
Advisory Fees 9
Fund Administration 10
Shareholder Services Plan 10
Determining Net Asset Value 11
Redemption in Kind 11
The Fund's Tax Status 11
Performance Information 11
Yield 11
Effective Yield 11
Tax-Equivalent Yield 12
Tax-Equivalency Table 12
Total Return 13
Performance Comparisons 13
General Information About the Fund
The Fund is a portfolio of Federated Municipal Trust (the "Trust"),
which
was established as a Massachusetts business trust under a Declaration of
Trust dated September 1, 1989. On August 5, 1994, shareholders of
California Municipal Cash Trust, an investment company whose investment
objective and policies are identical to those of the Fund, voted to
exchange their shares for shares of the Fund. The fiscal year-end of
California Municipal Cash Trust was September 30.
Investment Policies
Unless indicated otherwise, the policies described below may be changed
by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the
security, the issuer of any demand feature applicable to the security,
or
any guarantor of either the security or any demand feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution
irrevocable letters of credit or guarantees and give the Fund the right
to
demand payment of the principal amounts of the participation interests
plus
accrued interest on short notice (usually within seven days). The
municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation
interests
include the right to demand payment from the issuers of those interests.
By
purchasing participation interests having a seven day demand feature,
the
Fund is buying a security meeting the maturity and quality requirements
of
the Fund and also is receiving the tax-free benefits of the underlying
securities.
Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the
nature of the appropriation for the lease. Furthermore, a lease may
provide
that the participants cannot accelerate lease obligations upon default.
The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the
investment
adviser, under the authority delegated by the Board of Trustees, will
base
its determination on the following factors: whether the lease can be
terminated by the lessee; the potential recovery, if any, from a sale of
the leased property upon termination of the lease; the lessee's general
credit strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit
enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other
than normal transaction costs, are incurred. However, liquid assets of
the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are
marked to market daily and are maintained until the transaction has been
settled. The Fund does not intend to engage in when-issued and delayed
delivery transactions to an extent that would cause the segregation of
more
than 20% of the total value of its assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant
to
repurchase agreements. Repurchase agreements are arrangements in which
banks, brokers/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at
a mutually agreed upon time and price. To the extent that the seller
does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. The Fund or
its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund
will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by
the
Trustees.
California Investment Risks
Limits on Taxing and Spending Authority
Developments in California which constrain the taxing and spending
authority of California governmental entities could adversely affect the
ability of such entities to meet their interest and/or principal payment
obligations on securities they have issued or will issue. The following
information constitutes only a brief summary and is not intended as a
complete description.
In 1978, a statewide referendum approved Proposition 13, an amendment to
the California Constitution limiting both the valuation of real property
for property tax purposes and the power of local taxing authorities to
increase real property tax revenues. To provide revenue to local
governments, legislation was enacted shortly thereafter providing for
the
redistribution to local governments of the State's then existing surplus
in
its General Fund, reallocation of revenues to local governments, and
assumption by the State of certain local government obligations. More
recent California legislation has, however, reduced state assistance
payments to local governments and reallocated a portion of such payments
to
the State's General Fund.
In 1979, California voters amended the California Constitution again by
passing Article XIII B, which imposes an appropriations limit on the
spending authority of certain state and local government entities. The
state's appropriations limit is based on its 1978-1979 fiscal year
authorizations to expend proceeds of taxes and is adjusted annually to
reflect changes in cost of living and population and transfer of
financial
responsibility from one governmental unit to another. If a California
governmental entity raises revenues beyond its appropriations limit, the
excess must be returned to the entity's taxpayers within the two
subsequent
fiscal years, generally by a tax credit, refund, or temporary suspension
of
tax rates or fee schedules. These spending limitations do not, however,
apply to the debt service on obligations existing or legally authorized
as
of January 1, 1979, or on bonded indebtedness thereafter approved by the
voters.
In November 1988, California voters approved Proposition 98. This
initiative requires that revenues in excess of amounts permitted to be
spent, and which would otherwise be returned by revision of tax rates or
fee schedules, be transferred and allocated (up to a maximum of 4%) to
the
State School Fund and be expended solely for purposes of instructional
improvement and accountability. Any funds allocated to the State School
Fund shall cause the appropriation limits to be annually increased for
any
such allocation made in the prior year. Proposition 98 also requires the
State of California to provide a minimum level of funding for public
schools and community colleges. The initiative permits the enactment of
legislation, by a two-thirds vote, to suspend the minimum funding
requirement for one year.
The effect of these various constitutional and statutory changes upon
the
ability of California municipal securities issuers to pay interest and
principal on their obligations remains unclear. Furthermore, other
measures
affecting the taxing or spending authority of California or its
political
subdivisions may be approved or enacted in the future.
Economic Developments
Recent economic data suggest the California economy continues to emerge
from the recession, albeit sluggishly. The state's recovery has been
inhibited by the continued downsizing of the aerospace industry. The
state
has lost about 868,000 jobs (7 percent of its workforce) since 1990,
about
half attributable to defense downsizing and 40 percent to construction
losses. During this period, service sector employment grew and outside
forecasters predict real economic and employment growth in calendar
1995,
despite further scheduled military base closings.
California has been struggling with its finances for several years; the
last time its general fund unreserved-undesignated fund balance was
positive on a statutory basis was in 1989, and on a GAAP basis in 1985.
The budget enacted July 1994 sought to address an accumulated state
deficit
totaling $4.0 billion by adopting a two year budget designed to leave
the
state with a small surplus by the end of fiscal year 1994-1995. Major
spending and revenue actions during the last three budgets have
significantly mitigated further deterioration in the state's financial
position. However, this progress is misleading because it ignores "off-
budget" school expenditures. Looking ahead to the upcoming fiscal year,
the
Governor's budget for fiscal year 1994-1995 released in July 1994 rests
on
extremely ambitious and unrealistic assumptions, especially those
regarding
federal aid; and it defers budget balancing actions into fiscal year
1995-
1996. The measures undertaken to balance the current state budget signal
an
increased vulnerability of local governments to the state government's
financial condition.
The Fund's concentration in securities issued by the state and its
political subdivisions provides a greater level of risk than a fund
which
is diversified across numerous states and municipal entities. The
ability
of the state or its municipalities to meet their obligations will depend
on
the availability of tax and other revenues; economic, political, and
demographic conditions within the state; and the underlying fiscal
conditions of the state, its counties, and its municipalities.
Reductions
in state revenues and spending may also adversely affect the ratings of
California's counties, municipalities, and other public financing
authorities.
On December 6, 1994, the Board of Supervisors of Orange County,
California
filed a bankruptcy petition under Chapter 9 of the bankruptcy code on
behalf of the county and the county investment pool. The Fund owns $4
million principal amount of Orange County, California 1994-1995 Tax and
Revenue Anticipation Notes Series B due August 10, 1995 (TRANs"). In
response to the bankruptcy filing, a letter of credit issued by PNC Bank
has been obtained which guarantees full payment of the principal value
of
the TRANs held by the Fund. It is still unclear what effect the Orange
County bankruptcy filing will have upon the valuation of other
California
municipal securities.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as are
necessary for clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money in amounts up to one-third of the value of its total
assets, including the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather
as
a temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet
redemption
requests when the liquidation of portfolio securities is deemed to
be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of the value of its
total
assets are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except
as necessary to secure permitted borrowings. In those cases, it
may
pledge assets having a market value not exceeding the lesser of
the
dollar amounts borrowed or 15% of the value of total assets at the
time of the pledge.
Lending Cash or Securities
The Fund will not lend any of its assets, except that it may
acquire
publicly or non-publicly issued California municipal securities or
temporary investment or enter into repurchase agreements, in
accordance with its investment objective, policies, limitations,
or
Declaration of Trust.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts,
or commodity futures contracts.
Investing in Real Estate
The Fund will not purchase or sell real estate, although it may
invest in securities of issuers whose business involves the
purchase
or sale of real estate or in securities which are secured by real
estate or interests in real estate.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
Concentration of Investments
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would be
invested in any one industry, or in industrial development bonds
or
other securities the interest upon which is paid from revenues of
similar types of projects. However, the Fund may invest as
temporary
investments more than 25% of the value of its assets in cash or
certain money market instruments, securities issued or guaranteed
by
the U.S. government, its agencies or instrumentalities, or
instruments secured by these money market instruments, such as
repurchase agreements.
Investments in Any One Issuer
With respect to securities comprising 75% of its assets, the Fund
will not invest more than 10% of its total assets in the
securities
of any one issuer (except cash and cash items, repurchase
agreements
collateralized by U.S. government securities, and U.S. government
obligations).
Under this limitation, each governmental subdivision, including
states, territories, possessions of the United States, or their
political subdivisions, agencies, authorities, instrumentalitites,
or
similar entities, will be considered a separate issuer if its
assets
and revenues are separate from those of the government body
creating
it and the security is backed only by its own assets and revenues.
Industrial development bonds backed only by the assets and
revenues
of a non-governmental issuer are considered to be issued solely by
that issuer. If in the case of an industrial development bond or
government issued security, a governmental or other entity
guarantees
the security, such guarantee would be considered a separate
security
issued by the guarantor, as well as the other issuer, subject to
limited exclusions allowed by the Investment Company Act of 1940.
The above limitations cannot be changed without shareholder approval.
The
following investment limitations, however, may be changed by the
Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its net
assets
in illiquid securities.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment
companies,
except as part of a merger, consolidation, or other acquisition.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers (including companies responsible
for
paying principal and interest on industrial development bonds)
which
have records of less than three years of continuous operations,
including the operation of any predecessor.
Investing in Issuers Whose Securities Are Owned by Officers and
Trustees
of the Trust
The Fund will not purchase or retain the securities of any issuer
if
the Officers and Trustees of the Trust or its investment adviser,
owning individually more than .50 of 1% of the issuer's
securities,
together own more than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or
any
combination of them.
Investing in Minerals
The Fund will not purchase or sell oil, gas, or other mineral
exploration or development programs or leases.
For purposes of the above limitations, the Fund considers instruments
issued by a U.S. branch of a domestic bank or savings and loan having
capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items." Except with respect to borrowing
money, if a percentage limitation is adhered to at the time of
investment,
a later increase or decrease in percentage resulting from any change in
value or net assets will not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of
the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order
at a favorable price. In working with dealers, the adviser will
generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Board
of Trustees. The adviser may select brokers and dealers who offer
brokerage and research services. These services may be furnished
directly
to the Fund or to the adviser and may include: advice as to the
advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by
brokers
and dealers may be used by the adviser or its affiliates in advising the
Trust and other accounts. To the extent that receipt of these services
may
supplant services for which the adviser or its affiliates might
otherwise
have paid, it would tend to reduce their expenses. The adviser and its
affiliates exercise reasonable business judgment in selecting brokers
who
offer brokerage and research services to execute securities
transactions.
They determine in good faith that commissions charged by such persons
are
reasonable in relationship to the value of the brokerage and research
services provided. For the period from October 1, 1994 to October 31,
1994,
and for the fiscal years ended September 30, 1994 , 1993, and 1992, the
Fund paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type
the Fund may make may also be made by those other accounts. When the
Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
Federated Municipal Trust Management
Officers and Trustees are listed with their addresses, present positions
with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Center
Pittsburgh, PA 15219
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner of
the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate
ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of
the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center-
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of
the
Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation
and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman,
Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds;
Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue
is
the son of John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.;
Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in
the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of
the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes
the
following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Arrow
Funds;
Automated Government Money Trust; Cash Trust Series II; Cash Trust
Series,
Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust;
Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA
Trust;
Federated Government Trust; Federated Growth Trust; Federated High
Yield
Trust; Federated Income Securities Trust; Federated Income Trust;
Federated
Index Trust; Federated Institutional Trust; Federated
Intermediate
Government Trust; Federated Master Trust; Federated Short-
Intermediate
Government Trust; Federated Short-Term U.S. Government Trust;
Federated
Stock Trust; Federated Tax-Free Trust; Federated U.S. Government Bond
Fund;
First Priority Funds; Fixed Income Securities, Inc.; Fortress
Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund,
Inc.;
Fortress Utility Fund, Inc.; Fund for U.S. Government Securities,
Inc.;
Government Income Securities, Inc.; High Yield Cash Trust;
Insight
Institutional Series, Inc.; Insurance Management Series;
Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds,
Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High
Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty
U.S. Government Money Market Trust; Liberty Term Trust, Inc. -
1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust;
The
Medalist Funds: Money Market Management, Inc.; Money Market
Obligations
Trust; Money Market Trust; Municipal Securities Income Trust; 111
Corcoran
Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument
Funds; The Shawmut Funds; Short-Term Municipal Trust; Star Funds;
The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund,
Inc.;
Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments
Trust;
Trademark Funds; Trust for Financial Institutions; Trust For
Government
Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust
for
U.S. Treasury Obligations; World Investment Series, Inc.
Share Ownership
Officers and Trustees own less than 1% of the Trust's outstanding
shares.
As of January 10, 1995, the following shareholder(s) of record owned 5%
or
more of the outstanding shares of the California Municipal Cash Trust:
Fiduciary Trust Company International, New York, New York, owned
approximately 17,665,500 shares (21.44%); Citibank, Long Island City,
New
York, owned approximately 14,980,316 shares (18.18%); Pacific Bank,
N.A.,
San Francisco, California, owned approximately 4,418,606 shares (5.36%);
Tanfir & Co., Phoenix, Arizona, owned approximately 5,486,276 shares
(6.66%); Kenpar & Co., First American Trust Company, Santa Ana,
California,
owned approximately 6,285,100 shares (7.63%); Santa Monica Bank, Santa
Monica, California, owned approximately 5,221,000 shares (6.34%).
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable
for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject
by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated Management. It is a
subsidiary
of Federated Investors. All the voting securities of Federated
Investors
are owned by a trust, the trustees of which are John F. Donahue, his
wife
and his son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder
of
the Fund for any losses that may be sustained in the purchase, holding,
or
sale of any security or for anything done or omitted by it, except acts
or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with
the
Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the period from October 1, 1994 to October 31, 1994 , the adviser
earned $34,909 of which 30,860 was voluntarily waived. For the years
ended
September 30, 1994, 1993, and 1992, the adviser earned $469,163,
$541,206,
and $301,153, respectively, of which $370,160, $376,910, and $301,153,
respectively, was voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and
extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of
average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets,
the
adviser will reimburse the Fund for its expenses over the
limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the
amount of the excess, subject to an annual adjustment. If the
expense limitation is exceeded, the amount to be reimbursed by the
adviser will be limited, in any single fiscal year, by the amount
of
the investment advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred
to
as the "Administrators".) For the period from October 1, 1994 to
October
31, 1994 , Federated Administrative Services earned $10,617. For the
fiscal
years ended September 30, 1994, 1993, and 1992, the Administrators
earned
$178,552, $235,058, and $183,966, respectively. Dr. Henry J. Gailliot,
an
officer of Federated Management, the adviser to the Fund, holds
approximately 20% of the outstanding common stock and serves as a
director
of Commercial Data Services, Inc., a company which provides computer
processing services to Federated Administrative Services.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust
Company, Boston, MA is custodian for the securities and cash of the
Fund.
It also provides certain accounting and recordkeeping services with
respect
to the Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains
all necessary shareholder records. For its services, the transfer agent
receives a fee based on size, type, and number of accounts and
transactions
made by shareholders.
Shareholder Services Plan
This arrangement permits the payment of fees to Federated Shareholder
Services and Financial Institutions to cause services to be provided
which
are necessary for the maintenance of shareholder accounts and to
encourage
personal services to shareholders by a representative who has knowledge
of
the shareholder's particular circumstances and goals. These activities
and
services may include, but are not limited to: providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish
and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balance; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses. By
adopting the Shareholder Services Plan, the Board of Trustees expects
that
the Trust will benefit by: (1) providing personal services to
shareholders;
(2) investing shareholder assets with a minimum of delay and
administrative
detail; (3) enhancing shareholder recordkeeping systems; and (4)
responding
promptly to shareholders' requests and inquiries concerning their
accounts.
For the period from October 1, 1994 to October 31, 1994, payments in the
amount of $12,567 were made pursuant to the Shareholder Services Plan.
For
the year ended September 30, 1994, payments in the amount of $74,107
were
made pursuant to the Shareholder Services Plan.
Determining Net Asset Value
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.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or
1%
of the Fund's net asset value, whichever is less, for any one
shareholder
within a 90-day period. Any redemption beyond this amount will also be
in
cash unless the Trustees determine that further payments should be in
kind.
In such cases, the Fund will pay all or a portion of the remainder of
the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not as liquid as a cash redemption. If redemption is made in kind,
shareholders who sell these securities could receive less than the
redemption value and could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated
investment
companies, the Fund must, among other requirements: derive at least
90%
of its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested;
changes in interest rates; changes in expenses; and the relative amount
of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for
those
shareholders paying those fees.
Yield
The Fund calculates its yield based upon the seven days ending on the
day
of the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional
shares purchased with dividends earned from the original one share and
all
dividends declared on the original and any purchased shares; dividing
the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
The Fund's yield for the seven-day period ended October 31, 1994, was
2.81%.
Effective Yield
The Fund calculates its effective yield by compounding the unannualized
base period return by: adding 1 to the base period return; raising the
sum
to the 365/7th power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended October 31,
1994,
was 2.85%.
Tax-Equivalent Yield
The tax-equivalent yield of the Fund is calculated similarly to the
yield
but is adjusted to reflect the taxable yield that the Fund would have
had
to earn to equal its actual yield, assuming a 39.6% tax rate (the
maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
The Fund's tax-equivalent yield for the seven-day period ended October
31,
1994, was 5.69%.
Tax-Equivalency Table
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free
from state and local taxes as well. As the table below indicates, a
"tax-
free" investment can be an attractive choice for investors, particularly
in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF CALIFORNIA
TAX BRACKET:
Combined Federal
and State: 23.00% 37.30% 41.00% 47.00% 50.60%
Single Return$1-23,350$23,351-56,550$56,551-117,950$117,951-
$256,500
OVER $256,500
Tax-Exempt Yield Taxable Yield Equivalent
1.50% 1.95% 2.39% 2.54% 2.83% 3.04%
2.00 2.60 3.19 3.39 3.77 4.05
2.50 3.25 3.99 4.24 4.72 5.06
3.00 3.90 4.78 5.08 5.66 6.07
3.50 4.55 5.58 5.93 6.60 7.09
4.00 5.19 6.38 6.78 7.55 8.10
4.50 5.84 7.18 7.63 8.49 9.11
5.00 6.49 7.97 8.47 9.43 10.12
5.50 7.14 8.77 9.32 10.38 11.13
Combined Federal
and State: 21.00% 37.30% 40.30% 46.00% 49.60%
50.60%
Joint Return$1-39,000$39,001- $94,251- $143,601- $256,501-
Over
94,250 143,600 256,500 429,858
429,858
Tax-Exempt Yield Taxable Yield Equivalent
1.50% 1.90% 2.39% 2.51% 2.78% 2.98%
3.04%
2.00 2.53 3.19 3.35 3.70 3.97
4.05
2.50 3.16 3.99 4.19 4.63 4.96
5.06
3.00 3.80 4.78 5.03 5.56 5.95
6.07
3.50 4.43 5.58 5.86 6.48 6.94
7.09
4.00 5.06 6.38 6.70 7.41 7.94
8.10
4.50 5.70 7.18 7.54 8.33 8.93
9.11
5.00 6.33 7.97 8.38 9.26 9.92
10.12
5.50 6.96 8.77 9.21 10.19 10.91
11.13
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were
not
used to increase federal deductions. If you itemize deductions,
your
taxable yield equivalent will be lower.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
Total Return
Average annual total return is the average compounded rate of return for
a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
compounded by multiplying the number of shares owned at the end of the
period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number
of
shares purchased at the beginning of the period with $1,000, adjusted
over
the period by any additional shares, assuming the monthly reinvestment
of
all dividends and distributions.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
- Lipper Analytical Services, Inc. ranks funds in various fund
categories based on total return, which assumes the reinvestment
of
all income dividends and capital gains distributions, if any.
- Donoghue's Money Fund Report publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the
same
money funds.
- Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day
effective
yield.
G00329-02 (2/95)
MASSACHUSETTS MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares of Massachusetts Municipal Cash Trust
(the
"Fund") offered by this prospectus represent interests in a non-
diversified
portfolio of Federated Municipal Trust (the "Trust"), an open-end
management
investment company (a mutual fund). The Fund invests in short-term
Massachusetts
municipal securities to achieve current income exempt from federal
regular
income tax and Massachusetts state income tax consistent with stability
of
principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated
February 28,
1995, with the Securities and Exchange Commission. The information
contained in
the Statement of Additional Information is incorporated by reference
into this
prospectus. You may request a copy of the Statement of Additional
Information
free of charge by calling 1-800-235-4669. To obtain other information,
or make
inquiries about the Fund, contact the Fund at the address listed in the
back of
this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SERVICE SHARES
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
Massachusetts Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Institutional Service Shares
8
Administration of the Fund
9
NET ASSET VALUE
10
- ------------------------------------------------------
INVESTING IN THE FUND
10
- ------------------------------------------------------
Share Purchases
10
Minimum Investment Required
11
Subaccounting Services
11
Certificates and Confirmations
11
Dividends
11
Capital Gains
11
REDEEMING SHARES
12
- ------------------------------------------------------
By Mail
12
Telephone Redemption
13
Accounts with Low Balances
13
SHAREHOLDER INFORMATION
13
- ------------------------------------------------------
Voting Rights
13
Massachusetts Partnership Law
14
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
14
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
OTHER CLASSES OF SHARES
15
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--BAYFUNDS
SHARES
17
- ------------------------------------------------------
ADDRESSES
18
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)..........................................................
None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)..........................................................
None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as
applicable)........................................ None
Redemption Fee (as a percentage of amount redeemed, if
applicable)............................. None
Exchange
Fee.....................................................................
.............. None
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING
EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)
(1)..............................................................
0.15%
12b-1
Fee.....................................................................
................. None
Total Other
Expenses................................................................
........... 0.40%
Shareholder Services Fee (after waiver)
(2)....................................... 0.05%
Total Institutional Service Shares Operating Expenses
(3)............................. 0.55%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of a
portion of the management fee. The adviser can terminate this voluntary
waiver
at any time at its sole discretion. The maximum management fee is 0.50%.
(2) The maximum shareholder services fee is 0.25%.
(3) The Total Institutional Service Shares Operating Expenses in the
table above
are based on expenses expected during the fiscal year ending October 31,
1995.
The Total Institutional Service Shares Operating Expenses were 0.55% for
the
fiscal year ended October 31, 1994 and were 0.90% absent the voluntary
waiver of
a portion of the management fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of Institutional Service
Shares of
the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Investing in the
Fund" and
"Trust Information." Wire-transferred redemptions of less than $5,000
may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1
year 3 years 5 years 10 years
- ----------------------------------------------------------------- ----
- -- ------- ------- --------
<S> <C>
<C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period............................................... $6
$18 $31 $ 69
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the foregoing table and example relates
only to
Institutional Services Shares of the Fund. The Fund also offers another
class of
shares called BayFunds Shares. Institutional Service Shares and BayFunds
Shares
are subject to certain of the same expenses; however, BayFunds Shares
are
subject to a Sub-Transfer Agent Fee. Certain expenses are allocated as
incurred
by each class. These expenses are greater for BayFunds Shares than for
Institutional Service Shares. All other expenses are allocated based
upon the
average daily net assets of each Class. See "Other Classes of Shares."
MASSACHUSETTS MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year
ended October 31, 1994, and on the following table for each of the
periods
presented, is included in the Annual Report, which is incorporated by
reference.
This table should be read in conjunction with the Fund's financial
statements
and notes thereto, which may be obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER
31,
----------------------------
- -------------
1994 1993 1992
1991 1990*
----- ----- ----- -
- ---- -----
<S> <C> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
$1.00 $1.00
- -----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------
Net investment income 0.02 0.02 0.03
0.05 0.03
- ----------------------------------------- ----- ----- ----- -
- ---- -----
LESS DISTRIBUTIONS
- -----------------------------------------
Dividends to shareholders from net
investment income (0.02) (0.02) (0.03)
(0.05) (0.03)
- ----------------------------------------- ----- ----- ----- -
- ---- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
$1.00 $1.00
- ----------------------------------------- ----- ----- ----- -
- ---- -----
TOTAL RETURN** 2.14% 1.99% 2.87%
4.63% 2.59%
- -----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------
Expenses 0.55% 0.53% 0.34%
0.30% 0.17%(b)
- -----------------------------------------
Net investment income 2.12% 1.97% 2.82%
4.48% 5.66%(b)
- -----------------------------------------
Expense waiver/reimbursement (a) 0.35% 0.43% 0.55%
0.69% 0.57%(b)
- -----------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------
Net assets, end of period (000 omitted) $90,013 $84,524 $85,570
$81,681 $63,483
- -----------------------------------------
</TABLE>
* Reflects operations for the period from May 18, 1990 (date of initial
public
investment) to October 31, 1990.
** Based on net asset value, which does not reflect the sales load or
contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The shares in any one portfolio may be offered in separate
classes.
With respect to the Fund, as of the date of this prospectus, the Board
of
Trustees ("Trustees") have established two classes of shares known as
Institutional Service Shares and BayFunds Shares. This prospectus
relates only
to Institutional Service Shares of the Fund, which are designed
primarily for
financial institutions acting in an agency capacity as a convenient
means of
accumulating an interest in a professionally managed, non-diversified
portfolio
investing primarily in short-term Massachusetts municipal securities.
The Fund
may not be a suitable investment for retirement plans or for non-
Massachusetts
taxpayers because it invests in municipal securities of Massachusetts. A
minimum
initial investment of $25,000 over a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and Massachusetts state income tax consistent with
stability
of principal. This investment objective cannot be changed without
shareholder
approval. While there is no assurance that the Fund will achieve its
investment
objective, it endeavors to do so by following the investment policies
described
in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Massachusetts municipal securities (as defined below) maturing in 13
months or
less. As a matter of investment policy, which cannot be changed without
shareholder approval, at least 80% of the Fund's annual interest income
will be
exempt from federal regular income tax and Massachusetts state income
tax.
(Federal regular income tax does not include the federal individual
alternative
minimum tax or the federal alternative minimum tax for corporations.)
The
average maturity of the securities in the Fund's portfolio, computed on
a
dollar-weighted basis, will be 90 days or less. Unless indicated
otherwise, the
investment policies may be changed by the Trustees without shareholder
approval.
Shareholders will be notified before any material change in these
policies
becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued
by or on behalf of Massachusetts and its political subdivisions and
financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and Massachusetts state income tax imposed
upon non-corporate taxpayers ("Massachusetts municipal securities").
Examples of
Massachusetts municipal securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
- bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in
Massachusetts
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying Massachusetts
municipal securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The Massachusetts municipal securities in which the Fund
invests must
be rated in one of the two highest short-term rating categories by one
or more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating
categories.
The Fund will follow applicable regulations in determining whether a
security
rated by more than one NRSRO can be treated as being in one of the two
highest
short-term rating categories; currently, such securities must be rated
by two
NRSROs in one of their two highest rating categories. See "Regulatory
Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit-enhanced
securities
based upon the financial condition and ratings of the party providing
the credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit-
enhanced by the credit enhancer, in which case the securities will be
treated as
having been issued by both the issuer and the credit enhancer. The
bankruptcy,
receivership, or default of the credit enhancer will adversely affect
the
quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED SECURITIES. As a matter of fundamental policy, the Fund may
invest in
restricted securities. Restricted securities are any securities in which
the
Fund may invest pursuant to its investment objective and policies but
which are
subject to restrictions on resale under federal securities laws. Under
criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines
that market conditions call for a temporary defensive posture, the Fund
may
invest in tax-exempt or taxable securities such as: obligations issued
by or on
behalf of municipal or corporate issuers having the same quality
characteristics
as described above; obligations issued or guaranteed by the U.S.
government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so.
MASSACHUSETTS MUNICIPAL SECURITIES
Massachusetts municipal securities are generally issued to finance
public works,
such as airports, bridges, highways, housing, hospitals, mass
transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
Massachusetts municipal securities include industrial development bonds
issued
by or on behalf of public authorities to provide financing aid to
acquire sites
or construct and equip facilities for privately or publicly owned
corporations.
The availability of this financing encourages these corporations to
locate
within the sponsoring communities and thereby increases local
employment.
The two principal classifications of Massachusetts municipal securities
are
"general obligation" and "revenue" bonds. General obligation bonds are
secured
by the issuer's pledge of its full faith and credit and taxing power for
the
payment of principal and interest. Interest on and principal of revenue
bonds,
however, are payable only from the revenue generated by the facility
financed by
the bond or other specified sources of revenue. Revenue bonds do not
represent a
pledge of credit or create any debt of or charge against the general
revenues of
a municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Massachusetts municipal securities depend on a variety of
factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of Massachusetts municipal securities and participation interests, or
the credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of
Massachusetts
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in Massachusetts municipal securities which are
repayable
out of revenue streams generated from economically related projects or
facilities and/or whose issuers are located in the same state. Sizable
investments in these Massachusetts municipal securities could involve an
increased risk to the Fund should any of these related projects or
facilities
experience financial difficulties.
Obligations of issuers of Massachusetts municipal securities are subject
to the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under
certain
circumstances, the Fund may borrow up to one-third of the value of its
total
assets and pledge up to 15% of the value of those assets to secure such
borrowings. This investment limitation cannot be changed without
shareholder
approval.
As a matter of nonfundamental policy, the Fund will not invest more than
10% of
its net assets in illiquid securities.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Statement of Additional Information, in order to
comply with
applicable laws and regulations, including the provisions of and
regulations
under the Investment Company Act of 1940, as amended. In particular, the
Fund
will comply with the various requirements of Rule 2a-7, which regulates
money
market mutual funds. The Fund will determine the effective maturity of
its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are
responsible for managing the Fund's business affairs and for exercising
all the
Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee equal
to .50 of 1% of the Fund's average daily net assets. The adviser
has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for
Institutional
Service Shares of the Fund. It is a Pennsylvania corporation organized
on
November 14, 1969, and is the principal distributor for a number of
investment
companies. Federated Securities Corp. is a subsidiary of Federated
Investors.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services
Plan (the
"Services Plan") under which it will pay Federated Shareholder Services,
an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of Institutional Service Shares to
provide personal services and/or maintenance of shareholder accounts to
the Fund
and its shareholders. From time to time and for such periods as it deems
appropriate, Federated Shareholder Services may voluntarily reduce the
amount
stated above.
Federated Shareholder Services may elect to pay financial institutions
fees
based upon shares owned by their clients or customers for services
provided to
those clients or customers. The schedules of such fees and the basis
upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds,
investment
advisers, and broker/dealers to provide certain services to
shareholders. These
services may include, but are not limited to, distributing prospectuses
and
other information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of shares. Any fees paid for
these
services by the distributor will be reimbursed by the adviser and not
the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary
of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
------------------------------------ --------------------------------
- ----
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750
million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian
for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of Institutional
Service
Shares at $1.00 by valuing the portfolio securities using the amortized
cost
method. The net asset value per share is determined by subtracting
liabilities
attributable to Institutional Service Shares from the value of Fund
assets
attributable to Institutional Service Shares, and dividing the remainder
by the
number of Institutional Service Shares outstanding. The Fund cannot
guarantee
that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
INVESTING IN THE FUND
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- --------
SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased either by wire or mail. The Fund reserves the right to
reject any
purchase request.
To make a purchase, open an account by calling Federated Securities
Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase by Federal Reserve wire, call the Fund before 1:00
p.m.
(Eastern time) to place an order. The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) that
day. Federal funds should be wired as follows: Federated Services
Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE;
For Credit
to: Massachusetts Municipal Cash Trust--Institutional Service Shares;
Fund
Number (this number can be found on the account statement or by
contacting the
Fund); Group Number or Order Number; Nominee or Institution Name; and
ABA Number
011000028.
BY MAIL. To purchase by mail, send a check made payable to Massachusetts
Municipal Cash Trust-- Institutional Service Shares to: Federated
Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8602, Boston,
MA
02266-8602. Orders by mail are considered received when
payment by check is converted into federal funds. This is normally the
next
business day after the check is received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be
opened
with a smaller amount as long as the minimum is reached within 90 days.
Minimum
investments will be calculated by combining all accounts maintained with
the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts.
However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping
requirements. The
transfer agent charges a fee based on the level of subaccounting
services
rendered. Financial institutions 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 provided which may be related to the
ownership of
Fund shares. This prospectus should, therefore, be read together with
any
agreement between the customer and the financial institution with regard
to the
services provided, the fees charged for those services and any
restrictions and
limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all
purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund. Shares purchased by wire
before
1:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by
check begin earning dividends the day after the check is converted into
federal
funds.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
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Shares are redeemed at their net asset value next determined after
Federated
Services Company receives the redemption request. Redemptions will be
made on
days on which the Fund computes its net asset value. Redemption requests
must be
received in proper form and can be made as described below.
BY MAIL
Shares may be redeemed by sending a written request to: Federated
Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8602, Boston,
MA
02266-8602. The written request should state: Massachusetts Municipal
Cash
Trust--Institutional Service Shares; shareholder's name; the account
number; and
the share or dollar amount requested. Sign the request exactly as the
shares are
registered. Shareholders should call the Fund for assistance in
redeeming by
mail.
If share certificates have been issued, they must be properly endorsed
and
should be sent by registered or certified mail with the written request.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund,
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by:
- a trust company or commercial bank whose deposits are insured by
the Bank
Insurance Fund which is administered by the Federal Deposit
Insurance
Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific
Stock
Exchanges;
- a savings bank or savings and loan association whose deposits are
insured
by the Savings Association Insurance Fund, which is administered
by the
FDIC; or
- any other "eligible guarantor institution," as defined in the
Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the transfer agent have adopted standards for accepting
signature
guarantees from the above institutions. The Fund may elect in the future
to
limit eligible signature guarantors to institutions that are members of
the
signature guarantee program. The Fund and its transfer agent reserve the
right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day,
but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a
redemption
request is processed.
BY WRITING A CHECK. At the shareholder's request, State Street Bank and
Trust
Company will establish a checking account for redeeming shares. For
further
information, contact the Fund.
With this checking account, shares may be redeemed by writing a check
for
$100.00 or more. The redemption will be made at the net asset value on
the date
that the check is presented to the Fund. A check may not be written to
close an
account. A shareholder may obtain cash by negotiating the check through
the
shareholder's local bank. Checks should never be made payable or sent to
State
Street Bank and Trust Company to redeem shares. Canceled checks are sent
to the
shareholder each month.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions
may be
recorded. If reasonable procedures are not followed by the Fund, it may
be
liable for losses due to unauthorized or fraudulent telephone
instructions. An
authorization form permitting the Fund to accept telephone requests must
first
be completed. Authorization forms and information on this service are
available
from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time),
the
proceeds will be wired the same day to the shareholder's account at a
domestic
commercial bank which is a member of the Federal Reserve System, and
those
shares redeemed will not be entitled to that day's dividend. A daily
dividend
will be paid on shares redeemed if the redemption request is received
after
12:00 noon (Eastern time). However, the proceeds are not wired until the
following business day.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If such a case should occur,
another
method of redemption, such as "By Mail," should be considered. If at any
time
the Fund shall determine it necessary to terminate or modify this method
of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund
may
redeem shares in any account and pay the proceeds to the shareholder if
the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is
notified in
writing and allowed 30 days to purchase additional shares to meet the
minimum
requirement.
SHAREHOLDER INFORMATION
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VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of all
classes of
each portfolio in the Trust have equal voting rights, except that in
matters
affecting only a particular portfolio or class, only shares of that
portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust
is not
required to hold annual shareholder meetings. Shareholder approval will
be
sought only for certain changes in the Trust's or the Fund's operation
and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
As of January 11, 1995, State Street Bank and Trust, North Quincy,
Massachusetts, owned 30.3% of the voting securities of the Fund, and,
therefore,
may, for certain purposes, be deemed to control the Fund and be able to
affect
the outcome of certain matters presented for a vote of shareholders.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
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FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
Massachusetts. Shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.
MASSACHUSETTS TAXES. Under existing Massachusetts laws, distributions
made by
the Fund will not be subject to Massachusetts personal income taxes to
the
extent that such dividends qualify as exempt interest dividends under
the
Internal Revenue Code, and represent (i) interest or gain on obligations
issued
by the Commonwealth of Massachusetts, its political subdivisions or
agencies; or
(ii) interest on obligations of the United States, its territories or
possessions to the extent exempt from taxation by the states pursuant to
federal
law. Conversely, to the extent that the distributions made by the fund
are
derived from other types of obligations, such dividends will be subject
to
Massachusetts personal income taxes.
Shareholders subject to the Massachusetts corporate excise tax must
include all
dividends paid by the Fund in their net income, and the value of their
shares of
stock in the Fund in their net worth, when computing the Massachusetts
excise
tax.
PERFORMANCE INFORMATION
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From time to time, the Fund advertises the yield, effective yield, and
tax-equivalent yield for Institutional Service Shares.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
Institutional Service Shares' tax-exempt yield, assuming a specific tax
rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in Institutional Service Shares after reinvesting all income
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The performance figures will be calculated separately for each class of
shares.
Because each class of shares is subject to different expenses, the
performance
of Institutional Service Shares will exceed the performance of BayFunds
Shares
for the same period.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
OTHER CLASSES OF SHARES
- ------------------------------------------------------------------------
- --------
The Fund also offers the following class.
BayFunds Shares are sold at net asset value primarily to retail
customers of the
banking subsidiaries of BayBanks, Inc. Investments in BayFunds Shares
are
subject to a minimum initial investment of $2,500. Bay Funds Shares are
sold
with no distribution fees.
Financial institutions providing distribution or administrative services
may
receive additional compensation depending upon which class of shares of
the Fund
is sold. The distributor pays this compensation and is reimbursed from
sources
other than the assets of the Fund.
The amount of dividends payable to shareholders of any particular class
may be
more or less than that payable to the shareholders of any other class
depending
upon the existence of and differences in class expenses, 12b-1 Plan
expenses,
and Shareholder Services Plan expenses. The stated advisory fee is the
same for
all classes of shares.
MASSACHUSETTS MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--BAYFUNDS SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER
31,
---
- ------------------
1994 1993*
---
- -- ------
<S> <C>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD
$1.00 $1.00
- ----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------
Net investment income
0.02 0.01
- ----------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------
Dividends to shareholders from net investment income
(0.02) (0.01)
- ---------------------------------------------------------------- ---
- -- -----
NET ASSET VALUE, END OF PERIOD
$1.00 $1.00
- ---------------------------------------------------------------- ---
- -- -----
TOTAL RETURN**
2.05% 1.25%
- ----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------
Expenses
0.64% 0.65%(b)
- ----------------------------------------------------------------
Net investment income
2.09% 1.85%(b)
- ----------------------------------------------------------------
Expense waiver/reimbursement (a)
0.35% 0.43%(b)
- ----------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------
Net assets, end of period (000 omitted)
$41,912 $18,143
- ----------------------------------------------------------------
</TABLE>
* Reflects operations for the period from March 8, 1993 (date of
initial public
investment) to October 31, 1993.
** Based on net asset value, which does not reflect the sales load or
contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
(b) Computed on an annualized basis.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C> <C>
Massachusetts Municipal Cash Trust
Institutional Service Shares Federated
Investors Tower
Pittsburgh,
PA 15222-3779
- ------------------------------------------------------------------------
- ------------------------
Distributor
Federated Securities Corp. Federated
Investors Tower
Pittsburgh,
PA 15222-3779
- ------------------------------------------------------------------------
- ------------------------
Investment Adviser
Federated Management Federated
Investors Tower
Pittsburgh,
PA 15222-3779
- ------------------------------------------------------------------------
- ------------------------
Custodian
State Street Bank and P.O. Box
8602
Trust Company Boston, MA
02266-8602
- ------------------------------------------------------------------------
- ------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated
Investors Tower
Pittsburgh,
PA 15222-3779
- ------------------------------------------------------------------------
- ------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One
PPG Place
Pittsburgh,
PA 15222
- ------------------------------------------------------------------------
- ------------------------
</TABLE>
MASSACHUSETTS MUNICIPAL
CASH TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated February 28, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314229303
0032603A-ISS (2/95)
Massachusetts Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Institutional Service Shares
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus for Institutional Service Shares of Massachusetts
Municipal Cash Trust (the "Fund") dated February 28, 1995. This
Statement is not a prospectus. To receive a copy of a prospectus,
write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
Massachusetts Investment Risks 2
Investment Limitations 2
Brokerage Transactions 4
Federated Municipal Trust
Management 5
The Funds 8
Share Ownership 9
Trustees Compensation 9
Trustee Liability 10
Investment Adviser 10
Advisory Fees 10
Fund Administration 10
Shareholder Services Plan 11
Determining Net Asset Value 11
Redemption in Kind 11
The Fund's Tax Status 11
Performance Information 11
Yield 12
Effective Yield 12
Tax-Equivalent Yield 12
Tax-Equivalency Table 12
Total Return 13
Performance Comparisons 13
Investment Policies
Unless indicated otherwise, the policies described below may be changed
by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the
security, the issuer of any demand feature applicable to the security,
or
any guarantor of either the security or any demand feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution
irrevocable letters of credit or guarantees and give the Fund the right
to
demand payment of the principal amounts of the participation interests
plus
accrued interest on short notice (usually within seven days). The
municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation
interests
include the right to demand payment from the issuers of those interests.
By
purchasing participation interests having a seven day demand feature,
the
Fund is buying a security meeting the maturity and quality requirements
of
the Fund and also is receiving the tax-free benefits of the underlying
securities.
Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the
nature of the appropriation for the lease. Furthermore, a lease may
provide
that the participants cannot accelerate lease obligations upon default.
The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the
investment
adviser, under the authority delegated by the Board of Trustees, will
base
its determination on the following factors: whether the lease can be
terminated by the lessee; the potential recovery, if any, from a sale of
the leased property upon termination of the lease; the lessee's general
credit strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit
enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other
than normal transaction costs, are incurred. However, liquid assets of
the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are
marked to market daily and are maintained until the transaction has been
settled. The Fund does not intend to engage in when-issued and delayed
delivery transactions to an extent that would cause the segregation of
more
than 20% of the total value of its assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant
to
repurchase agreements. Repurchase agreements are arrangements in which
banks, brokers/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at
a mutually agreed upon time and price. To the extent that the seller
does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. The Fund or
its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund
will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by
the
Trustees.
Massachusetts Investment Risks
The Fund invests in obligations of Massachusetts issuers which results
in
the Fund's performance being subject to risks associated with the
overall
economic conditions present within Massachusetts (the "Commonwealth").
The
following information is a brief summary of the recent prevailing
economic
conditions and a general summary of the Commonwealth's financial status.
This information is based on official statements relating to securities
that have been offered by Massachusetts issuers and from other sources
believed to be reliable but should not be relied upon as a complete
description of all relevant information.
The Commonwealth has a diverse economy with manufacturing, education,
health care, computers and financial services all being significant
contributors. Massachusetts is generally considered the leader in
research
and development within the biotechnology, software and robotics
industries
as well as having many highly prestigious universities. In addition to a
highly skilled and educated workforce, the Commonwealth has one of the
higher average per capita incomes in this country.
Throughout the early to mid-1980's, Massachusetts had a strong economy
which was evidenced by low unemployment and high personal income growth
as
compared to national averages. However, beginning in the late 1980's,
economic growth in the New England region and Massachusetts, in
particular,
slowed and showed pronounced deterioration in the construction, real
estate, financial and manufacturing sectors. Between 1988 and 1992 there
were extensive job losses that resulted in a 10% reduction in the work
force. In addition, after years of above average property value growth,
property values have decreased an estimated 6% over the same period.
The two major revenue sources available to cities and towns in
Massachusetts are local property taxes and local aid from the
Commonwealth.
Property taxes are subject to limitations imposed by a state-wide
initiative approved by the voters in November, 1980 (commonly known as
Proposition 2-1/2), which limits the property taxes that may be levied
by
any city or town in any fiscal year to the lesser of (i) 2.5% of the
full
valuation of the real estate and personal property therein or (ii) 2.5%
over the previous year's levy limit plus any growth in the tax base from
new construction. In recent years the decrease in property values due to
the recession and the limitations of tax levy growth imposed by
Proposition
2-1/2 have resulted in budget constraints for many cities and towns.
The overall financial condition of the Commonwealth can also be
illustrated
by the changes of its debt ratings. During the period in which the
Commonwealth has experienced its financial difficulties beginning in
1988,
its general obligation long-term debt ratings as determined by Moody's
Investors Service, Inc. and Standard & Poor's Ratings Group decreased
from
Aa and AA+, respectively, to Baa and BBB. Since then the Commonwealth
has
had its debt ratings raised by the two rating agencies to A and A+ by
Moody's and S&P, respectively, reflecting its improved fiscal
performance.
The Fund's concentration in securities issued by the Commonwealth and
its
political subdivisions provides a greater level of risk than a fund
which
is diversified across numerous states and municipal entities. The
ability
of the Commonwealth or its municipalities to meet their obligations will
depend on the availability of tax and other revenues; economic,
political,
and demographic conditions within the Commonwealth; and the underlying
fiscal condition of the Commonwealth and its municipalities.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as are
necessary for the clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money in amounts up to one-third of the value of its total
assets, including the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather
as
a temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet
redemption
requests when the liquidation of portfolio securities is deemed to
be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of the value of its
total
assets are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except
as necessary to secure permitted borrowings. In those cases, it
may
pledge assets having a market value not exceeding the lesser of
the
dollar amounts borrowed or 15% of the value of total assets at the
time of the pledge.
Lending Cash or Securities
The Fund will not lend any of its assets, except that it may
acquire
publicly or non-publicly issued Massachusetts municipal securities
or
temporary investments or enter into repurchase agreements, in
accordance with its investment objective, policies, limitations or
Declaration of Trust.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts,
or commodity futures contracts.
Investing in Real Estate
The Fund will not purchase or sell real estate or real estate
limited
partnerships, although it may invest in securities of issuers
whose
business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real
estate.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
Investing in Restricted Securities
The Fund will not invest more than 10% of its net assets in
securities subject to restrictions on resale under the Securities
Act
of 1933.
Concentration of Investments
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would be
invested in any one industry, or in industrial development bonds
or
other securities the interest upon which is paid from revenues of
similar types of projects. However, the Fund may invest as
temporary
investments more than 25% of the value of its assets in cash or
certain money market instruments, securities issued or guaranteed
by
the U.S. government, its agencies or instrumentalities, or
instruments secured by these money market instruments, such as
repurchase agreements.
Diversification of Investments
With regard to at least 50% of its total assets, no more than 5%
of
its total assets are to be invested in the securities of a single
issuer, and no more than 25% of its total assets are to be
invested
in the securities of a single issuer at the close of each quarter
of
each fiscal year.
Under this limitation, each governmental subdivision, including
states, territories, possessions of the United States, or their
political subdivisions, agencies, authorities, instrumentalitites,
or
similar entities will be considered a separate issuer if its
assets
and revenues are separate from those of the government body
creating
it and the security is backed only by its own assets and revenues.
Industrial development bonds backed only by the assets and
revenues
of a non-governmental issuer are considered to be issued solely by
that issuer. If, in the case of an industrial development bond or
government issued security, a governmental or other entity
guarantees
the security, such guarantee would be considered a separate
security
issued by the guarantor, as well as the other issuer, subject to
limited exclusions allowed by the Investment Company Act of 1940.
The above limitations cannot be changed without shareholder approval.
The
following investment limitations, however, may be changed by the
Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its net
assets
in illiquid securities.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment
companies,
except as part of a merger, consolidation, or other acquisition.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers (including companies responsible
for
paying principal and interest on industrial development bonds)
which
have records of less than three years of continuous operations,
including the operation of any predecessor.
Investing for Control
The Fund will not invest in securities of a company for the
purpose
of exercising control or management.
Investing in Issuers Whose Securities Are Owned by Officers and
Trustees
of the Trust
The Fund will not purchase or retain the securities of any issuer
if
the Officers and Trustees of the Trust or its investment adviser,
owning individually more than .50 of 1% of the issuer's
securities,
together own more than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or
any
combination of them.
Investing in Minerals
The Fund will not purchase or sell interests in oil, gas, or other
mineral exploration or development programs or leases, although it
may purchase the securities of issuers which invest in or sponsor
such programs.
For purposes of the above limitations, the Fund considers instruments
issued by a U.S. branch of a domestic bank or savings and loan having
capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items." Except with respect to borrowing
money, if a percentage limitation is adhered to at the time of
investment,
a later increase or decrease in percentage resulting from any change in
value or net assets will not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of
the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order
at a favorable price. In working with dealers, the adviser will
generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Board
of Trustees. The adviser may select brokers and dealers who offer
brokerage and research services. These services may be furnished
directly
to the Fund or to the adviser and may include: advice as to the
advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by
brokers
and dealers may be used by the adviser or its affiliates in advising the
Trust and other accounts. To the extent that receipt of these services
may
supplant services for which the adviser or its affiliates might
otherwise
have paid, it would tend to reduce their expenses. The adviser and its
affiliates exercise reasonable business judgment in selecting brokers
who
offer brokerage and research services to execute securities
transactions.
They determine in good faith that commissions charged by such persons
are
reasonable in relationship to the value of the brokerage and research
services provided. During the fiscal year ended October 31, 1994, the
Trust paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type
the Fund may make may also be made by those other accounts. When the
Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
Federated Municipal Trust Management
Officers and Trustees are listed with their addresses, present positions
with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Center
Pittsburgh, PA 15219
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner
of the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate
ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of
the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center-
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of
the
Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation
and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman,
Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds;
Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue
is
the son of John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.;
Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in
the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of
the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes
the
following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Arrow
Funds;
Automated Cash Management Trust; Automated Government Money Trust;
Cash
Trust Series II; Cash Trust Series, Inc.; DG Investor Series; Edward
D.
Jones & Co. Daily Passport Cash Trust; Federated ARMs Fund;
Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government
Trust;
Federated Growth Trust; Federated High Yield Trust; Federated
Income
Securities Trust; Federated Income Trust; Federated Index Trust;
Federated
Institutional Trust; Federated Intermediate Government Trust;
Federated
Master Trust; Federated Short-Intermediate Government Trust;
Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-
Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds;
Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund,
Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund,
Inc.;
Fund for U.S. Government Securities, Inc.; Government Income
Securities,
Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance
Management Series; Intermediate Municipal Trust; International
Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust;
Liberty
Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty
Municipal Securities Fund, Inc.; Liberty U.S. Government Money
Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.;
Liquid
Cash Trust; Managed Series Trust; The Medalist Funds; Money
Market
Management, Inc.; Money Market Obligations Trust; Money Market
Trust;
Municipal Securities Income Trust; 111 Corcoran Funds; Peachtree Funds;
The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut
Funds;
Short-Term Municipal Trust; Star Funds; The Starburst Funds; The
Starburst
Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration
Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial
Institutions; Trust For Government Cash Reserves; Trust for Short-Term
U.S.
Government Securities; Trust for U.S. Treasury Obligations;
World
Investment Series, Inc.
Share Ownership
Officers and Trustees own less than 1% of the Trust's outstanding
shares.
As of December 31,1994, the following shareholders of record owned 5% or
more of the outstanding BayFunds Shares of the Fund: Express & Co.,
Boston,
Massachusetts, owned approximately 3,569,851 shares (8.76%); Claire S.
Caine & Daniel B. Caine, Newton, Massachusetts, owned approximately
3,569,852 shares (8.77%).
As of December 12, 1994, the following shareholders of record owned 5%
or
more of the outstanding Institutional Service Shares of the Fund: State
Street Bank and Trust Company, North Quincy, Massachusetts, owned
approximately 25,920,505 shares (30.27%); John & Company, Burlington,
Massachusetts, owned approximately 16,733,200 shares (19.54%); and Eric
M.
Kobren & Catherine S. Kobren, Dover, Massachusetts, owned approximately
5,215,684 shares (6.10%).
Trustees Compensation
AGGREGATE TOTAL COMPENSATION PAID
NAME , COMPENSATION TO TRUSTEES FROM
POSITION WITH FROM TRUST
TRUST TRUST# AND FUND COMPLEX
John F. Donahue, $ -0- $ -0- for the Trust and
Chairman and Trustee 69 other investment companies in the
Fund Complex
Thomas G. Bigley, $ 719.00 $ 24,991 for the Trust and
Trustee 50 other investment companies in the
Fund Complex
John T. Conroy, Jr., $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
William J. Copeland, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
James E. Dowd, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $ 4,308.00 $ 123,600 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $ 4,757.00 $ 136,100 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Glen R. Johnson, $ -0- $ -0- for the Trust and
President and Trustee 9 other investment companies in the
Fund Complex
Peter E. Madden, $ 4,308.00 $ 104,880 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Gregor F. Meyer, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Wesley W. Posvar, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Marjorie P. Smuts, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
#The aggregate compensation is provided for the Trust which is comprised
of
13 portfolios.
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable
for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject
by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated Management. It is a
subsidiary
of Federated Investors. All the voting securities of Federated
Investors
are owned by a trust, the trustees of which are John F. Donahue, his
wife
and his son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder
of
the Fund for any losses that may be sustained in the purchase, holding,
or
sale of any security or for anything done or omitted by it, except acts
or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with
the
Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the fiscal years ended October 31, 1994, 1993, and 1992 the adviser
earned $643,293, $498,975, and $445,783, respectively, of which
$445,711,
$427,232, and $445,783, respectively, was voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and
extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of
average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets,
the
adviser will reimburse the Fund for its expenses over the
limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the
amount of the excess, subject to an annual adjustment. If the
expense limitation is exceeded, the amount to be reimbursed by the
adviser will be limited, in any single fiscal year, by the amount
of
the investment advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred
to
as the "Administrators".) For the fiscal years ended October 31, 1994,
1993, and 1992, the Administrators earned $195,483, $253,380, and
$197,636
respectively. Dr. Henry J. Gailliot, an officer of Federated
Management,
the adviser to the Fund, holds approximately 20% of the outstanding
common
stock and serves as a director of Commercial Data Services, Inc., a
company
which provides computer processing services to Federated Administrative
Services.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust
Company, Boston, MA is custodian for the securities and cash of the
Fund.
It also provides certain accounting and recordkeeping services with
respect
to the Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains
all necessary shareholder records. For its services, the transfer agent
receives a fee based on size, type, and number of accounts and
transactions
made by shareholders.
Shareholder Services Plan
This arrangement permits the payment of fees to Federated Shareholder
Services and Financial Institutions to cause services to be provided
which
are necessary for the maintenance of shareholder accounts and to
encourage
personal services to shareholders by a representative who has knowledge
of
the shareholder's particular circumstances and goals. These activities
and
services may include, but are not limited to: providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish
and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balance; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses. By
adopting the Shareholder Services Plan, the Board of Trustees expects
that
the Fund will benefit by: (1) providing personal services to
shareholders;
(2) investing shareholder assets with a minimum of delay and
administrative
detail; (3) enhancing shareholder recordkeeping systems; and (4)
responding
promptly to shareholders' requests and inquiries concerning their
accounts.
For the fiscal period ending October 31, 1994, payments in the amount of
$49,493 and $19,343 were made pursuant to the Shareholder Services Plan
on
behalf of Institutional Service Shares and BayFunds Shares,
respectively.
Determining Net Asset Value
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.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or
1%
of the Fund's net asset value, whichever is less, for any one
shareholder
within a 90-day period. Any redemption beyond this amount will also be
in
cash unless the Trustees determine that further payments should be in
kind.
In such cases, the Fund will pay all or a portion of the remainder of
the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not as liquid as a cash redemption. If redemption is made in kind,
shareholders who sell these securities could receive less than the
redemption value and could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated
investment
companies, the Fund must, among other requirements: derive at least
90%
of its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested;
changes in interest rates; changes in expenses; and the relative amount
of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for
those
shareholders paying those fees.
Yield
The Fund calculates its yield based upon the seven days ending on the
day
of the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional
shares purchased with dividends earned from the original one share and
all
dividends declared on the original and any purchased shares; dividing
the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
For the seven-day period ended October 31, 1994, the yield for
Institutional Service Shares was 2.78%, and the yield for BayFunds
shares
was 2.71%.
Effective Yield
The Fund calculates its effective yield by compounding the unannualized
base period return by: adding 1 to the base period return; raising the
sum
to the 365/7th power; and subtracting 1 from the result.
For the seven-day period ended October 31, 1994, the effective yield for
Institutional Service was 2.82%, and the effective yield for BayFunds
Shares was 2.75%.
Tax-Equivalent Yield
The tax-equivalent yield of the Fund is calculated similarly to the
yield
but is adjusted to reflect the taxable yield that the Fund would have
had
to earn to equal its actual yield, assuming a 39.6% tax rate (the
maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
For the seven-day period ended October 31, 1994, the tax-equivalent
yield
for Institutional Service Shares was 5.74%, and the tax-equivalent yield
for BayFunds Shares was 5.60%.
Tax-Equivalency Table
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free
from state and local taxes as well. As the table below indicates, a
"tax-
free" investment can be an attractive choice for investors, particularly
in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF MASSACHUSETTS
TAX BRACKET:
Combined Federal
and State: 27.00% 40.00% 43.00% 48.00% 51.60%
Joint Return$1-39,000$39,001-94,250$94,251-143,600$143,601-256,500
OVER $256,500
Single Return$1-23,350$23,351-56,550$56,551-117,950$117,951-256,500
OVER $256,500
Tax-Exempt Yield Taxable Yield Equivalent
1.50% 2.05% 2.50% 2.63% 2.88% 3.10%
2.00 2.74 3.33 3.51 3.85 4.13
2.50 3.42 4.17 4.39 4.81 5.17
3.00 4.11 5.00 5.26 5.77 6.20
3.50 4.79 5.83 6.14 6.73 7.23
4.00 5.48 6.67 7.02 7.69 8.26
4.50 6.16 7.50 7.89 8.65 9.30
5.00 6.85 8.33 8.77 9.62 10.33
5.50 7.53 9.17 9.65 10.58 11.36
6.00 8.22 10.00 10.53 11.54 12.40
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were
not
used to increase federal deductions. If you itemize deductions,
your
taxable yield equivalent will be lower.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
Total Return
Average annual total return is the average compounded rate of return for
a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
compounded by multiplying the number of shares owned at the end of the
period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number
of
shares purchased at the beginning of the period with $1,000, adjusted
over
the period by any additional shares, assuming the monthly reinvestment
of
all dividends and distributions.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
- Lipper Analytical Services, Inc. ranks funds in various fund
categories based on total return, which assumes the reinvestment
of
all income dividends and capital gains distributions, if any.
- Donoghue's Money Fund Report publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the
same
money funds.
- Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day
effective
yield.
0032603B-ISS -- SAI (2/95)
MINNESOTA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
CASH SERIES SHARES
PROSPECTUS
The Cash Series Shares of Minnesota Municipal Cash Trust (the "Fund")
offered by
this prospectus represent interests in a non-diversified portfolio of
Federated
Municipal Trust (the "Trust"), an open-end management investment company
(a
mutual fund). The Fund invests in short-term Minnesota municipal
securities to
achieve current income exempt from federal regular income tax and the
regular
personal income taxes imposed by the State of Minnesota consistent with
stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information
dated
February 28, 1995, with the Securities and Exchange Commission. The
information
contained in the Combined Statement of Additional Information is
incorporated by
reference into this prospectus. You may request a copy of the Combined
Statement
of Additional Information free of charge by calling 1-800-235-4669. To
obtain
other information, or make inquiries about the Fund, contact the Fund at
the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
Minnesota Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
8
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Cash Series Shares
9
Administration of the Fund
10
NET ASSET VALUE
10
- ------------------------------------------------------
HOW TO PURCHASE SHARES
11
- ------------------------------------------------------
Special Purchase Features
11
HOW TO REDEEM SHARES
12
- ------------------------------------------------------
Special Redemption Features
13
ACCOUNT INFORMATION
13
- ------------------------------------------------------
Dividends
13
Capital Gains
13
Certificates and Confirmations
13
Accounts with Low Balances
13
SHAREHOLDER INFORMATION
14
- ------------------------------------------------------
Voting Rights
14
Massachusetts Partnership Law
14
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
15
PERFORMANCE INFORMATION
16
- ------------------------------------------------------
OTHER CLASSES OF SHARES
16
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SHARES
17
- ------------------------------------------------------
ADDRESSES
18
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
CASH SERIES SHARES
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)..................................................................
... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)..................................................................
... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as
applicable)............................................................
None
Redemption Fee (as a percentage of amount redeemed, if
applicable)........................................ None
Exchange
Fee.....................................................................
......................... None
ANNUAL CASH SERIES SHARES OPERATING
EXPENSES
(As a percentage of average net
assets)
Management Fee (after waiver)
(1).....................................................................
.... 0.06%
12b-1 Fee (after waiver)
(2).....................................................................
......... 0.15%
Total Other
Expenses................................................................
...................... 0.50%
Shareholder Services
Fee...................................................................
0.25%
Total Cash Series Shares Operating Expenses
(3).................................................. 0.71%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of a
portion of the management fee. The adviser can terminate this
voluntary
waiver at any time at its sole discretion. The maximum management
fee is
0.40%.
(2) The maximum 12b-1 fee is 0.50%.
(3) The Total Cash Series Shares Operating Expenses in the table above
are based
on expenses expected during the fiscal year ending October 31, 1995.
The
Total Cash Series Shares Operating Expenses were 0.71% for the
fiscal year
ended October 31, 1994 and were 1.32% absent the voluntary waivers
of a
portion of the management fee and a portion of the 12b-1 fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of Cash Series Shares of
the Fund
will bear, either directly or indirectly. For more complete descriptions
of the
various costs and expenses, see "How to Purchase Shares" and "Trust
Information." Wire-transferred redemptions of less than $5,000 may be
subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years 5 years 10 years
<S>
<C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1)
5% annual return and (2) redemption at the end of each time
period....... $7 $23 $40 $88
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the foregoing table and example relates
only to
Cash Series Shares of the Fund. The Fund also offers another class of
shares
called Institutional Shares. Cash Series Shares and Institutional Shares
are
subject to certain of the same expenses; however, Institutional Shares
are not
subject to a 12b-1 fee. See "Other Classes of Shares."
MINNESOTA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1994
1993 1992 1991*
<S> <C>
<C> <C> <C>
- ---------------------------------------------------------------- ------
- --- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $
1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------
Net investment income
0.02 0.02 0.03 0.04
- ----------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------
Dividends to shareholders from net investment income
(0.02) (0.02) (0.03) (0.04)
- ---------------------------------------------------------------- ------
- --- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $
1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------- ------
- --- --------- --------- ---------
TOTAL RETURN**
2.17% 2.02% 2.78% 3.60%
- ----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------
Expenses
0.71% 0.71% 0.71% 0.64%(b)
- ----------------------------------------------------------------
Net investment income
2.15% 2.01% 2.75% 4.11%(b)
- ----------------------------------------------------------------
Expense waiver/reimbursement (a)
0.61% 0.44% 0.44% 0.59%(b)
- ----------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------
Net assets, end of period (000 omitted)
$94,335 $67,521 $75,044 $69,747
- ----------------------------------------------------------------
</TABLE>
* Reflects operations for the period from January 7, 1991 (date of
initial
public investment) to October 31, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The shares in any one portfolio may be offered in separate
classes.
With respect to the Fund, as of the date of this prospectus, the
Trustees have
established two classes of shares known as Cash Series Shares and
Institutional
Shares. This prospectus relates only to Cash Series Shares of the Fund,
which
are designed primarily for retail customers of financial institutions as
a
convenient means of accumulating an interest in a professionally
managed,
non-diversified portfolio investing primarily in short-term Minnesota
municipal
securities. The Fund may not be a suitable investment for retirement
plans or
for non-Minnesota taxpayers because it invests in municipal securities
of
Minnesota. A minimum initial investment of $10,000 over a 90-day period
is
required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the regular personal income taxes imposed by the
State of
Minnesota consistent with stability of principal. This investment
objective
cannot be changed without shareholder approval. While there is no
assurance that
the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Minnesota municipal securities (as defined below) maturing in 13 months
or less.
As a matter of investment policy, which cannot be changed without
shareholder
approval, the Fund invests its assets so that (1) at least 80% of the
Fund's
annual interest income will be exempt from federal regular income tax
and
Minnesota regular personal income tax ("exempt interest dividends"); and
(2) at
least 95% of the exempt interest dividends that the Fund pays to its
shareholders will derive from interest income from Minnesota municipal
securities. The remaining 5% of such exempt interest dividends paid to
shareholders will derive either from interest income on Minnesota
municipal
securities or interest income which is exempt from both federal regular
and
Minnesota regular personal income taxes. (Federal regular income tax
does not
include the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.) The average maturity of the
securities in the Fund's portfolio, computed on a dollar-weighted basis,
will be
90 days or less. Unless indicated otherwise, the investment policies may
be
changed by the Trustees without shareholder approval. Shareholders will
be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by
or on behalf of Minnesota and its political subdivisions and financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and Minnesota state income tax imposed upon non-corporate taxpayers
("Minnesota
municipal securities"). Examples of Minnesota municipal securities
include, but
are not limited to:
tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
municipal commercial paper and other short-term notes;
variable rate demand notes;
municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in
Minnesota
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying Minnesota
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The Minnesota municipal securities in which the Fund invests
must be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating
categories. The Fund will follow applicable regulations in determining
whether a
security rated by more than one NRSRO can b e treated as being in one of
the two
highest short-term rating categories; currently, such securities must be
rated
by two NRSROs in one of their two highest rating categories. See
"Regulatory
Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit-enhanced
securities
based upon the financial condition and ratings of the party providing
the credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit-enhanced by the credit enhancer, in which case the securities
will be
treated as having been issued by both the issuer and the credit
enhancer. The
bankruptcy, receivership, or default of the credit enhancer will
adversely
affect the quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED SECURITIES. As a matter of fundamental policy, the Fund may
invest in
restricted securities. Restricted securities are any securities in which
the
Fund may invest pursuant to its investment objective and policies but
which are
subject to restrictions on resale under federal securities laws. Under
criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines
that market conditions call for a temporary defensive posture, the Fund
may
invest in tax-exempt or taxable securities such as: obligations issued
by or on
behalf of municipal or corporate issuers having the same quality
characteristics
as described above; obligations issued or guaranteed by the U.S.
government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so.
MINNESOTA MUNICIPAL SECURITIES
Minnesota municipal securities are generally issued to finance public
works,
such as airports, bridges, highways, housing, hospitals, mass
transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
Minnesota municipal securities include industrial development bonds
issued by or
on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Minnesota municipal securities are
"general
obligation" and "revenue" bonds. General obligation bonds are secured by
the
issuer's pledge of its full faith and credit and taxing power for the
payment of
principal and interest. Interest on and principal of revenue bonds,
however, are
payable only from the revenue generated by the facility financed by the
bond or
other specified sources of revenue. Revenue bonds do not represent a
pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Minnesota municipal securities depend on a variety of factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of Minnesota municipal securities and participation interests, or the
credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of
Minnesota
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in Minnesota municipal securities which are
repayable out of
revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
Minnesota municipal securities could involve an increased risk to the
Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Minnesota municipal securities are subject to
the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through repurchase agreements
(arrangements in which the Fund sells a money market instrument for a
percentage
of its cash value with an agreement to buy it back on a set date) or
pledge
securities except, under certain circumstances, the Fund may borrow up
to
one-third of the value of its total assets and pledge up to 15% of the
value of
total assets to secure such borrowings. This investment limitation
cannot be
changed without shareholder approval.
As a matter of nonfundamental policy, the Fund will not invest more than
10% of
its net assets in illiquid securities.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Combined Statement of Additional Information, in
order to
comply with applicable laws and regulations, including the provisions of
and
regulations under the Investment Company Act of 1940, as amended. In
particular,
the Fund will comply with the various requirements of Rule 2a-7, which
regulates
money market mutual funds. The Fund will determine the effective
maturity of its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are
responsible for managing the Fund's business affairs and for exercising
all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .40 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF CASH SERIES SHARES
Federated Securities Corp. is the principal distributor for Cash Series
Shares
of the Fund. It is a Pennsylvania corporation organized on November 14,
1969,
and is the principal distributor for a number of investment companies.
Federated
Securities Corp. is a subsidiary of Federated Investors.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan
adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution
Plan"),
the Fund may pay to the distributor an amount, computed at an annual
rate of .50
of 1% of the average daily net asset value of Cash Series Shares, to
finance any
activity which is principally intended to result in the sale of shares
subject
to the Distribution Plan. The distributor may select financial
institutions such
as banks, fiduciaries, custodians for public funds, investment advisers,
and
broker/dealers to provide sales support services as agents for their
clients or
customers. In addition, the Fund has adopted a Shareholder Services Plan
(the
"Services Plan") under which it will pay Federated Shareholder Services,
an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of Cash Series Shares to provide personal
services
and/or maintenance of shareholder accounts to the Fund and its
shareholders.
From time to time and for such periods as it deems appropriate,
Federated
Shareholder Services may voluntarily reduce the amount stated above.
Financial institutions will receive fees based upon shares owned by
their
clients or customers. The schedules of such fees and the basis upon
which such
fees will be paid will be determined from time to time by the Fund, the
distributor, or Federated Shareholder Services, as appropriate.
The Distribution Plan is a compensation-type plan. As such, the Fund
makes no
payments to the distributor except as described above. Therefore, the
Fund does
not pay for unreimbursed expenses of the distributor, including amounts
expended
by the distributor in excess of amounts received by it from the Fund,
interest,
carrying or other financing charges in connection with excess amounts
expended,
or the distributor's overhead expenses. However, the distributor may be
able to
recover such amounts or may earn a profit from future payments made by
the Fund
under the Distribution Plan.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may also pay
financial
institutions a fee for providing certain services to shareholders. This
fee is
in addition to the amounts paid under the Distribution Plan and, if
paid, will
be reimbursed by the adviser and not the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary
of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian
for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of Cash Series Shares
at
$1.00 by valuing the portfolio securities using the amortized cost
method. The
net asset value per share is determined by subtracting liabilities
attributable
to Cash Series Shares from the value of Fund assets attributable to Cash
Series
Shares, and dividing the remainder by the number of Cash Series Shares
outstanding. The Fund cannot guarantee that its net asset value will
always
remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
HOW TO PURCHASE SHARES
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Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased as described below either through a financial institution
(such as
a bank or broker/dealer) or by wire or by check directly from the Fund,
with a
minimum initial investment of $10,000. (Financial institutions may
impose
different minimum investment requirements on their customers.)
In connection with any sale, Federated Securities Corp. may from time to
time
offer certain items of nominal value to any shareholder or investor. The
Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and
returning
the new account form available from the Fund before shares can be
purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may
purchase shares
through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives
payment by
wire or converts payment by check from the financial institution into
federal
funds. It is the financial institution's responsibility to transmit
orders
promptly. Financial institutions may charge additional fees for their
services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling
the Fund
before 1:00 p.m. (Eastern time). The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) in
order to begin earning dividends that same day. Federal funds should be
wired as
follows: Federated Services Company, c/o State Street Bank and Trust
Company,
Boston, MA; Attention; EDGEWIRE; For Credit to: Minnesota Municipal Cash
Trust--Cash Series Shares; Fund Number (this number can be found on the
account
statement or by contacting the Fund); Group Number or Order Number;
Nominee or
Institution Name; and ABA Number 011000028. Shares cannot be purchased
by wire
on holidays when wire transfers are restricted.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check
made
payable to Minnesota Municipal Cash Trust--Cash Series Shares to:
Federated
Services Company, c/o State Street Bank and Trust Company, P.O. Box
8604,
Boston, MA 02266-8604. Orders by mail are considered received when
payment by
check is converted into federal funds (normally the business day after
the check
is received) and shares begin earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM. A minimum of $100 can be automatically
withdrawn
periodically from the shareholder's checking account at an Automated
Clearing
House ("ACH") member and invested in Fund shares. Shareholders should
contact
their financial institution or the Fund to participate in this program.
HOW TO REDEEM SHARES
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Shares are redeemed at their net asset value next determined after a
Fund
receives the redemption request. Redemptions will be made on days on
which the
Fund computes its net asset value. Redemption requests must be received
in
proper form and can be made as described below.
REDEEMING SHARES THROUGH A FINANCIAL INSTITUTION. Shares may be redeemed
by
contacting the shareholder's financial institution. Shares will be
redeemed at
the net asset value next determined after Federated Services Company
receives
the redemption request. According to the shareholder's instructions,
redemption
proceeds can be sent to the financial institution or to the shareholder
by check
or by wire. The financial institution is responsible for promptly
submitting
redemption requests and providing proper written redemption
instructions.
Customary fees and commissions may be charged by the financial
institution for
this service.
REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by
calling
the Fund provided the Fund has a properly completed authorization form.
These
forms can be obtained from Federated Securities Corp. Proceeds from
redemption
requests received before 12:00 noon (Eastern time) will be wired the
same day to
the shareholder's account at a domestic commercial bank which is a
member of the
Federal Reserve System, but will not include that day's dividend.
Proceeds from
redemption requests received after that time will include that day's
dividends
but will be wired the following business day. Under limited
circumstances,
arrangements may be made with the distributor for same-day payment of
proceeds,
without that day's dividend, for redemption requests received before
2:00 p.m.
(Eastern time). Proceeds from redeemed shares purchased by check or
through ACH
will not be wired until that method of payment has cleared.
Telephone instructions may be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares
By Mail"
should be considered. If at any time the Fund shall determine it
necessary to
terminate or modify the telephone redemption privilege, shareholders
would be
promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by
mailing a
written request together with properly endorsed certificates, if issued,
to:
Federated Services Company, c/o State Street Bank and Trust Company,
P.O. Box
8604, Boston, MA 02266-8604. The written request should state: Minnesota
Municipal Cash Trust--Cash Series Shares; the account name as registered
with
the Fund; the account number; and the number of shares to be redeemed or
the
dollar amount requested. All owners of the account must sign the request
exactly
as the shares are registered. Any share certificates should be sent by
registered or certified mail with the written request. Normally, a check
for the
proceeds is mailed within one business day, but in no event more than
seven
days, after receipt of a proper written redemption request. Dividends
are paid
up to and including the day that a redemption request is processed.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by: a commercial or savings bank, trust company or
savings
and loan association whose deposits are insured by an organization which
is
administered by the Federal Deposit Insurance Corporation; a member firm
of a
domestic stock exchange; or any other "eligible guarantor institution,"
as
defined in the Securities Exchange Act of 1934. The Fund does not accept
signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to
allow
shareholders to redeem their fund shares. A fee will be charged for this
service. The check writing service allows the shareholder to receive the
daily
dividend declared on the shares to be redeemed until the check is
presented to
State Street Bank for payment. However, checks should never be made
payable or
sent to State Street Bank or the Fund to redeem shares, and a check may
not be
written to close an account. Canceled checks are sent to the shareholder
each
month.
DEBIT CARD. Upon request, a debit account will be established. This
account
allows shareholders to redeem shares by using a debit card. A fee will
be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of
at
least $10,000, a systematic withdrawal program may be established
whereby
automatic redemptions are made from the account and transferred
electronically
to any commercial bank, savings bank, or credit union that is an ACH
member.
Shareholders may apply for participation in this program through their
financial
institution or the Fund.
ACCOUNT INFORMATION
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DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing. Monthly
confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, if an
account
balance falls below $10,000 due to shareholder redemptions, the Fund may
redeem
all of the remaining shares in that account (except accounts maintained
by
retirement plans) and pay the proceeds to the shareholder.
Before shares are redeemed to close an account, the shareholder will be
notified
in writing and allowed 30 days to purchase additional shares to meet the
minimum
requirement.
SHAREHOLDER INFORMATION
- ------------------------------------------------------------------------
- --------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of all
classes of
each portfolio in the Trust have equal voting rights, except that in
matters
affecting only a particular portfolio or class, only shares of that
portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust
is not
required to hold annual shareholder meetings. Shareholder approval will
be
sought only for certain changes in the Trust's or the Fund's operation
and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
As of January 11, 1995, First Trust National Association, St. Paul,
Minnesota,
owned 28.5% of the voting securities of the Fund, and, therefore, may,
for
certain purposes, be deemed to control the Fund and be able to affect
the
outcome of certain matters presented for a vote of shareholders.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
Minnesota. Shareholders are urged to consult their own tax advisers
regarding
the status of their accounts under state and local tax laws.
MINNESOTA TAXES. Under existing Minnesota laws, distributions made by
the Fund
will be not be subject to Minnesota regular personal income taxes
provided that
such distributions qualify as exempt-interest dividends under the
Internal
Revenue Code, and provided further that 95% of such distributions are
derived
from interest on obligations issued by the State of Minnesota or any of
its
political or governmental subdivisions, municipalities, or governmental
agencies
or instrumentalities ("Minnesota municipal obligations"). Conversely, to
the
extent that distributions made by the Fund are derived from other types
of
obligations, such distributions will be subject to Minnesota regular
personal
income taxes. Moreover, even if the Fund does derive 95% of exempt-
interest
dividends from interest income on Minnesota municipal obligations,
shareholders
could potentially be liable for Minnesota regular personal income tax to
the
extent that the remaining exempt-interest dividends paid to them are
derived
from sources of income not exempt from Minnesota regular personal income
tax.
Dividends of the Fund are not exempt from Minnesota corporate income
taxes.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time, the Fund advertises the yield, effective yield, and
tax-equivalent yield for Cash Series Shares.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
Cash Series Shares' tax-exempt yield, assuming a specific tax rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in Cash Series Shares after reinvesting all income
distributions. It
is calculated by dividing that change by the initial investment and is
expressed
as a percentage.
The performance figures will be calculated separately for each class of
shares.
Because each class of shares is subject to different expenses, the
performance
of Institutional Shares will exceed the performance of Cash Series
Shares for
the same period.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
OTHER CLASSES OF SHARES
- ------------------------------------------------------------------------
- --------
The Fund also offers the following class.
Institutional Shares are sold at net asset value primarily to financial
institutions acting in a fiduciary capacity. Investments in
Institutional Shares
are subject to a minimum initial investment of $25,000. Institutional
Shares are
sold with no 12b-1 fees.
Financial institutions providing distribution or administrative services
may
receive additional compensation depending upon which class of shares of
the Fund
is sold. The distributor pays this compensation and is reimbursed from
sources
other than the assets of the Fund.
The amount of dividends payable to shareholders of any particular class
may be
more or less than that payable to the shareholders of any other class
depending
upon the existence of and differences in class expenses, 12b-1 Plan
expenses,
and Shareholder Services Plan expenses. The stated advisory fee is the
same for
all classes of shares.
MINNESOTA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR
ENDED OCTOBER 31,
1994 1993
1992 1991 1990*
<S> <C> <C>
<C> <C> <C>
- -------------------------------------------------- --------- ---------
- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
$ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------
Net investment income 0.03 0.02
0.03 0.05 0.01
- --------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------
Dividends to shareholders from net investment
income (0.03)
(0.02) (0.03) (0.05) (0.01)
- -------------------------------------------------- --------- ---------
- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
$ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------- --------- ---------
- --------- --------- ---------
TOTAL RETURN** 2.58%
2.43% 3.19% 4.89% 0.90%
- --------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------
Expenses 0.31%
0.31% 0.31% 0.30% 0.01%(b)
- --------------------------------------------------
Net investment income 2.55%
2.40% 3.10% 4.73% 6.45%(b)
- --------------------------------------------------
Expense waiver/reimbursement (a) 0.34%
0.34% 0.33% 0.43% 0.69%(b)
- --------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------
Net assets, end of period
(000 omitted) $159,704 $165,865
$245,168 $124,603 $75,904
- --------------------------------------------------
</TABLE>
* Reflects operations for the period from September 10, 1990 (date of
initial
public investment) to October 31, 1990.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C>
<C>
Minnesota Municipal Cash Trust
Cash Series Shares
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Investment Adviser
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 8604
Boston, MA 02266-8604
- ------------------------------------------------------------------------
- -----------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Independent Public Accountants
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
- ------------------------------------------------------------------------
- -----------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL
CASH TRUST
CASH SERIES SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated February 28, 1995
314229873
0082715A-CSS (2/95)
MINNESOTA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares of Minnesota Municipal Cash Trust (the "Fund")
offered
by this prospectus represent interests in a non-diversified portfolio of
Federated Municipal Trust (the "Trust"), an open-end management
investment
company (a mutual fund). The Fund invests in short-term Minnesota
municipal
securities to achieve current income exempt from federal regular income
tax and
the regular personal income taxes imposed by the State of Minnesota
consistent
with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information
dated
February 28, 1995, with the Securities and Exchange Commission. The
information
contained in the Combined Statement of Additional Information is
incorporated by
reference into this prospectus. You may request a copy of the Combined
Statement
of Additional Information free of charge by calling 1-800-235-4669. To
obtain
other information, or make inquiries about the Fund, contact the Fund at
the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
Minnesota Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
8
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Institutional Shares
9
Administration of the Fund
9
NET ASSET VALUE
10
- ------------------------------------------------------
INVESTING IN THE FUND
10
- ------------------------------------------------------
Share Purchases
10
Minimum Investment Required
11
Subaccounting Services
11
Certificates and Confirmations
11
Dividends
11
Capital Gains
12
REDEEMING SHARES
12
- ------------------------------------------------------
By Mail
12
Telephone Redemption
13
Accounts with Low Balances
13
SHAREHOLDER INFORMATION
13
- ------------------------------------------------------
Voting Rights
13
Massachusetts Partnership Law
14
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
15
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
OTHER CLASSES OF SHARES
16
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES
17
- ------------------------------------------------------
ADDRESSES
18
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
INSTITUTIONAL
SHARES
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)..................................................................
.. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)..................................................................
.. None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as
applicable)...........................................................
None
Redemption Fee (as a percentage of amount redeemed, if
applicable)....................................... None
Exchange
Fee.....................................................................
........................ None
ANNUAL INSTITUTIONAL SHARES
OPERATING EXPENSES
(As a percentage of average
net assets)
Management Fee (after waiver)
(1).....................................................................
... 0.06%
12b-1
Fee.....................................................................
........................... None
Total Other
Expenses................................................................
..................... 0.25%
Shareholder Services Fee (after waiver)
(2).............................................. 0.00%
Total Institutional Shares Operating Expenses
(3).............................................. 0.31%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of the
management fee. The adviser can terminate this voluntary waiver at
any time
at its sole discretion. The maximum management fee is 0.40%.
(2) The maximum shareholder services fee is 0.25%.
(3) The Total Institutional Shares Operating Expenses would have been
0.65%
absent the voluntary waiver of a portion of the management fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of Institutional Shares of
the
Fund will bear, either directly or indirectly. For more complete
descriptions of
the various costs and expenses, see "Investing in the Fund" and "Trust
Information." Wire-transferred redemptions of less than $5,000 may be
subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years 5 years 10 years
<S>
<C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period................................................................
$3 $10 $17 $39
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the foregoing table and example relates
only to
Institutional Shares of the Fund. The Fund also offers another class of
shares
called Cash Series Shares. Institutional Shares and Cash Series Shares
are
subject to certain of the same expenses; however, Cash Series Shares are
subject
to a 12b-1 fee of up to 0.50%. See "Other Classes of Shares."
MINNESOTA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS-INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1994 1993
1992 1991 1990*
<S> <C> <C> <C>
<C> <C>
- --------------------------------------------- --------- --------- ---
- ------ --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $
1.00 $ 1.00 $ 1.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.03 0.02
0.03 0.05 0.01
- ---------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------
Dividends to shareholders from net
investment income (0.03) (0.02)
(0.03) (0.05) (0.01)
- --------------------------------------------- --------- --------- ---
- ------ --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $
1.00 $ 1.00 $ 1.00
- --------------------------------------------- --------- --------- ---
- ------ --------- ---------
TOTAL RETURN** 2.58% 2.43%
3.19% 4.89% 0.90%
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 0.31% 0.31%
0.31% 0.30% 0.01%(b)
- ---------------------------------------------
Net investment income 2.55% 2.40%
3.10% 4.73% 6.45%(b)
- ---------------------------------------------
Expense waiver/reimbursement (a) 0.34% 0.34%
0.33% 0.43% 0.69%(b)
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period
(000 omitted) $159,704 $165,865
$245,168 $124,603 $75,904
- ---------------------------------------------
</TABLE>
* Reflects operations for the period from September 10, 1990 (date of
initial
public investment) to October 31, 1990.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The shares in any one portfolio may be offered in separate
classes.
With respect to the Fund, as of the date of this prospectus, the
Trustees have
established two classes of shares known as Institutional Shares and Cash
Series
Shares. This prospectus relates only to Institutional Shares of the
Fund, which
are designed primarily for financial institutions acting in a fiduciary
capacity
as a convenient means of accumulating an interest in a professionally
managed,
non-diversified portfolio investing primarily in short-term Minnesota
municipal
securities. The Fund may not be a suitable investment for retirement
plans or
for non-Minnesota taxpayers because it invests in municipal securities
of
Minnesota. A minimum initial investment of $25,000 over a 90-day period
is
required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the regular personal income taxes imposed by the
state of
Minnesota consistent with stability of principal. This investment
objective
cannot be changed without shareholder approval. While there is no
assurance that
the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Minnesota municipal securities (as defined below) maturing in 13 months
or less.
As a matter of investment policy, which cannot be changed without
shareholder
approval, the Fund invests its assets so that (1) at least 80% of the
Fund's
annual interest income will be exempt from federal regular income tax
and
Minnesota regular personal income tax ("exempt interest dividends"); and
(2) at
least 95% of the exempt interest dividends that the Fund pays to its
shareholders will derive from interest income from Minnesota municipal
securities. The remaining 5% of such exempt interest dividends paid to
shareholders will derive either from interest income on Minnesota
municipal
securities or interest income which is exempt from both federal regular
and
Minnesota regular personal income taxes. (Federal regular income tax
does not
include the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.) The average maturity of the
securities in the Fund's portfolio, computed on a dollar-weighted basis,
will be
90 days or less. Unless indicated otherwise, the investment policies may
be
changed by the Trustees without shareholder approval. Shareholders will
be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by
or on behalf of Minnesota and its political subdivisions and financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and Minnesota state income tax imposed upon non-corporate taxpayers
("Minnesota
municipal securities"). Examples of Minnesota municipal securities
include, but
are not limited to:
tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
municipal commercial paper and other short-term notes;
variable rate demand notes;
municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in
Minnesota
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying Minnesota
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The Minnesota municipal securities in which the Fund invests
must be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating
categories. The Fund will follow applicable regulations in determining
whether a
security rated by more than one NRSRO can be treated as being in one of
the two
highest short-term rating categories; currently, such securities must be
rated
by two NRSROs in one of their two highest rating categories. See
"Regulatory
Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit-enhanced
securities
based upon the financial condition and ratings of the party providing
the credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit-enhanced by the credit enhancer, in which case the securities
will be
treated as having been issued by both the issuer and the credit
enhancer. The
bankruptcy, receivership, or default of the credit enhancer will
adversely
affect the quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED SECURITIES. As a matter of fundamental policy, the Fund may
invest in
restricted securities. Restricted securities are any securities in which
the
Fund may invest pursuant to its investment objective and policies but
which are
subject to restrictions on resale under federal securities laws. Under
criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines
that market conditions call for a temporary defensive posture, the Fund
may
invest in tax-exempt or taxable securities such as: obligations issued
by or on
behalf of municipal or corporate issuers having the same quality
characteristics
as described above; obligations issued or guaranteed by the U.S.
government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so.
MINNESOTA MUNICIPAL SECURITIES
Minnesota municipal securities are generally issued to finance public
works,
such as airports, bridges, highways, housing, hospitals, mass
transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
Minnesota municipal securities include industrial development bonds
issued by or
on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Minnesota municipal securities are
"general
obligation" and "revenue" bonds. General obligation bonds are secured by
the
issuer's pledge of its full faith and credit and taxing power for the
payment of
principal and interest. Interest on and principal of revenue bonds,
however, are
payable only from the revenue generated by the facility financed by the
bond or
other specified sources of revenue. Revenue bonds do not represent a
pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Minnesota municipal securities depend on a variety of factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of Minnesota municipal securities and participation interests, or the
credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of
Minnesota
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in Minnesota municipal securities which are
repayable out of
revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
Minnesota municipal securities could involve an increased risk to the
Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Minnesota municipal securities are subject to
the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through repurchase agreements
(arrangements in which the Fund sells a money market instrument for a
percentage
of its cash value with an agreement to buy it back on a set date) or
pledge
securities except, under certain circumstances, the Fund may borrow up
to
one-third of the value of its total assets and pledge up to 15% of the
value of
total assets to secure such borrowings. This investment limitation
cannot be
changed without shareholder approval.
As a matter of nonfundamental policy, the Fund will not invest more than
10% of
its net assets in illiquid securities.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Combined Statement of Additional Information, in
order to
comply with applicable laws and regulations, including the provisions of
and
regulations under the Investment Company Act of 1940, as amended. In
particular,
the Fund will comply with the various requirements of Rule 2a-7, which
regulates
money market mutual funds. The Fund will determine the effective
maturity of its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are
responsible for managing the Fund's business affairs and for exercising
all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .40 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for
Institutional Shares
of the Fund. It is a Pennsylvania corporation organized on November 14,
1969,
and is the principal distributor for a number of investment companies.
Federated
Securities Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services
Plan (the
"Services Plan") under which it will pay Federated Shareholder Services,
an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of Institutional Shares to provide
personal
services and/or maintenance of shareholder accounts to the Fund and its
shareholders. From time to time and for such periods as it deems
appropriate,
Federated Shareholder Services may voluntarily reduce the amount stated
above.
Federated Shareholder Services may elect to pay financial institutions
fees
based upon shares owned by their clients or customers for services
provided to
those clients or customers. The schedules of such fees and the basis
upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds,
investment
advisers, and broker/dealers to provide certain services to
shareholders. These
services may include, but are not limited to, distributing prospectuses
and
other information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of shares. Any fees paid for
these
services by the distributor will be reimbursed by the adviser and not
the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary
of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian
for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of Institutional
Shares at
$1.00 by valuing the portfolio securities using the amortized cost
method. The
net asset value per share is determined by subtracting liabilities
attributable
to Institutional Shares from the value of Fund assets attributable to
Institutional Shares, and dividing the remainder by the number of
Institutional
Shares outstanding. The Fund cannot guarantee that its net asset value
will
always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
INVESTING IN THE FUND
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SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased either by wire or mail. The Fund reserves the right to
reject any
purchase request.
To make a purchase, open an account by calling Federated Securities
Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase by Federal Reserve wire, call the Fund before 1:00
p.m.
(Eastern time) to place an order. The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) that
day. Federal funds should be wired as follows: Federated Services
Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE;
For Credit
to: Minnesota Municipal Cash Trust--Institutional Shares; Fund Number
(this
number can be found on the account statement or by contacting the Fund);
Group
Number or Order Number; Nominee or Institution Name; and ABA Number
011000028.
BY MAIL. To purchase by mail, send a check made payable to Minnesota
Municipal
Cash Trust-- Institutional Shares to: Federated Services Company, c/o
State
Street Bank and Trust Company, P.O. Box 8602, Boston, MA 02266-8602.
Orders by
mail are considered received when payment by check is converted into
federal
funds. This is normally the next business day after the check is
received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be
opened
with a smaller amount as long as the minimum is reached within 90 days.
Minimum
investments will be calculated by combining all accounts maintained with
the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts.
However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping
requirements. The
transfer agent charges a fee based on the level of subaccounting
services
rendered. Financial institutions 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 provided which may be related to the
ownership of
Fund shares. This prospectus should, therefore, be read together with
any
agreement between the customer and the financial institution with regard
to the
services provided, the fees charged for those services and any
restrictions and
limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all
purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund.
Shares purchased by wire before 1:00 p.m. (Eastern time) begin earning
dividends
that day. Shares purchased by check begin earning dividends the day
after the
check is converted into federal funds.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
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Shares are redeemed at their net asset value next determined after
Federated
Services Company receives the redemption request. Redemptions will be
made on
days on which the Fund computes its net asset value. Redemption requests
must be
received in proper form and can be made as described below.
BY MAIL
Shares may be redeemed by sending a written request to: Federated
Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8602, Boston,
MA
02266-8602. The written request should state: Minnesota Municipal Cash
Trust--Institutional Shares; shareholder's name; the account number; and
the
share or dollar amount requested. Sign the request exactly as the shares
are
registered. Shareholders should call the Fund for assistance in
redeeming by
mail.
If share certificates have been issued, they must be properly endorsed
and
should be sent by registered or certified mail with the written request.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund,
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by:
a trust company or commercial bank whose deposits are insured by
the Bank
Insurance Fund which is administered by the Federal Deposit
Insurance
Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific
Stock
Exchanges;
a savings bank or savings and loan association whose deposits are
insured
by the Savings Association Insurance Fund, which is administered
by the
FDIC; or
any other "eligible guarantor institution," as defined in the
Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the transfer agent have adopted standards for accepting
signature
guarantees from the above institutions. The Fund may elect in the future
to
limit eligible signature guarantors to institutions that are members of
the
signature guarantee program. The Fund and its transfer agent reserve the
right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day,
but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a
redemption
request is processed.
BY WRITING A CHECK. At the shareholder's request, State Street Bank and
Trust
Company will establish a checking account for redeeming shares. For
further
information, contact the Fund.
With this checking account, shares may be redeemed by writing a check
for
$100.00 or more. The redemption will be made at the net asset value on
the date
that the check is presented to the Fund. A check may not be written to
close an
account. A shareholder may obtain cash by negotiating the check through
the
shareholder's local bank. Checks should never be made payable or sent to
State
Street Bank and Trust Company to redeem shares. Canceled checks are sent
to the
shareholder each month.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions
may be
recorded. If reasonable procedures are not followed by the Fund, it may
be
liable for losses due to unauthorized or fraudulent telephone
instructions. An
authorization form permitting the Fund to accept telephone requests must
first
be completed. Authorization forms and information on this service are
available
from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time),
the
proceeds will be wired the same day to the shareholder's account at a
domestic
commercial bank which is a member of the Federal Reserve System, and
those
shares redeemed will not be entitled to that day's dividend. A daily
dividend
will be paid on shares redeemed if the redemption request is received
after
12:00 noon (Eastern time). However, the proceeds are not wired until the
following business day.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If such a case should occur,
another
method of redemption, such as "By Mail," should be considered. If at any
time
the Fund shall determine it necessary to terminate or modify this method
of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund
may
redeem shares in any account and pay the proceeds to the shareholder if
the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is
notified in
writing and allowed 30 days to purchase additional shares to meet the
minimum
requirement.
SHAREHOLDER INFORMATION
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VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of all
classes of
each portfolio in the Trust have equal voting rights, except that in
matters
affecting only a particular portfolio or class, only shares of that
portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust
is not
required to hold annual shareholder meetings. Shareholder approval will
be
sought only for certain changes in the Trust's or the Fund's operation
and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
As of January 11, 1995, First Trust National Association, St. Paul,
Minnesota,
owned 28.5% of the voting securities of the Fund, and, therefore, may,
for
certain purposes, be deemed to control the Fund and be able to affect
the
outcome of certain matters presented for a vote of shareholders.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
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FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
Minnesota. Shareholders are urged to consult their own tax advisers
regarding
the status of their accounts under state and local tax laws.
MINNESOTA TAXES. Under existing Minnesota laws, distributions made by
the Fund
will be not be subject to Minnesota regular personal income taxes
provided that
such distributions qualify as exempt-interest dividends under the
Internal
Revenue Code, and provided further that 95% of such distributions are
derived
from interest on obligations issued by the State of Minnesota or any of
its
political or governmental subdivisions, municipalities, or governmental
agencies
or instrumentalities ("Minnesota municipal obligations"). Conversely, to
the
extent that distributions made by the Fund are derived from other types
of
obligations, such distributions will be subject to Minnesota regular
personal
income taxes. Moreover, even if the Fund does derive 95% of exempt-
interest
dividends from interest income on Minnesota municipal obligations,
shareholders
could potentially be liable for Minnesota regular personal income tax to
the
extent that the remaining exempt-interest dividends paid to them are
derived
from sources of income not exempt from Minnesota regular personal income
tax.
Dividends of the Fund are not exempt from Minnesota corporate income
taxes.
PERFORMANCE INFORMATION
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From time to time, the Fund advertises the yield, effective yield, and
tax-equivalent yield for Institutional Shares.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
Institutional Shares' tax-exempt yield, assuming a specific tax rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in Institutional Shares after reinvesting all income
distributions.
It is calculated by dividing that change by the initial investment and
is
expressed as a percentage.
The performance figures will be calculated separately for each class of
shares.
Because each class of shares is subject to different expenses, the
performance
of Institutional Shares will exceed the performance of Cash Series
Shares for
the same period.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
OTHER CLASSES OF SHARES
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The Fund also offers the following class.
Cash Series Shares are sold at net asset value primarily to retail
customers of
financial institutions. Investments in Cash Series Shares are subject to
a
minimum initial investment of $10,000. Cash Series Shares are sold with
a 12b-1
fee of up to .50 of 1%.
Financial institutions providing distribution or administrative services
may
receive additional compensation depending upon which class of shares of
the Fund
is sold. The distributor pays this compensation and is reimbursed from
sources
other than the assets of the Fund.
The amount of dividends payable to shareholders of any particular class
may be
more or less than that payable to the shareholders of any other class
depending
upon the existence of and differences in class expenses, Distribution
Plan
expenses, and Shareholder Services Plan expenses. The stated advisory
fee is the
same for all classes of shares.
MINNESOTA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C>
<C> <C> <C>
------
- ------------------------------------
<CAPTION>
1994
1993 1992 1991*
<S> <C>
<C> <C> <C>
- ---------------------------------------------------------------- ------
- --- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $
1.00 $1.00 $ 1.00
- ----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------
Net investment income
0.02 0.02 0.03 0.04
- ----------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------
Dividends to shareholders from net investment income
(0.02) (0.02) (0.03) (0.04)
- ---------------------------------------------------------------- ------
- --- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $
1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------- ------
- --- --------- --------- ---------
TOTAL RETURN**
2.17% 2.02% 2.78% 3.60%
- ----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------
Expenses
0.71% 0.71% 0.71% 0.64%(b)
- ----------------------------------------------------------------
Net investment income
2.15% 2.01% 2.75% 4.11%(b)
- ----------------------------------------------------------------
Expense waiver/reimbursement (a)
0.61% 0.44% 0.44% 0.59%(b)
- ----------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------
Net assets, end of period (000 omitted)
$94,335 $67,521 $75,044 $69,747
- ----------------------------------------------------------------
</TABLE>
* Reflects operations for the period from January 7, 1991 (date of
initial
public investment) to October 31, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C>
<C>
Minnesota Municipal Cash Trust
Institutional Shares
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Investment Adviser
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 8602
Boston, MA 02266-8602
- ------------------------------------------------------------------------
- -----------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Independent Public Accountants
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
- ------------------------------------------------------------------------
- -----------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL
CASH TRUST
INSTITUTIONAL SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated February 28, 1995
314229402
0082715A-IS (2/95)
Minnesota Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Cash Series Shares
Institutional Shares
Combined Statement of Additional Information
This Combined Statement of Additional Information should be read
with the prospectuses of Minnesota Municipal Cash Trust (the
"Fund"),
dated February 28, 1995. This Statement is not a prospectus. To
receive a copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
Reverse Repurchase Agreements 2
Minnesota Investment Risks 2
Investment Limitations 2
Brokerage Transactions 4
Federated Municipal Trust
Management 5
The Funds 8
Share Ownership 9
Trustees Compensation 9
Trustee Liability 10
Investment Adviser 10
Advisory Fees 10
Fund Administration 10
Distribution and Shareholder
Services Plans 11
Determining Net Asset Value 11
Redemption in Kind 11
The Fund's Tax Status 12
Performance Information 12
Yield 12
Effective Yield 12
Tax-Equivalent Yield 12
Tax-Equivalency Table 13
Total Return 13
Performance Comparisons 14
Investment Policies
Unless indicated otherwise, the policies described below may be changed
by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the
security, the issuer of any demand feature applicable to the security,
or
any guarantor of either the security or any demand feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution
irrevocable letters of credit or guarantees and give the Fund the right
to
demand payment of the principal amounts of the participation interests
plus
accrued interest on short notice (usually within seven days). The
municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation
interests
include the right to demand payment from the issuers of those interests.
By
purchasing participation interests having a seven day demand feature,
the
Fund is buying a security meeting the maturity and quality requirements
of
the Fund and also is receiving the tax-free benefits of the underlying
securities.
Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the
nature of the appropriation for the lease. Furthermore, a lease may
provide
that the participants cannot accelerate lease obligations upon default.
The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the
investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be
terminated
by the lessee; the potential recovery, if any, from a sale of the leased
property upon termination of the lease; the lessee's general credit
strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit
enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other
than normal transaction costs, are incurred. However, liquid assets of
the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are
marked to market daily and are maintained until the transaction has been
settled. The Fund does not intend to engage in when-issued and delayed
delivery transactions to an extent that would cause the segregation of
more
than 20% of the total value of its assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant
to
repurchase agreements. Repurchase agreements are arrangements in which
banks, brokers/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at
a mutually agreed upon time and price. To the extent that the seller
does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. The Fund or
its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund
will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by
the
Trustees.
Reverse Repurchase Agreements
The Fund may enter into reverse repurchase agreements. These
transactions
are similar to borrowing cash. In a reverse repurchase agreement, the
Fund
transfers possession of a portfolio instrument to another person, such
as a
financial institutions, broker, or dealer, in return for a percentage of
the instrument's market value in cash, and agrees that on a stipulated
date
in the future the Fund will repurchase the portfolio instrument by
remitting the original consideration plus interest at an agreed-upon
rate.
The use of reverse repurchase agreements may enable the Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase
agreements does not ensure that the Fund will be able to avoid selling
portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund,
in
a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked
to
market daily and maintained until the transaction is settled.
Minnesota Investment Risks
Minnesota (the "State") has a diversified economy, the structure of
which
has increasingly come to resemble the nation as a whole. Minnesota's
emergence as a regional center is evidenced by the comparatively high
rates
of employment growth in trade, finance, insurance and service industries
over the past ten years. Agriculture, which had been severely affected
since 1981, appears to be improving with land values now stabilizing at
levels seen in the early 1980's. State unemployment rates remain below
the
national level; and personal income has grown more rapidly than that of
the
nation as a whole, with personal income per capita remaining slightly
above
the national average.
Minnesota's financial operations have been stable in recent years,
following a period of volatility in the early 1980's. Through frequent
reviews of revenue forecasts and timely legislative action, the State
has
maintained balanced operations. Almost all of Minnesota's debt is
general
obligation, with general purpose bonds serviced from the General Fund
(with
additional pledges of cigarette tax, sales taxes from health and sports
clubs, and lottery net proceeds) and highway bonds serviced from the
Highway User Tax Fund. Debt level is moderate, amortization is rapid,
and
debt service is a minor burden (less than 3% of General Fund Revenues).
Although Minnesota's debt management policies have been conservative,
concerns developed when the State was authorized to issue up to $350
million of revenue bonds and up to $175 million of state general
obligation
bonds to finance the construction of maintenance facilities for
Northwest
Airlines (NWA) in 1991. However, a substantial downsizing of NWA's
plans
to build aircraft maintenance facilities in northern Minnesota minimizes
future credit risk exposure on the State. The State in now expected to
issue $43 million of bonds in November 1994, with a state general
obligation pledge. The bonds will be initially payable from NWA lease
payments.
The Fund's concentration in municipal securities issued by the state and
its political subdivisions provides a greater level of risk than a fund
which is diversified across numerous states and municipal entities. The
ability of the state or its municipalities to meet their obligations
will
depend on the availability of tax and other revenues; economic,
political,
and demographic conditions within the state; and the underlying fiscal
condition of the state, its counties, and its municipalities.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as are
necessary for the clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements in
amounts up to one-third of the value of its total assets,
including
the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather
as
a temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet
redemption
requests when the liquidation of portfolio securities is deemed to
be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of the value of its
total
assets are outstanding. During the period any reverse repurchase
agreements are outstanding, the Fund will restrict the purchase of
portfolio securities to money market instruments maturing on or
before the expiration date of the reverse repurchase agreements,
but
only to the extent necessary to assure completion of the reverse
repurchase agreements.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except
as necessary to secure permitted borrowings. In those cases, it
may
pledge assets having a market value not exceeding the lesser of
the
dollar amounts borrowed or 15% of the value of its total assets at
the time of the pledge.
Lending Cash or Securities
The Fund will not lend any of its assets, except that it may
acquire
publicly or nonpublicly issued Minnesota municipal securities or
temporary investments or enter into repurchase agreements in
accordance with its investment objective, policies, limitations,
or
Declaration of Trust.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts,
or commodity futures contracts.
Investing in Real Estate
The Fund will not purchase or sell real estate or real estate
limited
partnerships , although it may invest in securities of issuers
whose
business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real
estate.
Investing in Restricted Securities
The Fund will not invest more than 10% of the value of its net
assets
in securities subject to restrictions on resale under federal
securities law, except for certain restricted securities which
meet
the criteria for liquidity established by the Trustees.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
Concentration of Investments
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would be
invested in any one industry, or in industrial development bonds
or
other securities, the interest upon which is paid from revenues of
similar types of projects. However, the Fund may invest as
temporary
investments more than 25% of the value of its assets in cash or
cash
items, securities issued or guaranteed by the U.S. government ,
its
agencies, or instrumentalities, or instruments secured by these
money
market instruments, such as repurchase agreements.
The above limitations cannot be changed without shareholder approval.
The
following investment limitations, however, may be changed by the
Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its net
assets
in illiquid securities.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment
companies,
except as part of a merger, consolidation, or other acquisition.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers (including companies responsible
for
paying principal and interest on industrial development bonds)
which
have records of less than three years of continuous operations,
including the operation of any predecessor.
Investing for Control
The Fund will not invest in securities of a company for the
purpose
of exercising control or management.
Investing in Issuers Whose Securities Are Owned by Officers and
Trustees of the Trust
The Fund will not purchase or retain the securities of any issuer
if
the Officers and Trustees of the Trust or its investment adviser,
owning individually more than .50 of 1% of the issuer's
securities,
together own more than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or
any
combination of them.
Investing in Minerals
The Fund will not purchase or sell interests in oil, gas, or other
mineral exploration or development programs or leases, although it
may purchase the securities of issuers which invest in or sponsor
such programs.
For purposes of the above limitations, the Fund considers instruments
issued by a U.S. branch of a domestic bank or savings and loan having
capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items." Except with respect to borrowing
money, if a percentage limitation is adhered to at the time of
investment,
a later increase or decrease in percentage resulting from any change in
value or net assets will not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of
the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order
at a favorable price. In working with dealers, the adviser will
generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Board
of Trustees. The adviser may select brokers and dealers who offer
brokerage and research services. These services may be furnished
directly
to the Fund or to the adviser and may include: advice as to the
advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by
brokers
and dealers may be used by the adviser or its affiliates in advising the
Trust and other accounts. To the extent that receipt of these services
may
supplant services for which the adviser or its affiliates might
otherwise
have paid, it would tend to reduce their expenses. The adviser and its
affiliates exercise reasonable business judgment in selecting brokers
who
offer brokerage and research services to execute securities
transactions.
They determine in good faith that commissions charged by such persons
are
reasonable in relationship to the value of the brokerage and research
services provided. During the fiscal years ended October 31, 1994 ,
1993,
and 1992, the Trust paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type
the Fund may make may also be made by those other accounts. When the
Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
Federated Municipal Trust Management
Officers and Trustees are listed with their addresses, present positions
with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Center
Pittsburgh, PA 15219
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner
of the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate
ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of
the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center-
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of
the
Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation
and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman,
Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds;
Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue
is
the son of John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.;
Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined
in
the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of
the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes
the
following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Arrow
Funds;
Automated Government Money Trust; Cash Trust Series II; Cash Trust
Series,
Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust;
Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA
Trust;
Federated Government Trust; Federated Growth Trust; Federated High
Yield
Trust; Federated Income Securities Trust; Federated Income Trust;
Federated
Index Trust; Federated Institutional Trust; Federated
Intermediate
Government Trust; Federated Master Trust; Federated Short-
Intermediate
Government Trust; Federated Short-Term U.S. Government Trust;
Federated
Stock Trust; Federated Tax-Free Trust; Federated U.S. Government Bond
Fund;
First Priority Funds; Fixed Income Securities, Inc.; Fortress
Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund,
Inc.;
Fortress Utility Fund, Inc.; Fund for U.S. Government Securities,
Inc.;
Government Income Securities, Inc.; High Yield Cash Trust;
Insight
Institutional Series, Inc.; Insurance Management Series;
Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds,
Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High
Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty
U.S. Government Money Market Trust; Liberty Term Trust, Inc. -
1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust;
The
Medalist Funds: Money Market Management, Inc.; Money Market
Obligations
Trust; Money Market Trust; Municipal Securities Income Trust; 111
Corcoran
Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument
Funds; The Shawmut Funds; Short-Term Municipal Trust; Star Funds;
The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund,
Inc.;
Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments
Trust;
Trademark Funds; Trust for Financial Institutions; Trust For
Government
Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust
for
U.S. Treasury Obligations; World Investment Series, Inc.
Share Ownership
Officers and Trustees own less than 1% of the Trust's outstanding
shares.
As of January 11, 1995, the following shareholder(s) of record owned 5%
or
more of the outstanding Cash Series Shares of Minnesota Municipal Cash
Trust: Juran & Moody, Inc., St. Paul, Minnesota, owned approximately
12,222,966 shares (10.72%); Voyageur Fund Managers, Minneapolis,
Minnesota,
owned approximately 16,516,718 shares (14.49%).
As of January 11, 1995, the following shareholder(s) of record owned 5%
or
more of the outstanding Institutional Shares of Minnesota Municipal Cash
Trust: Resource Bank & Trust Company, Minneapolis, Minnesota, owned
approximately 80,423,190 shares (36.42%); First State Bank of Bayport,
Bayport, Minnesota, owned approximately 13,199,188 shares (5.98%); First
Trust National Association, St. Paul, Minnesota, owned approximately
95,505,531 shares (43.26%).
Trustees Compensation
AGGREGATE TOTAL COMPENSATION PAID
NAME , COMPENSATION TO TRUSTEES FROM
POSITION WITH FROM TRUST
TRUST TRUST# AND FUND COMPLEX
John F. Donahue, $ -0- $ -0- for the Trust and
Chairman and Trustee 69 other investment companies in the
Fund Complex
Thomas G. Bigley, $ 719.00 $ 24,991 for the Trust and
Trustee 50 other investment companies in the
Fund Complex
John T. Conroy, Jr., $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
William J. Copeland, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
James E. Dowd, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $ 4,308.00 $ 123,600 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $ 4,757.00 $ 136,100 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Glen R. Johnson, $ -0- $ -0- for the Trust and
President and Trustee 9 other investment companies in the
Fund Complex
Peter E. Madden, $ 4,308.00 $ 104,880 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Gregor F. Meyer, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Wesley W. Posvar, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Marjorie P. Smuts, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
#The aggregate compensation is provided for the Trust which is comprised
of
13 portfolios.
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable
for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject
by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated Management. It is a
subsidiary
of Federated Investors. All the voting securities of Federated
Investors
are owned by a trust, the trustees of which are John F. Donahue, his
wife
and his son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder
of
the Fund for any losses that may be sustained in the purchase, holding,
or
sale of any security or for anything done or omitted by it, except acts
or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with
the
Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the fiscal years ended October 31, 1994, 1993, and 1992, the adviser
earned $1,025,614, $1,077,211, and $865,213, respectively, of which
$868,068, $915,191, and $734,973, respectively, was voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and
extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of
average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets,
the
adviser will reimburse the Fund for its expenses over the
limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the
amount of the excess, subject to an annual adjustment. If the
expense limitation is exceeded, the amount to be reimbursed by the
adviser will be limited, in any single fiscal year, by the amount
of
the investment advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred
to
as the "Administrators".) For the fiscal year ended October 31, 1994,
1993, and 1992, the Administrators earned $249,373, $333,328, and
$258,623,
respectively. Dr. Henry J. Gailliot, an officer of Federated Management,
the adviser to the Fund, holds approximately 20% of the outstanding
common
stock and serves as a director of Commercial Data Services, Inc., a
company
which provides computer processing services to Federated Administrative
Services.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust
Company, Boston, MA is custodian for the securities and cash of the
Fund.
It also provides certain accounting and recordkeeping services with
respect
to the Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains
all necessary shareholder records. For its services, the transfer agent
receives a fee based on size, type, and number of accounts and
transactions
made by shareholders.
Distribution and Shareholder Services Plans
With respect to Cash Series Shares, the Fund has adopted a Distribution
Plan pursuant to Rule 12b-1 which was promulgated by the Securities and
Exchange Commission pursuant to the Investment Company Act of 1940.
Additionally, the Fund has adopted a Shareholder Service Plan with
respect
to both Cash Series Shares and Institutional Shares.
These arrangements permit the payment of fees to financial institutions
to
stimulate distribution activities and services to shareholders provided
by
a representative who has knowledge of the shareholder's particular
circumstances and goals. These activities and services may include, but
are not limited to, marketing efforts; providing office space,
equipment,
telephone facilities, and various clerical, supervisory, computer, and
other personnel as necessary or beneficial to establish and maintain
shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Board of Trustees expects that
the
Fund will be able to achieve a more predictable flow of cash for
investment
purposes and to meet redemptions. This will facilitate more efficient
portfolio management and assist the Fund in pursuing its investment
objectives. By identifying potential investors whose needs are served
by
the Fund's objectives, and properly servicing these accounts, it may be
possible to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail;
(3)
enhancing shareholder recordkeeping systems; and (4) responding promptly
to
shareholders' requests and inquiries concerning their accounts.
For the fiscal period ending October 31,1994, payments in the amount of
$402,958 were made pursuant to the Distribution Plan, $217,702 of which
was
waived. For the fiscal period ending October 31, 1994, payments in the
amount of $137,111 were made pursuant to the Shareholder Services Plan.
Determining Net Asset Value
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.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or
1%
of the Fund's net asset value, whichever is less, for any one
shareholder
within a 90-day period. Any redemption beyond this amount will also be
in
cash unless the Trustees determine that further payments should be in
kind.
In such cases, the Fund will pay all or a portion of the remainder of
the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not as liquid as a cash redemption. If redemption is made in kind,
shareholders who sell these securities could receive less than the
redemption value and could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated
investment
companies, the Fund must, among other requirements: derive at least
90%
of its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested;
changes in interest rates; changes in expenses; and the relative amount
of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for
those
shareholders paying those fees.
Yield
The yield is calculated based upon the seven days ending on the day of
the
calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional
shares purchased with dividends earned from the original one share and
all
dividends declared on the original and any purchased shares; dividing
the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
For the seven-day period ended October 31,1994, the yields for Cash
Series
Shares and Institutional Shares were 2.65% and 3.05%, respectively.
Effective Yield
The effective yield is calculated by compounding the unannualized base
period return by: adding 1 to the base period return; raising the sum to
the 365/7th power; and subtracting 1 from the result.
For the seven-day period ended October 31,1994, the effective yields for
Cash Series Shares and Institutional Shares were 2.69% and 3.10%,
respectively.
Tax-Equivalent Yield
The tax-equivalent yield of the Fund is calculated similarly to the
yield
but is adjusted to reflect the taxable yield that the Fund would have
had
to earn to equal its actual yield, assuming a 39.6% tax rate (the
maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
For the seven-day period ended October 31,1994, the tax-equivalent
yields
for Cash Series Shares and Institutional Shares were 5.11% and 5.88%,
respectively.
Tax-Equivalency Table
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free
from state and local taxes as well. As the table below indicates, a
"tax-
free" investment can be an attractive choice for investors, particularly
in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF MINNESOTA
TAX BRACKET:
Combined Federal
and State: 23.00% 36.50% 39.50% 44.50% 48.10%
Joint Return$1-39,000$39,001-94,250$94,251-143,600$143,601-256,500
OVER $256,500
Single Return$1-23,350$23,351-56,550$56,551-117,950$117,951-256,500
OVER $256,500
Tax-Exempt Yield Taxable Yield Equivalent
1.50% 1.95% 2.36% 2.48% 2.70% 2.89%
2.00 2.60 3.15 3.31 3.60 3.85
2.50 3.25 3.94 4.13 4.50 4.82
3.00 3.90 4.72 4.96 5.41 5.78
3.50 4.55 5.51 5.79 6.31 6.74
4.00 5.19 6.30 6.61 7.21 7.71
4.50 5.84 7.09 7.44 8.11 8.67
5.00 6.49 7.87 8.26 9.01 9.63
5.50 7.14 8.66 9.09 9.91 10.60
6.00 7.79 9.45 9.92 10.81 11.56
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were
not
used to increase federal deductions. If you itemize deductions,
your
taxable yield equivalent will be lower.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
Total Return
Average annual total return is the average compounded rate of return for
a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
compounded by multiplying the number of shares owned at the end of the
period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number
of
shares purchased at the beginning of the period with $1,000, adjusted
over
the period by any additional shares, assuming the monthly reinvestment
of
all dividends and distributions.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
- Lipper Analytical Services, Inc. ranks funds in various fund
categories based on total return, which assumes the reinvestment
of
all income dividends and capital gains distributions, if any.
- Donoghue's Money Fund Report publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the
same
money funds.
- Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day
effective
yield.
0082715B (2/95)
NEW JERSEY MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares of New Jersey Municipal Cash Trust (the "Fund")
offered
by this prospectus represent interests in a non-diversified portfolio of
Federated Municipal Trust (the "Trust"), an open-end management
investment
company (a mutual fund). The Fund invests in short-term New Jersey
municipal
securities to achieve current income exempt from federal regular income
tax and
the New Jersey state income tax imposed upon non-corporate taxpayers
consistent
with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information
dated
February 28, 1995, with the Securities and Exchange Commission. The
information
contained in the Combined Statement of Additional Information is
incorporated by
reference into this prospectus. You may request a copy of the Combined
Statement
of Additional Information free of charge by calling 1-800-235-4669. To
obtain
other information, or make inquiries about the Fund, contact the Fund at
the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
New Jersey Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Institutional Shares
9
Administration of the Fund
9
NET ASSET VALUE
10
- ------------------------------------------------------
INVESTING IN THE FUND
10
- ------------------------------------------------------
Share Purchases
10
Minimum Investment Required
11
Subaccounting Services
11
Certificates and Confirmations
11
Dividends
11
Capital Gains
12
REDEEMING SHARES
12
- ------------------------------------------------------
By Mail
12
Telephone Redemption
13
Accounts with Low Balances
13
SHAREHOLDER INFORMATION
13
- ------------------------------------------------------
Voting Rights
13
Massachusetts Partnership Law
13
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
14
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
OTHER CLASSES OF SHARES
15
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES
17
- ------------------------------------------------------
ADDRESSES
18
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
INSTITUTIONAL
SHARES
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)............................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)..................................................................
... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as
applicable)............................................................
None
Redemption Fee (as a percentage of amount redeemed, if
applicable)........................................ None
Exchange
Fee.....................................................................
......................... None
ANNUAL INSTITUTIONAL SHARES
OPERATING EXPENSES
(As a percentage of average
net assets)
Management Fee (after waiver)
(1).....................................................................
.... 0.00%
12b-1
Fee.....................................................................
............................ None
Total Other Expenses (after expense
reimbursement)........................................................
0.55%
Shareholder Services Fee (after waiver)
(2)................................................ 0.15%
Total Institutional Shares Operating Expenses
(3)................................................ 0.55%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of the
management fee. The adviser can terminate this voluntary waiver at
any time
at its sole discretion. The maximum management fee is 0.40%.
(2) The maximum shareholder services fee is 0.25%.
(3) The Total Institutional Shares Operating Expenses in the table above
are
based on expenses expected during the fiscal year ending October 31,
1995.
The Total Institutional Shares Operating Expenses were 0.54% for the
fiscal
year ended October 31, 1994, and would have been 0.93% absent the
voluntary
waiver of a portion of the management fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of Institutional Shares of
the
Fund will bear, either directly or indirectly. For more complete
descriptions of
the various costs and expenses, see "Investing in the Fund" and "Trust
Information." Wire-transferred redemptions of less than $5,000 may be
subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years 5 years 10 years
<S>
<C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1)
5% annual return and (2) redemption at the end of each time
period....... $6 $18 $31 $69
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the foregoing table and example relates
only to
Institutional Shares of the Fund. The Fund also offers another class of
shares
called Institutional Service Shares. Institutional Shares and
Institutional
Service Shares are subject to certain of the same expenses; however,
Institutional Service Shares are subject to a 12b-1 fee of up to 0.10%.
See
"Other Classes of Shares."
NEW JERSEY MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1994 1993 1992 1991*
<S>
<C> <C> <C> <C>
- -------------------------------------------------------------------- --
- ------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $
1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------
Net investment income
0.02 0.02 0.03 0.04
- -------------------------------------------------------------------- --
- ------- --------- --------- ---------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------
Dividends to shareholders from net investment income
(0.02) (0.02) (0.03) (0.04)
- -------------------------------------------------------------------- --
- ------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $
1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------- --
- ------- --------- --------- ---------
TOTAL RETURN**
2.26% 2.22% 2.96% 3.87%
- --------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------
Expenses
0.54% 0.46% 0.45% 0.27%(b)
- --------------------------------------------------------------------
Net investment income
2.22% 2.19% 2.86% 4.19%(b)
- --------------------------------------------------------------------
Expense waiver/reimbursement (a)
0.39% 0.45% 0.51% 0.67%(b)
- --------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------
Net assets, end of period (000 omitted)
$62,984 $66,346 $57,657 $39,423
- --------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from December 13, 1990 (date of
initial
public investment) to October 31, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The shares in any one portfolio may be offered in separate
classes.
With respect to the Fund, as of the date of this prospectus, the
Trustees have
established two classes of shares known as Institutional Shares and
Institutional Service Shares. This prospectus relates only to
Institutional
Shares of the Fund, which are designed primarily for financial
institutions
acting in a fiduciary capacity as a convenient means of accumulating an
interest
in a professionally managed, non-diversified portfolio investing
primarily in
short-term New Jersey municipal securities. The Fund may not be a
suitable
investment for retirement plans or for non-New Jersey taxpayers because
it
invests in municipal securities of New Jersey. A minimum initial
investment of
$25,000 over a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the New Jersey state income tax imposed upon
non-corporate taxpayers consistent with stability of principal. This
investment
objective cannot be changed without shareholder approval. While there is
no
assurance that the Fund will achieve its investment objective, it
endeavors to
do so by following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
New
Jersey municipal securities (as defined below) maturing in 13 months or
less. As
a matter of investment policy, which cannot be changed without
shareholder
approval, at least 80% of the Fund's annual interest income will be
exempt from
federal regular income tax and the New Jersey state income tax imposed
upon
non-corporate taxpayers. (Federal regular income tax does not include
the
federal individual alternative minimum tax or the federal alternative
minimum
tax for corporations.) The average maturity of the securities in the
Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less.
Unless
indicated otherwise, the investment policies may be changed by the
Trustees
without shareholder approval. Shareholders will be notified before any
material
change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by
or on behalf of New Jersey and its political subdivisions and financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and the New Jersey state income
tax imposed upon non-corporate taxpayers ("New Jersey municipal
securities").
Examples of New Jersey municipal securities include, but are not limited
to:
tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
municipal commercial paper and other short-term notes;
variable rate demand notes;
municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in New
Jersey
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying New Jersey
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The New Jersey municipal securities in which the Fund invests
must be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating
categories. The Fund will follow applicable regulations in determining
whether a
security rated by more than one NRSRO can be treated as being in one of
the two
highest short-term rating categories; currently, such securities must be
rated
by two NRSROs in one of their two highest rating categories. See
"Regulatory
Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit
enhanced by a guaranty, letter of credit, or insurance. The Fund
typically
evaluates the credit quality and ratings of credit-enhanced securities
based
upon the financial condition and ratings of the party providing the
credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit
enhanced by the credit enhancer, in which case the securities will be
treated as
having been issued by both the issuer and the credit enhancer. The
bankruptcy,
receivership, or default of the credit enhancer will adversely affect
the
quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED SECURITIES. As a matter of fundamental policy, the Fund may
invest in
restricted securities. Restricted securities are any securities in which
the
Fund may invest pursuant to its investment objective and policies but
which are
subject to restrictions on resale under federal securities laws. Under
criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines
that market conditions call for a temporary defensive posture, the Fund
may
invest in tax-exempt or taxable securities such as: obligations issued
by or on
behalf of municipal or corporate issuers having the same quality
characteristics
as described above; obligations issued or guaranteed by the U.S.
government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so.
NEW JERSEY MUNICIPAL SECURITIES
New Jersey municipal securities are generally issued to finance public
works,
such as airports, bridges, highways, housing, hospitals, mass
transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
New Jersey municipal securities include industrial development bonds
issued by
or on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of New Jersey municipal securities are
"general obligation" and "revenue" bonds. General obligation bonds are
secured
by the issuer's pledge of its full faith and credit and taxing power for
the
payment of principal and interest. Interest on and principal of revenue
bonds,
however, are payable only from the revenue generated by the facility
financed by
the bond or other specified sources of revenue. Revenue bonds do not
represent a
pledge of credit or create any debt of or charge against the general
revenues of
a municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on New Jersey municipal securities depend on a variety of
factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of New Jersey municipal securities and participation interests, or the
credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of New
Jersey
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in New Jersey municipal securities which are
repayable out
of revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
New Jersey municipal securities could involve an increased risk to the
Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of New Jersey municipal securities are subject to
the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase
agreements
(arrangements in which the Fund sells a money market instrument for a
percentage
of its cash value with an agreement to buy it back on a set date) or
pledge
securities except, under certain circumstances, the Fund may borrow up
to
one-third of the value of its total assets and pledge up to 15% of the
value of
total assets to secure such borrowings. This investment limitation
cannot be
changed without shareholder approval.
As a matter of nonfundamental policy, the Fund will not invest more than
10% of
its net assets in illiquid securities.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Combined Statement of Additional Information, in
order to
comply with applicable laws and regulations, including the provisions of
and
regulations under the Investment Company Act of 1940, as amended. In
particular,
the Fund will comply with the various requirements of Rule 2a-7, which
regulates
money market mutual funds. The Fund will determine the effective
maturity of its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are
responsible for managing the Fund's business affairs and for exercising
all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .40 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for
Institutional Shares
of the Fund. It is a Pennsylvania corporation organized on November 14,
1969,
and is the principal distributor for a number of investment companies.
Federated
Securities Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services
Plan (the
"Services Plan") under which it will pay Federated Shareholder Services,
an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of Institutional Shares to provide
personal
services and/or maintenance of shareholder accounts to the Fund and its
shareholders. From time to time and for such periods as it deems
appropriate,
Federated Shareholder Services may voluntarily reduce the amount stated
above.
Federated Shareholder Services may elect to pay financial institutions
fees
based upon shares owned by their clients or customers for services
provided to
those clients or customers. The schedules of such fees and the basis
upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds,
investment
advisers, and broker/dealers to provide certain services to
shareholders. These
services may include, but are not limited to, distributing prospectuses
and
other information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of shares. Any fees paid for
these
services by the distributor will be reimbursed by the adviser and not
the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Board of Trustees will
consider
appropriate changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary
of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian
for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of Institutional
Shares at
$1.00 by valuing the portfolio securities using the amortized cost
method. The
net asset value per share is determined by subtracting liabilities
attributable
to Institutional Shares from the value of Fund assets attributable to
Institutional Shares, and dividing the remainder by the number of
Institutional
Shares outstanding. The Fund cannot guarantee that its net asset value
will
always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
INVESTING IN THE FUND
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SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased either by wire or mail. The Fund reserves the right to
reject any
purchase request.
To make a purchase, open an account by calling Federated Securities
Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase by Federal Reserve wire, call the Fund before 1:00
p.m.
(Eastern time) to place an order. The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) that
day. Federal funds should be wired as follows: Federated Services
Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE;
For Credit
to: New Jersey Municipal Cash Trust--Institutional Shares; Fund Number
(this
number can be found on the account statement or by contacting the Fund);
Group
Number or Order Number; Nominee or Institution Name; and ABA Number
011000028.
BY MAIL. To purchase by mail, send a check made payable to New Jersey
Municipal
Cash Trust-- Institutional Shares to: Federated Services Company, c/o
State
Street Bank and Trust Company, P.O. Box 8602, Boston, MA 02266-8602.
Orders by
mail are considered received when payment by check is converted into
federal
funds. This is normally the next business day after the check is
received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be
opened
with a smaller amount as long as the minimum is reached within 90 days.
Minimum
investments will be calculated by combining all accounts maintained with
the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts.
However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping
requirements. The
transfer agent charges a fee based on the level of subaccounting
services
rendered. Financial institutions 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 provided which may be related to the
ownership of
Fund shares. This prospectus should, therefore, be read together with
any
agreement between the customer and the financial institution with regard
to the
services provided, the fees charged for those services and any
restrictions and
limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all
purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund.
Shares purchased by wire before 1:00 p.m. (Eastern time) begin earning
dividends
that day. Shares purchased by check begin earning dividends the day
after the
check is converted into federal funds.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
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Shares are redeemed at their net asset value next determined after
Federated
Services Company receives the redemption request. Redemptions will be
made on
days on which the Fund computes its net asset value. Redemption requests
must be
received in proper form and can be made as described below.
BY MAIL
Shares may be redeemed by sending a written request to: Federated
Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8602, Boston,
MA
02266-8602. The written request should state: New Jersey Municipal Cash
Trust--Institutional Shares; shareholder's name; the account number; and
the
share or dollar amount requested. Sign the request exactly as the shares
are
registered. Shareholders should call the Fund for assistance in
redeeming by
mail.
If share certificates have been issued, they must be properly endorsed
and
should be sent by registered or certified mail with the written request.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund,
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by:
a trust company or commercial bank whose deposits are insured by
the Bank
Insurance Fund which is administered by the Federal Deposit
Insurance
Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific
Stock
Exchanges;
a savings bank or savings and loan association whose deposits are
insured
by the Savings Association Insurance Fund, which is administered
by the
FDIC; or
any other "eligible guarantor institution," as defined in the
Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the transfer agent have adopted standards for accepting
signature
guarantees from the above institutions. The Fund may elect in the future
to
limit eligible signature guarantors to institutions that are members of
the
signature guarantee program. The Fund and its transfer agent reserve the
right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day,
but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a
redemption
request is processed.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions
may be
recorded. If reasonable procedures are not followed by the Fund, it may
be
liable for losses due to unauthorized or fraudulent telephone
instructions. An
authorization form permitting the Fund to accept telephone requests must
first
be completed. Authorization forms and information on this service are
available
from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time),
the
proceeds will be wired the same day to the shareholder's account at a
domestic
commercial bank which is a member of the Federal Reserve System, and
those
shares redeemed will not be entitled to that day's dividend. A daily
dividend
will be paid on shares redeemed if the redemption request is received
after
12:00 noon (Eastern time). However, the proceeds are not wired until the
following business day.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If such a case should occur,
another
method of redemption, such as "By Mail," should be considered. If at any
time
the Fund shall determine it necessary to terminate or modify this method
of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund
may
redeem shares in any account and pay the proceeds to the shareholder if
the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is
notified in
writing and allowed 30 days to purchase additional shares to meet the
minimum
requirement.
SHAREHOLDER INFORMATION
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VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of all
classes of
each portfolio in the Trust have equal voting rights, except that in
matters
affecting only a particular portfolio or class, only shares of that
portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust
is not
required to hold annual shareholder meetings. Shareholder approval will
be
sought only for certain changes in the Trust's or the Fund's operation
and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
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FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than New
Jersey. Shareholders are urged to consult their own tax advisers
regarding the
status of their accounts under state and local tax laws.
NEW JERSEY TAXES. Under existing New Jersey laws, distributions made by
the Fund
will not be subject to New Jersey income taxes to the extent that such
distributions qualify as exempt-interest dividends under the Internal
Revenue
Code, and represent (i) interest or gain from obligations issued by or
on behalf
of the State of New Jersey or any county, municipality, school or other
district, agency, authority, commission, instrumentality, public
corporation,
body corporate and politic or political subdivision of New Jersey; or
(ii)
interest or gain from obligations (such as obligations of the United
States)
that are statutorily free from New Jersey taxation under federal or New
Jersey
state laws. Conversely, to the extent that distributions by the Fund are
attributable to other types of obligations, such distributions will be
subject
to New Jersey income taxes.
Distributions received by a corporate shareholder from the Fund will not
be
exempt from New Jersey corporation business tax or New Jersey
corporation income
tax.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time, the Fund advertises the yield, effective yield, and
tax-equivalent yield for Institutional Shares.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
Institutional Shares' tax-exempt yield, assuming a specific tax rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in Institutional Shares after reinvesting all income
distributions.
It is calculated by dividing that change by the initial investment and
is
expressed as a percentage.
The performance figures will be calculated separately for each class of
shares.
Because each class of shares is subject to different expenses, the
performance
of Institutional Shares will exceed the performance of Institutional
Service
Shares for the same period.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
OTHER CLASSES OF SHARES
- ------------------------------------------------------------------------
- --------
The Fund also offers the following class.
Institutional Service Shares are sold at net asset value primarily to
financial
institutions acting in an agency capacity. Investments in Institutional
Service
Shares are subject to a minimum initial investment of $25,000.
Institutional
Service Shares are sold with a .10 of 1% 12b-1 fee.
Financial institutions providing distribution or administrative services
may
receive additional compensation depending upon which class of shares of
the Fund
is sold. The distributor pays this compensation and is reimbursed from
sources
other than the assets of the Fund.
The amount of dividends payable to shareholders of any particular class
may be
more or less than that payable to the shareholders of any other class
depending
upon the existence of and differences in class expenses, Distribution
Plan
expenses, and Shareholder Services Plan expenses. The stated advisory
fee is the
same for all classes of shares.
NEW JERSEY MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1994 1993 1992 1991*
<S>
<C> <C> <C> <C>
- -------------------------------------------------------------------- --
- ------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $
1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------
Net investment income
0.02 0.02 0.03 0.04
- -------------------------------------------------------------------- --
- ------- --------- --------- ---------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------
Dividends to shareholders from net investment income
(0.02) (0.02) (0.03) (0.04)
- -------------------------------------------------------------------- --
- ------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $
1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------- --
- ------- --------- --------- ---------
TOTAL RETURN**
2.16% 2.12% 2.86% 3.82%
- --------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------
Expenses
0.65% 0.56% 0.55% 0.35%(b)
- --------------------------------------------------------------------
Net investment income
2.19% 2.08% 2.69% 4.11%(b)
- --------------------------------------------------------------------
Expense waiver/reimbursement (a)
0.41% 0.45% 0.51% 0.69%(b)
- --------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------
Net assets, end of period (000 omitted)
$36,704 $21,005 $26,844 $17,709
- --------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from December 13, 1990 (date of
initial
public investment) to October 31, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C>
<C>
New Jersey Municipal Cash Trust
Institutional Shares
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Investment Adviser
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 8602
Boston, MA 02266-8602
- ------------------------------------------------------------------------
- -----------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Independent Public Accountants
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
- ------------------------------------------------------------------------
- -----------------------------------------------
</TABLE>
NEW JERSEY MUNICIPAL
CASH TRUST
INSTITUTIONAL SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated February 28, 1995
314229600
0100802A-IS (2/95)
NEW JERSEY MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares of New Jersey Municipal Cash Trust (the
"Fund")
offered by this prospectus represent interests in a non-diversified
portfolio of
Federated Municipal Trust (the "Trust"), an open-end management
investment
company (a mutual fund). The Fund invests in short-term New Jersey
municipal
securities to achieve current income exempt from federal regular income
tax and
the New Jersey state income tax imposed upon non-corporate taxpayers
consistent
with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information
dated
February 28, 1995, with the Securities and Exchange Commission. The
information
contained in the Combined Statement of Additional Information is
incorporated by
reference into this prospectus. You may request a copy of the Combined
Statement
of Additional Information free of charge by calling 1-800-235-4669. To
obtain
other information, or make inquiries about the Fund, contact the Fund at
the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SERVICE SHARES
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
New Jersey Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Institutional Service
Shares
9
Administration of the Fund
10
NET ASSET VALUE
10
- ------------------------------------------------------
INVESTING IN THE FUND
11
- ------------------------------------------------------
Share Purchases
11
Minimum Investment Required
11
Subaccounting Services
11
Certificates and Confirmations
12
Dividends
12
Capital Gains
12
REDEEMING SHARES
12
- ------------------------------------------------------
By Mail
12
Telephone Redemption
13
Accounts with Low Balances
13
SHAREHOLDER INFORMATION
14
- ------------------------------------------------------
Voting Rights
14
Massachusetts Partnership Law
14
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
15
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
OTHER CLASSES OF SHARES
16
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
17
- ------------------------------------------------------
ADDRESSES
18
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
INSTITUTIONAL SERVICE
SHARES
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)..................................................................
... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)..................................................................
... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as
applicable)............................................................
None
Redemption Fee (as a percentage of amount redeemed, if
applicable)........................................ None
Exchange
Fee.....................................................................
......................... None
ANNUAL INSTITUTIONAL SERVICE SHARES
OPERATING EXPENSES
(As a percentage of average
net assets)
Management Fee (after waiver)
(1).....................................................................
.... 0.00%
12b-1 Fee (after waiver)
(2).....................................................................
......... 0.00%
Total Other Expenses (after expense
reimbursement)........................................................
0.65%
Shareholder Services
Fee...................................................................
0.25%
Total Institutional Service Shares Operating Expenses
(3)........................................ 0.65%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of the
management fee. The adviser can terminate this voluntary waiver at
any time
at its sole discretion. The maximum management fee is 0.40%.
(2) The maximum 12b-1 fee is 0.10%.
(3) The Total Institutional Service Shares Operating Expenses in the
table above
are based on expenses expected during the fiscal year ending October
31,
1995. The Total Institutional Service Shares Operating Expenses were
0.65%
for the fiscal year ended October 31, 1994, and would have been
1.06% absent
the voluntary waiver of a portion of the management fee and a
portion of the
12b-1 fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of Institutional Service
Shares of
the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Investing in the
Fund" and
"Trust Information." Wire-transferred redemptions of less than $5,000
may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years 5 years 10 years
<S>
<C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1)
5% annual return and (2) redemption at the end of each time
period....... $7 $21 $36 $81
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the foregoing table and example relates
only to
Institutional Service Shares of the Fund. The Fund also offers another
class of
shares called Institutional Shares. Institutional Service Shares and
Institutional Shares are subject to certain of the same expenses;
however,
Institutional Shares are not subject to a 12b-1 fee. See "Other Classes
of
Shares."
NEW JERSEY MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR
ENDED OCTOBER 31,
1994
1993 1992 1991*
<S> <C> <C>
<C> <C>
- -------------------------------------------------------- --------- ---
- ------ --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $
1.00 $ 1.00 $ 1.00
- --------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------
Net investment income 0.02
0.02 0.03 0.04
- -------------------------------------------------------- --------- ---
- ------ --------- ---------
LESS DISTRIBUTIONS
- --------------------------------------------------------
Dividends to shareholders from net investment income (0.02)
(0.02) (0.03) (0.04)
- -------------------------------------------------------- --------- ---
- ------ --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $
1.00 $ 1.00 $ 1.00
- -------------------------------------------------------- --------- ---
- ------ --------- ---------
TOTAL RETURN** 2.16%
2.12% 2.86% 3.82%
- --------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------
Expenses 0.65%
0.56% 0.55% 0.35%(b)
- --------------------------------------------------------
Net investment income 2.19%
2.08% 2.69% 4.11%(b)
- --------------------------------------------------------
Expense waiver/reimbursement (a) 0.41%
0.45% 0.51% 0.69%(b)
- --------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------
Net assets, end of period (000 omitted) $36,704
$21,005 $26,844 $17,709
- --------------------------------------------------------
</TABLE>
* Reflects operations for the period from December 13, 1990 (date of
initial
public investment) to October 31, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The shares in any one portfolio may be offered in separate
classes.
With respect to the Fund, as of the date of this prospectus, the
Trustees have
established two classes of shares known as Institutional Service Shares
and
Institutional Shares. This prospectus relates only to Institutional
Service
Shares of the Fund, which are designed primarily for financial
institutions
acting in an agency capacity as a convenient means of accumulating an
interest
in a professionally managed, non-diversified portfolio investing
primarily in
short-term New Jersey municipal securities. The Fund may not be a
suitable
investment for retirement plans or for non-New Jersey taxpayers because
it
invests in municipal securities of New Jersey. A minimum initial
investment of
$25,000 over a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the New Jersey state income tax imposed upon
non-corporate taxpayers consistent with stability of principal. This
investment
objective cannot be changed without shareholder approval. While there is
no
assurance that the Fund will achieve its investment objective, it
endeavors to
do so by following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
New
Jersey municipal securities (as defined below) maturing in 13 months or
less. As
a matter of investment policy, which cannot be changed without
shareholder
approval, at least 80% of the Fund's annual interest income will be
exempt from
federal regular income tax and the New Jersey state income tax imposed
upon
non-corporate taxpayers. (Federal regular income tax does not include
the
federal individual alternative minimum tax or the federal alternative
minimum
tax for corporations.) The average maturity of the securities in the
Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less.
Unless
indicated otherwise, the investment policies may be changed by the
Trustees
without shareholder approval. Shareholders will be notified before any
material
change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by
or on behalf of New Jersey and its political subdivisions and financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and the New Jersey state income tax imposed upon non-corporate taxpayers
("New
Jersey municipal securities"). Examples of New Jersey municipal
securities
include, but are not limited to:
tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
municipal commercial paper and other short-term notes;
variable rate demand notes;
municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in New
Jersey
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying New Jersey
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The New Jersey municipal securities in which the Fund invests
must be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating
categories. The Fund will follow applicable regulations in determining
whether a
security rated by more than one NRSRO can be treated as being in one of
the two
highest short-term rating categories; currently, such securities must be
rated
by two NRSROs in one of their two highest rating categories. See
"Regulatory
Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit
enhanced by a guaranty, letter of credit, or insurance. The Fund
typically
evaluates the credit quality and ratings of credit-enhanced securities
based
upon the financial condition and ratings of the party providing the
credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit
enhanced by the credit enhancer, in which case the securities will be
treated as
having been issued by both the issuer and the credit enhancer. The
bankruptcy,
receivership, or default of the credit enhancer will adversely affect
the
quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED SECURITIES. As a matter of fundamental policy, the Fund may
invest in
restricted securities. Restricted securities are any securities in which
the
Fund may invest pursuant to its investment objective and policies but
which are
subject to restrictions on resale under federal securities laws. Under
criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines
that market conditions call for a temporary defensive posture, the Fund
may
invest in tax-exempt or taxable securities such as: obligations issued
by or on
behalf of municipal or corporate issuers having the same quality
characteristics
as described above; obligations issued or guaranteed by the U.S.
government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so.
NEW JERSEY MUNICIPAL SECURITIES
New Jersey municipal securities are generally issued to finance public
works,
such as airports, bridges, highways, housing, hospitals, mass
transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
New Jersey municipal securities include industrial development bonds
issued by
or on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of New Jersey municipal securities are
"general obligation" and "revenue" bonds. General obligation bonds are
secured
by the issuer's pledge of its full faith and credit and taxing power for
the
payment of principal and interest. Interest on and principal of revenue
bonds,
however, are payable only from the revenue generated by the facility
financed by
the bond or other specified sources of revenue. Revenue bonds do not
represent a
pledge of credit or create any debt of or charge against the general
revenues of
a municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on New Jersey municipal securities depend on a variety of
factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of New Jersey municipal securities and participation interests, or the
credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of New
Jersey
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in New Jersey municipal securities which are
repayable out
of revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
New Jersey municipal securities could involve an increased risk to the
Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of New Jersey municipal securities are subject to
the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase
agreements
(arrangements in which the Fund sells a money market instrument for a
percentage
of its cash value with an agreement to buy it back on a set date) or
pledge
securities except, under certain circumstances, the Fund may borrow up
to
one-third of the value of its total assets and pledge up to 15% of the
value of
total assets to secure such borrowings. This investment limitation
cannot be
changed without shareholder approval.
As a matter of nonfundamental policy, the Fund will not invest more than
10% of
its net assets in illiquid securities.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Combined Statement of Additional Information, in
order to
comply with applicable laws and regulations, including the provisions of
and
regulations under the Investment Company Act of 1940, as amended. In
particular,
the Fund will comply with the various requirements of Rule 2a-7, which
regulates
money market mutual funds. The Fund will determine the effective
maturity of its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
- ------------------------------------------------------------------------
- --------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are
responsible for managing the Fund's business affairs and for exercising
all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .40 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for
Institutional
Service Shares of the Fund. It is a Pennsylvania corporation organized
on
November 14, 1969, and is the principal distributor for a number of
investment
companies. Federated Securities Corp. is a subsidiary of Federated
Investors.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan
adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution
Plan"),
the Fund may pay to the distributor an amount, computed at an annual
rate of .10
of 1% of the average daily net asset value of Institutional Service
Shares to
finance any activity which is principally intended to result in the sale
of
shares subject to the Distribution Plan. The distributor may select
financial
institutions such as banks, fiduciaries, custodians for public funds,
investment
advisers, and broker/dealers to provide sales support services as agents
for
their clients or customers. In addition, the Fund has adopted a
Shareholder
Services Plan (the "Services Plan") under which it will pay Federated
Shareholder Services, an affiliate of Federated Investors, an amount not
exceeding .25 of 1% of the average daily net asset value of
Institutional
Service Shares to provide personal services and/or maintenance of
shareholder
accounts to the Fund and its shareholders. From time to time and for
such
periods as it deems appropriate, Federated Shareholder Services may
voluntarily
reduce the amounts stated above.
Financial institutions will receive fees based upon shares owned by
their
clients or customers. The schedules of such fees and the basis upon
which such
fees will be paid will be determined from time to time by the Fund, the
distributor, or Federated Shareholder Services, as appropriate.
The Distribution Plan is a compensation-type plan. As such, the Fund
makes no
payments to the distributor except as described above. Therefore, the
Fund does
not pay for unreimbursed expenses of the distributor, including amounts
expended
by the distributor in excess of amounts received by it from the Fund,
interest,
carrying or other financing charges in connection with excess amounts
expended,
or the distributor's overhead expenses. However, the distributor may be
able to
recover such amounts or may earn a profit from future payments made by
the Fund
under the Distribution Plan.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may also pay
financial
institutions a fee for providing certain services to shareholders. This
fee is
in addition to the amounts paid under the Distribution Plan and, if
paid, will
be reimbursed by the adviser and not the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary
of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian
for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
- ------------------------------------------------------------------------
- --------
The Fund attempts to stabilize the net asset value of Institutional
Service
Shares at $1.00 by valuing the portfolio securities using the amortized
cost
method. The net asset value per share is determined by subtracting
liabilities
attributable to Institutional Service Shares from the value of Fund
assets
attributable to Institutional Service Shares, and dividing the remainder
by the
number of Institutional Service Shares outstanding. The Fund cannot
guarantee
that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
INVESTING IN THE FUND
- ------------------------------------------------------------------------
- --------
SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased either by wire or mail. The Fund reserves the right to
reject any
purchase request.
To make a purchase, open an account by calling Federated Securities
Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase by Federal Reserve wire, call the Fund before 1:00
p.m.
(Eastern time) to place an order. The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) that
day. Federal funds should be wired as follows: Federated Services
Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE;
For Credit
to: New Jersey Municipal Cash Trust--Institutional Service Shares; Fund
Number
(this number can be found on the account statement or by contacting the
Fund);
Group Number or Order Number; Nominee or Institution Name; and ABA
Number
011000028.
BY MAIL. To purchase by mail, send a check made payable to New Jersey
Municipal
Cash Trust-- Institutional Service Shares to: Federated Services
Company, c/o
State Street Bank and Trust Company, P.O. Box 8602, Boston, MA 02266-
8602.
Orders by mail are considered received when payment by check is
converted into
federal funds. This is normally the next business day after the check is
received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be
opened
with a smaller amount as long as the minimum is reached within 90 days.
Minimum
investments will be calculated by combining all accounts maintained with
the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts.
However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping
requirements. The
transfer agent charges a fee based on the level of subaccounting
services
rendered. Financial institutions 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 provided which may be related to the
ownership of
Fund shares. This prospectus should, therefore, be read together with
any
agreement between the customer and the financial institution with regard
to the
services provided, the fees charged for those services and any
restrictions and
limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all
purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund. Shares purchased by wire
before
1:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by
check begin earning dividends the day after the check is converted into
federal
funds.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
- ------------------------------------------------------------------------
- --------
Shares are redeemed at their net asset value next determined after
Federated
Services Company receives the redemption request. Redemptions will be
made on
days on which the Fund computes its net asset value. Redemption requests
must be
received in proper form and can be made as described below.
BY MAIL
Shares may be redeemed by sending a written request to: Federated
Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8602, Boston,
MA
02266-8602. The written request should state: New Jersey Municipal Cash
Trust-Institutional Service Shares; shareholder's name; the account
number; and
the share or dollar amount requested. Sign the request exactly as the
shares are
registered. Shareholders should call the Fund for assistance in
redeeming by
mail.
If share certificates have been issued, they must be properly endorsed
and
should be sent by registered or certified mail with the written request.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund,
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by:
a trust company or commercial bank whose deposits are insured by
the Bank
Insurance Fund which is administered by the Federal Deposit
Insurance
Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific
Stock
Exchanges;
a savings bank or savings and loan association whose deposits are
insured
by the Savings Association Insurance Fund, which is administered
by the
FDIC; or
any other "eligible guarantor institution," as defined in the
Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the transfer agent have adopted standards for accepting
signature
guarantees from the above institutions. The Fund may elect in the future
to
limit eligible signature guarantors to institutions that are members of
the
signature guarantee program. The Fund and its transfer agent reserve the
right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day,
but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a
redemption
request is processed.
BY WRITING A CHECK. At the shareholder's request, State Street Bank and
Trust
Company will establish a checking account for redeeming shares. For
further
information, contact the Fund.
With this checking account, shares may be redeemed by writing a check
for
$100.00 or more. The redemption will be made at the net asset value on
the date
that the check is presented to the Fund. A check may not be written to
close an
account. A shareholder may obtain cash by negotiating the check through
the
shareholder's local bank. Checks should never be made payable or sent to
State
Street Bank and Trust Company to redeem shares. Canceled checks are sent
to the
shareholder each month.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions
may be
recorded. If reasonable procedures are not followed by the Fund, it may
be
liable for losses due to unauthorized or fraudulent telephone
instructions. An
authorization form permitting the Fund to accept telephone requests must
first
be completed. Authorization forms and information on this service are
available
from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time),
the
proceeds will be wired the same day to the shareholder's account at a
domestic
commercial bank which is a member of the Federal Reserve System, and
those
shares redeemed will not be entitled to that day's dividend. A daily
dividend
will be paid on shares redeemed if the redemption request is received
after
12:00 noon (Eastern time). However, the proceeds are not wired until the
following business day.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If such a case should occur,
another
method of redemption, such as "By Mail," should be considered. If at any
time
the Fund shall determine it necessary to terminate or modify this method
of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund
may
redeem shares in any account and pay the proceeds to the shareholder if
the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is
notified in
writing and allowed 30 days to purchase additional shares to meet the
minimum
requirement.
SHAREHOLDER INFORMATION
- ------------------------------------------------------------------------
- --------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of all
classes of
each portfolio in the Trust have equal voting rights, except that in
matters
affecting only a particular portfolio or class, only shares of that
portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust
is not
required to hold annual shareholder meetings. Shareholder approval will
be
sought only for certain changes in the Trust's or the Fund's operation
and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
As of January 11, 1995, Fiduciary Trust Company International, New York,
New
York, owned 35.6% of the voting securities of the Institutional Service
Shares
of the Fund, and, therefore, may, for certain purposes, be deemed to
control the
Institutional Service Shares of the Fund and be able to affect the
outcome of
certain matters presented for a vote of shareholders.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than New
Jersey. Shareholders are urged to consult their own tax advisers
regarding the
status of their accounts under state and local tax laws.
NEW JERSEY TAXES. Under existing New Jersey laws, distributions made by
the Fund
will not be subject to New Jersey income taxes to the extent that such
distributions qualify as exempt-interest dividends under the Internal
Revenue
Code, and represent (i) interest or gain from obligations issued by or
on behalf
of the State of New Jersey or any county, municipality, school or other
district, agency, authority, commission, instrumentality, public
corporation,
body corporate and politic or political subdivision of New Jersey; or
(ii)
interest or gain from obligations (such as obligations of the United
States)
that are statutorily free from New Jersey taxation under federal or New
Jersey
state laws. Conversely, to the extent that distributions by the Fund are
attributable to other types of obligations, such distributions will be
subject
to New Jersey income taxes.
Distributions received by a corporate shareholder from the Fund will not
be
exempt from New Jersey corporation business taxes or New Jersey
corporation
income taxes.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time, the Fund advertises the yield, effective yield, and
tax-equivalent yield for Institutional Service Shares.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
Institutional Service Shares' tax-exempt yield, assuming a specific tax
rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in Institutional Service Shares after reinvesting all income
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The performance figures will be calculated separately for each class of
shares.
Because each class of shares is subject to different expenses, the
performance
of Institutional Shares will exceed the performance of Institutional
Service
Shares for the same period.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
OTHER CLASSES OF SHARES
- ------------------------------------------------------------------------
- --------
The Fund also offers the following class.
Institutional Shares are sold at net asset value primarily to financial
institutions acting in a fiduciary capacity. Investments in
Institutional Shares
are subject to a minimum initial investment of $25,000. Institutional
Shares are
sold with no 12b-1 fees.
Financial institutions providing distribution or administrative services
may
receive additional compensation depending upon which class of shares of
the Fund
is sold. The distributor pays this compensation and is reimbursed from
sources
other than the assets of the Fund.
The amount of dividends payable to shareholders of any particular class
may be
more or less than that payable to the shareholders of any other class
depending
upon the existence of and differences in class expenses, Distribution
Plan
expenses, and Shareholder Services Plan expenses. The stated advisory
fee is the
same for all classes of shares.
NEW JERSEY MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR
ENDED OCTOBER 31,
1994
1993 1992 1991*
<S> <C> <C>
<C> <C>
- -------------------------------------------------------- --------- ---
- ------ --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $
1.00 $ 1.00 $ 1.00
- --------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------
Net investment income 0.02
0.02 0.03 0.04
- -------------------------------------------------------- --------- ---
- ------ --------- ---------
LESS DISTRIBUTIONS
- --------------------------------------------------------
Dividends to shareholders from net investment income (0.02)
(0.02) (0.03) (0.04)
- -------------------------------------------------------- --------- ---
- ------ --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $
1.00 $ 1.00 $ 1.00
- -------------------------------------------------------- --------- ---
- ------ --------- ---------
TOTAL RETURN** 2.26%
2.22% 2.96% 3.87%
- --------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------
Expenses 0.54%
0.46% 0.45% 0.27%(b)
- --------------------------------------------------------
Net investment income 2.22%
2.19% 2.86% 4.19%(b)
- --------------------------------------------------------
Expense waiver/reimbursement (a) 0.39%
0.45% 0.51% 0.67%(b)
- --------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------
Net assets, end of period (000 omitted) $62,984
$66,346 $57,657 $39,423
- --------------------------------------------------------
</TABLE>
* Reflects operations for the period from December 13, 1990 (date of
initial
public investment) to October 31, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C>
<C>
New Jersey Municipal Cash Trust
Institutional Service Shares
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Investment Adviser
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 8602
Boston, MA 02266-8602
- ------------------------------------------------------------------------
- -----------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Independent Public Accountants
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
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- -----------------------------------------------
</TABLE>
NEW JERSEY MUNICIPAL
CASH TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated February 28, 1995
314229709
0100802A-SS (2/95)
New York Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Institutional Service Shares, Cash II Shares
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectuses of New York Municipal Cash Trust (the "Fund") dated
February 28, 1995. This Statement is not a prospectus. To receive a
copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
New York Investment Risks 2
Investment Limitations 2
Brokerage Transactions 4
Federated Municipal Trust
Management 5
The Funds 8
Share Ownership 8
Trustees Compensation 9
Trustee Liability 9
Investment Adviser 9
Advisory Fees 10
Fund Administration 10
Distribution and Shareholder
Services Plans 10
Determining Net Asset Value 11
Redemption in Kind 11
The Fund's Tax Status 11
Performance Information 11
Yield 12
Effective Yield 12
Tax-Equivalent Yield 12
Tax-Equivalency Table 12
Total Return 13
Performance Comparisons 13
Investment Policies
Unless indicated otherwise, the policies described below may be changed
by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the
security, the issuer of any demand feature applicable to the security,
or
any guarantor of either the security or any demand feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution
irrevocable letters of credit or guarantees and give the Fund the right
to
demand payment of the principal amounts of the participation interests
plus
accrued interest on short notice (usually within seven days). The
municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation
interests
include the right to demand payment from the issuers of those interests.
By
purchasing participation interests having a seven day demand feature,
the
Fund is buying a security meeting the maturity and quality requirements
of
the Fund and also is receiving the tax-free benefits of the underlying
securities.
Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the
nature of the appropriation for the lease. Furthermore, a lease may
provide
that the participants cannot accelerate lease obligations upon default.
The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the
investment
adviser, under the authority delegated by the Board of Trustees, will
base
its determination on the following factors: whether the lease can be
terminated by the lessee; the potential recovery, if any, from a sale of
the leased property upon termination of the lease; the lessee's general
credit strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit
enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other
than normal transaction costs, are incurred. However, liquid assets of
the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are
marked to market daily and are maintained until the transaction has been
settled. The Fund does not intend to engage in when-issued and delayed
delivery transactions to an extent that would cause the segregation of
more
than 20% of the total value of its assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant
to
repurchase agreements. Repurchase agreements are arrangements in which
banks, brokers/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at
a mutually agreed upon time and price. To the extent that the seller
does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. The Fund or
its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund
will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by
the
Trustees.
New York Investment Risks
The Fund invests in obligations of New York (the "State") issuers which
result in the Fund's performance being subject to risks associated with
the
overall conditions present within the State. The following information
is a
general summary of the State's financial condition and a brief summary
of
the prevailing economic conditions. This information is based on
official
statements relating to securities that are believed to be reliable but
should not be considered as a complete description of all relevant
information.
The State has achieved fiscal balance for the last few years after large
deficits in the middle and late 1980's. Growing social service needs,
education and Medicare expenditures have been the areas of largest
growth
while prudent program cuts and increases in revenues through service
fees
has enabled the state's budget to remain within balance for the last few
years. While the state still has a large accumulated deficit as a
percentage of its overall budget, the fiscal performance in recent years
has demonstrated a changed political environment that has resulted in
realistic revenue and expenditure projections to achieve financially
favorable results. The state also benefits from a high level of per
capita
income that is well above the national average and from significant
amounts
of international trade.
New York's economy is large and diverse. While several upstate counties
benefit from agriculture, manufacturing and high technology industries,
New
York City nonetheless still dominates the State's economy through its
international importance in economic sectors such as advertising,
finance,
and banking. The State's economy has been slow to recover after the late
1980's recession that resulted in the loss of over 400,000 jobs in the
New
York City metropolitan area alone. Any major changes to the financial
condition of New York City would ultimately have an affect on the State.
The overall financial condition of the state can also be illustrated by
changes to its debt ratings. During the period in which the state
experienced financial difficulties, its general obligation long-term
debt
ratings as determined by Moody's Investors Service, Inc. and Standard &
Poor's Ratings Group decreased form A1 and A, respectively, to A and A-.
The Fund's concentration in municipal securities issued by the state and
its political subdivisions provides a greater level of risk than a fund
which is diversified across numerous states and municipal entities. The
ability of the state or its municipalities to meet their obligations
will
depend on the availability of tax and other revenues; economic,
political,
and demographic conditions within the state; and the underlying fiscal
condition of the state, its counties, and its municipalities.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as are
necessary for clearance of transactions.
Borrowing Money
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not
in
excess of 5% of the value of its total assets or in an amount up
to
one-third of the value of its total assets, including the amount
borrowed, in order to meet redemption requests without immediately
selling portfolio instruments. This borrowing provision is not
for
investment leverage but solely to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when
the
liquidation of portfolio instruments would be inconvenient or
disadvantageous. Interest paid on borrowed funds will serve to
reduce
the Fund's income. The Fund will liquidate any such borrowings as
soon as possible and may not purchase any portfolio instruments
while
any borrowings are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except
as necessary to secure permitted borrowings. In those cases, it
may
pledge assets having a market value not exceeding 10% of the value
of
total assets at the time of the pledge.
Investing in Real Estate
The Fund will not purchase or sell real estate, although it may
invest in New York municipal securities secured by real estate or
interests in real estate.
Investing in Commodities and Minerals
The Fund will not purchase or sell commodities, commodity
contracts,
or oil, gas, or other mineral exploration or development programs.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
Making Loans
The Fund will not make loans except that it may acquire publicly
or
non-publicly issued New York municipal securities, in accordance
with
its investment objective, policies, and limitations.
Acquiring Securities
The Fund will not acquire the voting securities of any issuer,
except
as part of a merger, consolidation, reorganization, or acquisition
of
assets.
Investing in Securities of Other Investment Companies
The Fund will not invest in securities issued by any other
investment
company or investment trust.
Investments in Any One Issuer
With respect to securities comprising 75% of its assets, the Fund
will not invest more than 10% of its total assets in the
securities
of any one issuer.
Under this limitation, each governmental subdivision, including
states, territories, possessions of the United States, or their
political subdivisions, agencies, authorities, instrumentalitites,
or
similar entities, will be considered a separate issuer if its
assets
and revenues are separate from those of the government body
creating
it and the security is backed only by its own assets and revenues.
Industrial development bonds backed only by the assets and
revenues
of a non-governmental issuer are considered to be issued solely by
that issuer. If in the case of an industrial development bond or
government issued security, a governmental or other entity
guarantees
the security, such guarantee would be considered a separate
security
issued by the guarantor, as well as the other issuer, subject to
limited exclusions allowed by the Investment Company Act of 1940.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers (or in the alternative,
guarantors,
where applicable) which have records of less than three years of
continuous operations, including the operation of any predecessor.
Investing in Issuers Whose Securities Are Owned by Officers and
Trustees of the Trust
The Fund will not purchase or retain the securities of any issuer
if
the Officers and Trustees of the Trust or its investment adviser,
owning individually more than .50 of 1% of the issuer's
securities,
together own more than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or
any
combination of them, except that the Fund may purchase municipal
securities accompanied by agreements of sellers to repurchase them
at
the Fund's option.
Investing in Illiquid Securities
The Fund will not invest more than 10% of its total assets in
illiquid securities, including repurchase agreements maturing in
more
than seven days.
Issuing Senior Securities
The Fund will not issue senior securities, except as permitted by
the
investment objective and policies and investment limitations of
the
Fund.
The above limitations cannot be changed without shareholder approval.
For purposes of the above limitations, the Fund considers instruments
issued by a U.S. branch of a domestic bank or savings and loan having
capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items." Except with respect to borrowing
money, if a percentage limitation is adhered to at the time of
investment,
a later increase or decrease in percentage resulting from any change in
value or net assets will not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of
the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order
at a favorable price. In working with dealers, the adviser will
generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Board
of Trustees. The adviser may select brokers and dealers who offer
brokerage and research services. These services may be furnished
directly
to the Fund or to the adviser and may include: advice as to the
advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by
brokers
and dealers may be used by the adviser or its affiliates in advising the
Trust and other accounts. To the extent that receipt of these services
may
supplant services for which the adviser or its affiliates might
otherwise
have paid, it would tend to reduce their expenses. The adviser and its
affiliates exercise reasonable business judgment in selecting brokers
who
offer brokerage and research services to execute securities
transactions.
They determine in good faith that commissions charged by such persons
are
reasonable in relationship to the value of the brokerage and research
services provided. During the fiscal years ended October 31, 1994,
1993,
and 1992, the Trust paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type
the Fund may make may also be made by those other accounts. When the
Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
Federated Municipal Trust Management
Officers and Trustees are listed with their addresses, present positions
with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Center
Pittsburgh, PA 15219
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner
of the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate
ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of
the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center-
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of
the
Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation
and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman,
Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds;
Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue
is
the son of John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.;
Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in
the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of
the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes
the
following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Arrow
Funds;
Automated Cash Management Trust; Automated Government Money Trust;
Cash
Trust Series II; Cash Trust Series, Inc.; DG Investor Series; Edward
D.
Jones & Co. Daily Passport Cash Trust; Federated ARMs Fund;
Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government
Trust;
Federated Growth Trust; Federated High Yield Trust; Federated
Income
Securities Trust; Federated Income Trust; Federated Index Trust;
Federated
Institutional Trust; Federated Intermediate Government Trust;
Federated
Master Trust; Federated Short-Intermediate Government Trust;
Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-
Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds;
Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund,
Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund,
Inc.;
Fund for U.S. Government Securities, Inc.; Government Income
Securities,
Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance
Management Series; Intermediate Municipal Trust; International
Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust;
Liberty
Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty
Municipal Securities Fund, Inc.; Liberty U.S. Government Money
Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.;
Liquid
Cash Trust; Managed Series Trust; The Medalist Funds: Money
Market
Management, Inc.; Money Market Obligations Trust; Money Market
Trust;
Municipal Securities Income Trust; 111 Corcoran Funds; Peachtree Funds;
The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut
Funds;
Short-Term Municipal Trust; Star Funds; The Starburst Funds; The
Starburst
Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration
Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial
Institutions; Trust For Government Cash Reserves; Trust for Short-Term
U.S.
Government Securities; Trust for U.S. Treasury Obligations;
World
Investment Series, Inc.
Share Ownership
Officers and Trustees own less than 1% of the Trust's outstanding
shares.
As of January 10, 1995, the following shareholder(s) of record owned 5%
or
more of the outstanding Institutional Service Shares of New York
Municipal
Cash Trust: Fiduciary Trust Company International, New York, New York,
owned approximately 51,028,500 shares (19.05%); Fleet Securities Corp.,
Rochester, New York, owned approximately 49,554,545 shares (18.50%); Key
Trust Company, Cleveland, Ohio, owned approximately 20,011,352 shares
(7.47%); The bank of New York, New York, New York, owned approximately
48,625,378 shares (18.15%).
As of January 10, 1995, the following shareholder(s) of record owned 5%
or
more of the outstanding Cash II Shares of New York Municipal Cash Trust:
Charles Schwab & Co., San Francisco, California, owned approximately
148,756,068 shares (93.34%).
Trustees Compensation
AGGREGATE TOTAL COMPENSATION PAID
NAME , COMPENSATION TO TRUSTEES FROM
POSITION WITH FROM TRUST
TRUST TRUST# AND FUND COMPLEX
John F. Donahue, $ -0- $ -0- for the Trust and
Chairman and Trustee 69 other investment companies in the
Fund Complex
Thomas G. Bigley, $ 719.00 $ 24,991 for the Trust and
Trustee 50 other investment companies in the
Fund Complex
John T. Conroy, Jr., $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
William J. Copeland, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
James E. Dowd, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $ 4,308.00 $ 123,600 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $ 4,757.00 $ 136,100 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Glen R. Johnson, $ -0- $ -0- for the Trust and
President and Trustee 9 other investment companies in the
Fund Complex
Peter E. Madden, $ 4,308.00 $ 104,880 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Gregor F. Meyer, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Wesley W. Posvar, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Marjorie P. Smuts, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
#The aggregate compensation is provided for the Trust which is comprised
of
13 portfolios.
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable
for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject
by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated Management. It is a
subsidiary
of Federated Investors. All the voting securities of Federated
Investors
are owned by a trust, the trustees of which are John F. Donahue, his
wife
and his son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder
of
the Fund for any losses that may be sustained in the purchase, holding,
or
sale of any security or for anything done or omitted by it, except acts
or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with
the
Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the fiscal years ended October 31, 1994, 1993, and 1992, the adviser
earned $1,383,576, $1,065,970, and $839,082, respectively, of which
$364,783, $460,455, and $413,760, respectively, was voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and
extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of
average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets,
the
adviser will reimburse the Fund for its expenses over the
limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the
amount of the excess, subject to an annual adjustment. If the
expense limitation is exceeded, the amount to be reimbursed by the
adviser will be limited, in any single fiscal year, by the amount
of
the investment advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred
to
as the "Administrators".) For the fiscal years ended October 31, 1994,
1993, and 1992, the Administrators earned $292,612, $329,428, and
$280,632,
respectively. Dr. Henry J. Gailliot, an officer of Federated
Management,
the adviser to the Fund, holds approximately 20% of the outstanding
common
stock and serves as a director of Commercial Data Services, Inc., a
company
which provides computer processing services to Federated Administrative
Services.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust
Company, Boston, MA is custodian for the securities and cash of the
Fund.
It provides certain accounting and recordkeeping services with respect
to
the Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains
all necessary shareholder records. For its services, the transfer agent
receives a fee based on size, type, and number of accounts and
transactions
made by shareholders.
Distribution and Shareholder Services Plans
With respect to Cash II Shares and Institutional Service Shares, the
Fund
has adopted a Distribution Plan pursuant to Rule 12b-1 which was
promulgated by the Securities and Exchange Commission pursuant to the
Investment Company Act of 1940. Additionally, the Fund has adopted a
Shareholder Service Plan with respect to both Cash II Shares and
Institutional Service Shares.
These arrangements permit the payment of fees to financial institutions
to
stimulate distribution activities and services to shareholders provided
by
a representative who has knowledge of the shareholder's particular
circumstances and goals. These activities and services may include, but
are not limited to, marketing efforts; providing office space,
equipment,
telephone facilities, and various clerical, supervisory, computer, and
other personnel as necessary or beneficial to establish and maintain
shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Board of Trustees expects that
the
Fund will be able to achieve a more predictable flow of cash for
investment
purposes and to meet redemptions. This will facilitate more efficient
portfolio management and assist the Fund in pursuing its investment
objectives. By identifying potential investors whose needs are served
by
the Fund's objectives, and properly servicing these accounts, it may be
possible to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail;
(3)
enhancing shareholder recordkeeping systems; and (4) responding promptly
to
shareholders' requests and inquiries concerning their accounts.
For the fiscal period ending October 31, 1994, payments in the amount of
$255,897 and $148,378, respectively, were made pursuant to the
Distribution Plan, on behalf of Cash II Shares and Institutional Service
Shares, respectively, of which $105,575 and $47,624 , respectively, was
waived. In addition, for this period, payments in the amount of $105,575
and $47,966, respectively, were made pursuant to the Shareholder
Services
Plan on behalf of Cash II Shares and Institutional Shares, respectively.
Determining Net Asset Value
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.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or
1%
of the Fund's net asset value, whichever is less, for any one
shareholder
within a 90-day period. Any redemption beyond this amount will also be
in
cash unless the Trustees determine that further payments should be in
kind.
In such cases, the Fund will pay all or a portion of the remainder of
the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not as liquid as a cash redemption. If redemption is made in kind,
shareholders who sell these securities could receive less than the
redemption value and could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated
investment
companies, the Fund must, among other requirements: derive at least
90%
of its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested;
changes in interest rates; changes in expenses; and the relative amount
of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for
those
shareholders paying those fees.
Yield
The Fund calculates its yield based upon the seven days ending on the
day
of the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional
shares purchased with dividends earned from the original one share and
all
dividends declared on the original and any purchased shares; dividing
the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
For the seven-day period ended October 31, 1994, the yields for
Institutional Service Shares and Cash II Shares were 3.04%, and 2.85%,
respectively.
Effective Yield
The Fund calculates its effective yield by compounding the unannualized
base period return by: adding 1 to the base period return; raising the
sum
to the 365/7th power; and subtracting 1 from the result.
For the seven-day period ended October 31, 1994, the effective yields
for
Institutional Service Shares and Cash II Shares were 3.08% and 2.89%,
respectively.
Tax-Equivalent Yield
The tax-equivalent yield of the Fund is calculated similarly to the
yield
but is adjusted to reflect the taxable yield that the Fund would have
had
to earn to equal its actual yield, assuming a 39.6% tax rate (the
maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
For the seven-day period ended October 31, 1994, the tax-equivalent
yields
for Institutional Service Shares and Cash II Shares were 5.03% and
4.72%,
respectively.
Tax-Equivalency Table
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free
from state and local taxes as well. As the table below indicates, a
"tax-
free" investment can be an attractive choice for investors, particularly
in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF NEW YORK
TAX BRACKET:
Combined Federal
and State: 22.875% 35.875% 38.875% 43.875%
47.475%
Joint Return$1-39,000$39,001-94,250$94,251-143,600$143,601-256,500
OVER $256,500
Single Return$1-23,350$23,351-56,550$56,551-117,950$117,951-256,500
OVER $256,500
Tax-Exempt Yield Taxable Yield Equivalent
1.50% 1.94% 2.34% 2.45% 2.67% 2.86%
2.00 2.59 3.12 3.27 3.56 3.81
2.50 3.24 3.90 4.09 4.45 4.76
3.00 3.89 4.68 4.91 5.35 5.71
3.50 5.54 5.46 5.73 6.24 6.66
4.00 5.19 6.24 6.54 7.13 7.62
4.50 5.83 7.02 7.36 8.02 8.57
5.00 6.48 7.80 8.18 8.91 9.52
5.50 7.13 8.58 9.00 9.80 10.47
6.00 7.78 9.36 9.82 10.69 11.42
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were
not
used to increase federal deductions. If you itemize deductions,
your
taxable yield equivalent will be lower.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
Total Return
Average annual total return is the average compounded rate of return for
a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
compounded by multiplying the number of shares owned at the end of the
period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number
of
shares purchased at the beginning of the period with $1,000, adjusted
over
the period by any additional shares, assuming the monthly reinvestment
of
all dividends and distributions.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
- Lipper Analytical Services, Inc. ranks funds in various fund
categories based on total return, which assumes the reinvestment
of
all income dividends and capital gains distributions, if any.
- Donoghue's Money Fund Report publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the
same
money funds.
- Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day
effective
yield.
8120103B SAI (2/95)
NEW YORK MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
CASH II SHARES
PROSPECTUS
The Cash II Shares of New York Municipal Cash Trust (the "Fund") offered
by this
prospectus represent interests in a non-diversified portfolio of
Federated
Municipal Trust (the "Trust"), an open-end management investment company
(a
mutual fund). The Fund invests in short-term New York municipal
securities to
achieve current income exempt from federal regular income tax and the
personal
income taxes imposed by New York State and New York municipalities
consistent
with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information
dated
February 28, 1995, with the Securities and Exchange Commission. The
information
contained in the Combined Statement of Additional Information is
incorporated by
reference into this prospectus. You may request a copy of the Combined
Statement
of Additional Information free of charge by calling 1-800-235-4669. To
obtain
other information, or make inquiries about the Fund, contact the Fund at
the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CASH II SHARES
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
New York Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Cash II Shares
8
Administration of the Fund
9
NET ASSET VALUE
10
- ------------------------------------------------------
HOW TO PURCHASE SHARES
10
- ------------------------------------------------------
Special Purchase Features
11
HOW TO REDEEM SHARES
11
- ------------------------------------------------------
Special Redemption Features
12
ACCOUNT INFORMATION
13
- ------------------------------------------------------
Dividends
13
Capital Gains
13
Certificates and Confirmations
13
Accounts with Low Balances
13
SHAREHOLDER INFORMATION
13
- ------------------------------------------------------
Voting Rights
13
Massachusetts Partnership Law
14
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
15
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
OTHER CLASSES OF SHARES
16
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SERVICE SHARES
17
- ------------------------------------------------------
ADDRESSES
18
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
CASH II SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)........................................ None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)........................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as
applicable)...................... None
Redemption Fee (as a percentage of amount redeemed, if
applicable)........... None
Exchange
Fee.................................................................
None
ANNUAL CASH II SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)
(1)............................................ 0.29%
12b-1 Fee (after waiver)
(2)................................................. 0.15%
Total Other
Expenses.........................................................
0.27%
Shareholder Services Fee
(3)............................................... 0.10%
Total Cash II Shares Operating Expenses
(4)............................. 0.71%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of a
portion of the management fee. The adviser can terminate this voluntary
waiver
at any time at its sole discretion. The maximum management fee is 0.40%.
(2) The maximum 12b-1 fee is 0.25%.
(3) The maximum shareholder services fee is 0.25%.
(4) The total Cash II Shares operating expenses would have been 0.92%
absent the
voluntary waiver of the management fee and the 12b-1 fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of Cash II Shares of the
Fund will
bear, either directly or indirectly. For more complete descriptions of
the
various costs and expenses, see "How to Purchase Shares" and "Trust
Information." Wire-transferred redemptions of less than $5,000 may be
subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
5 years 10 years
- ------------------------------------------------------------------------
- -----------------
<S> <C> <C>
<C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period........... $ 7 $ 23 $
40 $ 88
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the foregoing table and example
relates only
to Cash II Shares of the Fund. The Fund also offers another class of
shares
called Institutional Service Shares. See "Other Classes of Shares."
NEW YORK MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH II SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants for the year ended October 31, 1994.
Their
report, dated December 14, 1994, on the Fund's financial statements for
the year
ended October 31, 1994, and on the following table for the year ended
October
31, 1994, is included in the Annual Report, which is incorporated by
reference.
The financial statements as of October 31, 1993, as well as the
financial
highlights for the periods ended October 31, 1985, through October 31,
1993,
were audited by other auditors whose report dated December 17, 1993 is
also
included by reference. This table should be read in conjunction with the
Fund's
financial statements and notes thereto, which may be obtained free of
charge
from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
--------------------
- ---------------------
1994 1993
1992 1991*
----- -----
- ----- -----
<S> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
$1.00 $1.00
- ------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------
Net investment income 0.02 0.02
0.03 0.02
- ------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------
Dividends to shareholders from net
investment income (0.02) (0.02)
(0.03) (0.02)
- ------------------------------------------------ ----- -----
- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
$1.00 $1.00
- ------------------------------------------------ ----- -----
- ----- -----
TOTAL RETURN** 2.15% 1.98%
2.86% 2.20%
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------
Expenses 0.71% 0.71%
0.73% 0.46%(a)
- ------------------------------------------------
Net investment income 2.19% 1.96%
2.46% 4.08%(a)
- ------------------------------------------------
Expense waiver/reimbursement(b) 0.21% 0.17%
- -- --
- ------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------
Net assets, end of period (000 omitted) $134,051 $58,884
$4,641 $56
- ------------------------------------------------
</TABLE>
* For the period from April 25, 1991 (date of initial public
investment) to
October 31, 1991.
** 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.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The shares in any one portfolio may be offered in separate
classes.
With respect to the Fund, as of the date of this prospectus, the
Trustees have
established two classes of shares known as Cash II Shares and
Institutional
Service Shares. This prospectus relates only to Cash II Shares of the
Fund,
which are designed to provide a cash management vehicle for certain
customers of
financial institutions which would include corporations and
municipalities, as
well as larger individual accounts, seeking a high level of cash
management
services from the participating institution. The Fund may not be a
suitable
investment for retirement plans or for non-New York taxpayers because it
invests
in municipal securities of New York. A minimum initial investment of
$25,000
over a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the personal income taxes imposed by New York
State and
New York municipalities consistent with stability of principal. This
investment
objective cannot be changed without shareholder approval. While there is
no
assurance that the Fund will achieve its investment objective, it
endeavors to
do so by following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
New
York municipal securities (as defined below) maturing in 13 months or
less. As a
matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be
exempt from
federal regular income tax and the personal income taxes imposed by New
York
State and New York municipalities. (Federal regular income tax does not
include
the federal individual alternative minimum tax or the federal
alternative
minimum tax for corporations.) The average maturity of the securities in
the
Fund's portfolio, computed on a dollar-weighted basis, will be 90 days
or less.
Unless indicated otherwise, the investment policies may be changed by
the
Trustees without shareholder approval. Shareholders will be notified
before any
material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued
by or on behalf of New York and its political subdivisions and financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and New York state income tax imposed upon
non-corporate taxpayers ("New York municipal securities"). Examples of
New York
municipal securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
- bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in New
York
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying New York
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The New York municipal securities in which the Fund invests
must be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating
categories.
The Fund will follow applicable regulations in determining whether a
security
rated by more than one NRSRO can be treated as being in one of the two
highest
short-term rating categories; currently, such securities must be rated
by two
NRSROs in one of their two highest rating categories. See "Regulatory
Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit-enhanced
securities
based upon the financial condition and ratings of the party providing
the credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit-
enhanced by the credit enhancer, in which case the securities will be
treated as
having been issued by both the issuer and the credit enhancer. The
bankruptcy,
receivership, or default of the credit enhancer will adversely affect
the
quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund
may
invest pursuant to its investment objective and policies but which are
subject
to restrictions on resale under federal securities laws. Under criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase, together with other illiquid
securities, to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines that market conditions call for a temporary defensive
posture, the
Fund may invest in tax-exempt or taxable securities such as: obligations
issued
by or on behalf of municipal or corporate issuers; marketable
obligations issued
or guaranteed by the U.S. government, its agencies, or
instrumentalities;
instruments issued by a U.S. branch of a domestic bank or other deposit
institution having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment; and repurchase agreements
(arrangements
in which the organization selling the Fund a temporary investment agrees
at the
time of sale to repurchase it at a mutually agreed upon time and price).
All
temporary investments will satisfy the same credit quality standards as
the
Funds acceptable investments.
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so.
NEW YORK MUNICIPAL SECURITIES
New York municipal securities are generally issued to finance public
works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
New York municipal securities include industrial development bonds
issued by or
on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of New York municipal securities are
"general
obligation" and "revenue" bonds. General obligation bonds are secured by
the
issuer's pledge of its full faith and credit and taxing power for the
payment of
principal and interest. Interest on and principal of revenue bonds,
however, are
payable only from the revenue generated by the facility financed by the
bond or
other specified sources of revenue. Revenue bonds do not represent a
pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on New York municipal securities depend on a variety of factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of New York municipal securities and participation interests, or the
credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of New
York
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in New York municipal securities which are repayable
out of
revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
New York municipal securities could involve an increased risk to the
Fund should
any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of New York municipal securities are subject to
the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under
certain
circumstances, the Fund may borrow up to one-third of the value of its
total
assets and pledge up to 10% of the value of total assets to secure such
borrowings. This investment limitation cannot be changed without
shareholder
approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Combined Statement of Additional Information, in
order to
comply with applicable laws and regulations, including the provisions of
and
regulations under the Investment Company Act of 1940, as amended. In
particular,
the Fund will comply with the various requirements of Rule 2a-7, which
regulates
money market mutual funds. The Fund will determine the effective
maturity of its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees
are responsible for managing the Fund's business affairs and for
exercising all
the Trust's powers except those reserved for the shareholders. An
Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .40 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF CASH II SHARES
Federated Securities Corp. is the principal distributor for Cash II
Shares of
the Fund. It is a Pennsylvania corporation organized on November 14,
1969, and
is the principal distributor for a number of investment companies.
Federated
Securities Corp. is a subsidiary of Federated Investors.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan
adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution
Plan"),
the Fund may pay to the distributor an amount, computed at an annual
rate of .25
of 1% of the average daily net asset value of
Cash II Shares, to finance any activity which is principally intended to
result
in the sale of shares subject to the Distribution Plan. The distributor
may
select financial institutions such as banks, fiduciaries, custodians for
public
funds, investment advisers, and broker/dealers to provide sales support
services
as agents for their clients or customers. In addition, the Fund has
adopted a
Shareholder Services Plan (the "Services Plan") under which it will pay
Federated Shareholder Services, an affiliate of Federated Investors, an
amount
not exceeding .25 of 1% of the average daily net asset value of Cash II
Shares
to provide personal services and/or maintenance of shareholder accounts
to the
Fund and its shareholders. From time to time and for such periods as it
deems
appropriate, Federated Shareholder Services may voluntarily reduce the
amounts
stated above.
Financial institutions will receive fees based upon shares owned by
their
clients or customers. The schedules of such fees and the basis upon
which such
fees will be paid will be determined from time to time by the Fund, the
distributor, or Federated Shareholder Services, as appropriate.
The Distribution Plan is a compensation-type plan. As such, the Fund
makes no
payments to the distributor except as described above. Therefore, the
Fund does
not pay for unreimbursed expenses of the distributor, including amounts
expended
by the distributor in excess of amounts received by it from the Fund,
interest,
carrying or other financing charges in connection with excess amounts
expended,
or the distributor's overhead expenses. However, the distributor may be
able to
recover such amounts or may earn a profit from future payments made by
the Fund
under the Distribution Plan.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may also pay
financial
institutions a fee for providing certain services to shareholders. This
fee is
in addition to the amounts paid under the Distribution Plan and, if
paid, will
be reimbursed by the adviser and not the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a
subsidiary of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
-------------------------------- ---------------------------
- -----
<S> <C>
.15 of 1% on the first $250
million
.125 of 1% on the next $250
million
.10 of 1% on the next $250
million
on assets in excess of
$750
.075 of 1% million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is
custodian for
the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of Cash II Shares at
$1.00 by
valuing the portfolio securities using the amortized cost method. The
net asset
value per share is determined by subtracting liabilities attributable to
Cash II
Shares from the value of Fund assets attributable to Cash II Shares, and
dividing the remainder by the number of Cash II Shares outstanding. The
Fund
cannot guarantee that its net asset value will always remain at $1.00
per share.
The net asset value is determined at 12:00 noon, 3:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
HOW TO PURCHASE SHARES
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Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased as described below either through a financial institution
(such as
a bank or broker/dealer) or by wire or by check directly from the Fund,
with a
minimum initial investment of $25,000. (Financial institutions may
impose
different minimum investment requirements on their customers.)
In connection with any sale, Federated Securities Corp. may from time to
time
offer certain items of nominal value to any shareholder or investor. The
Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and
returning
the new account form available from the Fund before shares can be
purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may
purchase
shares through a financial institution which has a sales agreement with
the
distributor. Orders are considered received when the Fund receives
payment by
wire or converts payment by check from the financial institution
into federal funds. It is the financial institution's responsibility to
transmit
orders promptly. Financial institutions may charge additional fees for
their
services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling
the Fund
before 3:00 p.m. (Eastern time). The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) in
order to begin earning dividends that same day. Federal funds should be
wired as
follows: Federated Services Company, c/o State Street Bank and Trust
Company,
Boston, MA; Attention; EDGEWIRE; For Credit to: New York Municipal Cash
Trust--
Cash II Shares; Fund Number (this number can be found on the account
statement
or by contacting the Fund) Group Number or Order Number; Nominee or
Institution
Name; and ABA Number 011000028. Shares cannot be purchased by wire on
holidays
when wire transfers are restricted.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check
made
payable to New York Municipal Cash Trust--Cash II Shares to: Federated
Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8604, Boston,
MA
02266-8604. Orders by mail are considered received when payment by check
is
converted into federal funds (normally the business day after the check
is
received) and shares begin earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM. A minimum of $100 can be automatically
withdrawn
periodically from the shareholder's checking account at an Automated
Clearing
House ("ACH") member and invested in Fund shares. Shareholders should
contact
their financial institution or the Fund to participate in this program.
HOW TO REDEEM SHARES
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- --------
Shares are redeemed at their net asset value next determined after a
Fund
receives the redemption request. Redemptions will be made on days on
which the
Fund computes its net asset value. Redemption requests must be received
in
proper form and can be made as described below.
REDEEMING SHARES THROUGH A FINANCIAL INSTITUTION. Shares may be
redeemed by
contacting the shareholder's financial institution. Shares will be
redeemed at
the net asset value next determined after Federated Services Company
receives
the redemption request. According to the shareholder's instructions,
redemption
proceeds can be sent to the financial institution or to the shareholder
by check
or by wire. The financial institution is responsible for promptly
submitting
redemption requests and providing proper written redemption
instructions.
Customary fees and commissions may be charged by the financial
institution for
this service.
REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by
calling
the Fund provided the Fund has a properly completed authorization form.
These
forms can be obtained from Federated Securities Corp. Proceeds from
redemption
requests received before 12:00 noon (Eastern time) will be wired the
same day to
the shareholder's account at a domestic commercial bank which is a
member of the
Federal Reserve System, but will not include that day's dividend.
Proceeds from
redemption requests received after that time will include that day's
dividends
but will be wired the following business day. Under limited
circumstances,
arrangements may be made with the distributor
for same-day payment of proceeds, without that day's dividend, for
redemption
requests received before 2:00 p.m. (Eastern time). Proceeds from
redeemed shares
purchased by check or through ACH will not be wired until that method of
payment
has cleared.
Telephone instructions may be recorded and if reasonable procedures are
not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares
By Mail"
should be considered. If at any time the Fund shall determine it
necessary to
terminate or modify the telephone redemption privilege, shareholders
would be
promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by
mailing a
written request together with properly endorsed certificates, if issued,
to:
Federated Services Company, c/o State Street Bank and Trust Company,
P.O. Box
8604, Boston, MA 02266-8604. The written request should state: New York
Municipal Cash Trust--Cash II Shares; the account name as registered
with the
Fund; the account number; and the number of shares to be redeemed or the
dollar
amount requested. All owners of the account must sign the request
exactly as the
shares are registered. Any share certificates should be sent by
registered or
certified mail with the written request. Normally, a check for the
proceeds is
mailed within one business day, but in no event more than seven days,
after
receipt of a proper written redemption request. Dividends are paid up to
and
including the day that a redemption request is processed.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by: a commercial or savings bank, trust company or
savings
and loan association whose deposits are insured by an organization which
is
administered by the Federal Deposit Insurance Corporation; a member firm
of a
domestic stock exchange; or any other "eligible guarantor institution,"
as
defined in the Securities Exchange Act of 1934. The Fund does not accept
signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to
allow
shareholders to redeem their fund shares. A fee will be charged for this
service. The check writing service allows the shareholder to receive the
daily
dividend declared on the shares to be redeemed until the check is
presented to
State Street Bank for payment. However, checks should never be made
payable or
sent to State Street Bank or the Fund to redeem shares, and a check may
not be
written to close an account. Canceled checks are sent to the shareholder
each
month.
DEBIT CARD. Upon request, a debit account will be established. This
account
allows shareholders to redeem shares by using a debit card. A fee will
be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value
of at
least $25,000, a systematic withdrawal program may be established
whereby
automatic redemptions are made from the account and transferred
electronically
to any commercial bank, savings bank, or credit union that is an ACH
member.
Shareholders may apply for participation in this program through their
financial
institution or the Fund.
ACCOUNT INFORMATION
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DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing. Monthly
confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, if an
account
balance falls below $25,000 due to shareholder redemptions, the Fund may
redeem
all of the remaining shares in that account (except accounts maintained
by
retirement plans) and pay the proceeds to the shareholder. Before shares
are
redeemed to close an account, the shareholder will be notified in
writing and
allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
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VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of all
classes of
each portfolio in the Trust have equal voting rights, except that in
matters
affecting only a particular portfolio or class, only shares of that
portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust
is not
required to hold annual shareholder meetings. Shareholder approval will
be
sought only for certain changes in the Trust's or the Fund's operation
and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
As of January 11, 1995, Charles Schwab & Co., Inc., San Francisco,
California,
owned 34.7% of the voting securities of the Fund, and, therefore, may,
for
certain purposes, be deemed to control the Fund and be able to affect
the
outcome of certain matters presented for a vote of shareholders.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
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FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than New
York. Shareholders are urged to consult their own tax advisers regarding
the
status of their accounts under state and local tax laws.
NEW YORK TAXES. Under existing New York laws, distributions made by the
Fund
will not be subject to New York State or New York City personal income
taxes to
the extent that such distributions qualify as exempt-interest dividends
under
the Internal Revenue Code, and represent interest income attributable to
obligations of the State of New York and its political subdivisions, as
well as
certain other obligations, the interest on which is exempt from New York
State
and New York City personal income taxes, such as, for example, certain
obligations of the Commonwealth of Puerto Rico. Conversely, to the
extent that
distributions made by the Fund are derived from other types of
obligations, such
distributions will be subject to New York State and New York City
personal
income taxes.
The Fund cannot predict in advance the exact portion of its dividends
that will
be exempt from New York State and New York City personal income taxes.
However,
the Fund will report to shareholders at least annually what percentage
of the
dividends it actually paid is exempt from such taxes.
Dividends paid by the Fund are exempt from the New York City
unincorporated
business taxes to the same extent that they are exempt from the New York
City
personal income taxes.
Dividends paid by the Fund are not excluded from net income in
determining New
York State or New York City franchise taxes on corporations or financial
institutions.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time, the Fund advertises the yield, effective yield, and
tax-equivalent yield for Cash II Shares.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
Cash II Shares' tax-exempt yield, assuming a specific tax rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in Cash II Shares after reinvesting all income distributions.
It is
calculated by dividing that change by the initial investment and is
expressed as
a percentage.
The performance figures will be calculated separately for each class of
shares.
Because each class of shares is subject to different expenses, the
performance
of Institutional Service Shares will exceed the performance of Cash II
Shares
for the same period.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
OTHER CLASSES OF SHARES
- ------------------------------------------------------------------------
- --------
The Fund also offers the following class.
Institutional Service Shares are sold at net asset value primarily to
banks and
other institutions that hold assets for individuals, trusts, estates, or
partnerships. Investments in Institutional Service Shares are subject to
a
minimum initial investment of $25,000. Institutional Service Shares are
distributed pursuant to a 12b-1 Plan adopted by the Trust whereby the
distributor is paid a fee of up to .25 of 1% of the Institutional
Service
Shares' average daily net assets.
Financial institutions providing distribution or administrative services
may
receive additional compensation depending upon which class of shares of
the Fund
is sold. The distributor pays this compensation and is reimbursed from
sources
other than the assets of the Fund.
The amount of dividends payable to shareholders of any particular class
may be
more or less than that payable to the shareholders of any other class
depending
upon the existence of and differences in class expenses, 12b-1 Plan
expenses,
and Shareholder Services Plan expenses. The stated advisory fee is the
same for
all classes of shares.
NEW YORK MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants for the year ended October 31, 1994.
Their
report, dated December 14, 1994, on the Fund's financial statements for
the year
ended October 31, 1994, and on the following table for the year ended
October
31, 1994, is included in the Annual Report, which is incorporated by
reference.
The financial statements as of October 31, 1993, as well as the
financial
highlights for the periods ended October 31, 1985, through October 31,
1993,
were audited by other auditors whose report dated December 17, 1993 is
also
included by reference. This table should be read in conjunction with the
Fund's
financial statements and notes thereto, which may be obtained free of
charge
from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------
- --------------------------------------------------------
1994 1993 1992 1991
1990 1989 1988 1987 1986 1985
----- ----- ----- -----
- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C>
<C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00 $1.00 $1.00
$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 0.06 0.05 0.04 0.04 0.05
- ------------------------------
LESS DISTRIBUTIONS
- ------------------------------
Dividends to shareholders
from net investment income (0.02) (0.02) (0.03) (0.04)
(0.05) (0.06) (0.05) (0.04) (0.04) (0.05)
- ------------------------------ ---- ---- ---- ----
- ---- ---- ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------ ---- ---- ---- ----
- ---- ---- ---- ---- ---- ----
TOTAL RETURN* 2.35% 2.16% 3.01% 4.59%
5.51% 5.70% 4.66% 3.90% 4.35% 4.88%
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------
Expenses 0.52% 0.54% 0.57% 0.52%
0.54% 0.55% 0.51% 0.47% 0.47% 0.47%
- ------------------------------
Net investment income 2.31% 2.14% 2.99% 4.48%
5.36% 5.56% 4.57% 3.81% 4.18% 4.75%
- ------------------------------
Expense waiver/
reimbursement(a) 0.13% 0.17% -- --
- -- -- -- -- -- --
- ------------------------------
SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000 omitted) $236,580 $274,357 $164,492 $191,616
$197,213 $245,542 $212,786 $141,040 $183,941 $83,085
- ------------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or
contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C> <C>
New York Municipal Cash Trust
Cash II Shares Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Distributor
Federated Securities Corp. Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Investment Adviser
Federated Management Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Custodian
State Street Bank and Trust Company P.O. Box 8604
Boston, MA
02266-8604
- ------------------------------------------------------------------------
- ----------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG
Place
Pittsburgh, PA
15222
- ------------------------------------------------------------------------
- ----------------------
</TABLE>
NEW YORK MUNICIPAL
CASH TRUST
CASH II SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated
Municipal Trust, an Open-End
Management
Investment Company
Prospectus dated February 28, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314229733
G00319-02-CII (2/95)
NEW YORK MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares of New York Municipal Cash Trust (the
"Fund")
offered by this prospectus represent interests in a non-diversified
portfolio of
Federated Municipal Trust (the "Trust"), an open-end management
investment
company (a mutual fund). The Fund invests in short-term New York
municipal
securities to achieve current income exempt from federal regular income
tax and
the personal income taxes imposed by New York State and New York
municipalities
consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information
dated
February 28, 1995, with the Securities and Exchange Commission. The
information
contained in the Combined Statement of Additional Information is
incorporated by
reference into this prospectus. You may request a copy of the Combined
Statement
of Additional Information free of charge by calling 1-800-235-4669. To
obtain
other information, or make inquiries about the Fund, contact the Fund at
the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
New York Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Institutional Service Shares 8
Administration of the Fund
9
NET ASSET VALUE
10
- ------------------------------------------------------
INVESTING IN THE FUND
10
- ------------------------------------------------------
Share Purchases
10
Minimum Investment Required
11
Subaccounting Services
11
Certificates and Confirmations
11
Dividends
12
Capital Gains
12
REDEEMING SHARES
12
- ------------------------------------------------------
By Mail
12
Telephone Redemption
13
Accounts with Low Balances
13
SHAREHOLDER INFORMATION
13
- ------------------------------------------------------
Voting Rights
13
Massachusetts Partnership Law
14
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
15
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
OTHER CLASSES OF SHARES
16
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CASH II SHARES
17
- ------------------------------------------------------
ADDRESSES
18
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price).................................................
None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price).................................................
None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as
applicable)............................... None
Redemption Fee (as a percentage of amount redeemed, if
applicable).................... None
Exchange
Fee.....................................................................
..... None
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING
EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)
(1).....................................................
0.29%
12b-1 Fee (after waiver)
(2)..........................................................
0.00%
Total Other
Expenses................................................................
.. 0.23%
Shareholder Services Fee (after waiver)
(3)......................................... 0.06%
Total Institutional Service Shares Operating Expenses
(4)......................... 0.52%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of a
portion of the management fee.
The adviser can terminate this voluntary waiver at any time at its sole
discretion. The maximum management
fee is 0.40%.
(2) The maximum 12b-1 fee is 0.25%.
(3) The maximum shareholder services fee is 0.25%.
(4) The total Institutional Service Shares operating expenses in the
table above
are based on expenses expected during the fiscal year ending October 31,
1995.
The total Institutional Service Shares operating expenses were 0.52% for
the
fiscal year ended October 31, 1994, and were 0.65% absent the voluntary
waiver
of a portion of the management fee and a portion of the 12b-1 Fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of Institutional Service
Shares of
the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Investing in the
Fund" and
"Trust Information." Wire-transferred redemptions of less than $5,000
may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year
3 years 5 years 10 years
- ------------------------------------------------------------------------
- --------------------------
<S> <C>
<C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each time period.......................................... $ 5
$ 17 $ 29 $ 65
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the forgoing table and example relates
only to
Institutional Service Shares of the Fund. The Fund also offers another
class of
shares called Cash II Shares. See "Other Classes of Shares."
NEW YORK MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants for the year ended October 31, 1994.
Their
report, dated December 14, 1994, on the Fund's financial statements for
the year
ended October 31, 1994, and on the following table for the year ended
October
31, 1994, is included in the Annual Report, which is incorporated by
reference.
The financial statements as of October 31, 1993, as well as the
financial
highlights for the periods ended October 31, 1985, through October 31,
1993,
were audited by other auditors whose report dated December 17, 1993 is
also
included by reference. This table should be read in conjunction with the
Fund's
financial statements and notes thereto, which may be obtained free of
charge
from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------
- --------------------------------------------------------
1994 1993 1992 1991
1990 1989 1988 1987 1986 1985
----- ----- ----- -----
- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C>
<C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00 $1.00 $1.00 $1.00
$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 0.06 0.05 0.04 0.04 0.05
- ------------------------------
LESS DISTRIBUTIONS
- ------------------------------
Dividends to shareholders
from net investment income (0.02) (0.02) (0.03) (0.04)
(0.05) (0.06) (0.05) (0.04) (0.04) (0.05)
- ------------------------------ ---- ---- ---- ----
- ---- ---- ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------ ---- ---- ---- ----
- ---- ---- ---- ---- ---- ----
TOTAL RETURN* 2.35% 2.16% 3.01% 4.59%
5.51% 5.70% 4.66% 3.90% 4.35% 4.88%
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------
Expenses 0.52% 0.54% 0.57% 0.52%
0.54% 0.55% 0.51% 0.47% 0.47% 0.47%
- ------------------------------
Net investment income 2.31% 2.14% 2.99% 4.48%
5.36% 5.56% 4.57% 3.81% 4.18% 4.75%
- ------------------------------
Expense waiver/
reimbursement(a) 0.13% 0.17% -- --
- -- -- -- -- -- --
- ------------------------------
SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000 omitted) $236,580 $274,357 $164,492 $191,616
$197,213 $245,542 $212,786 $141,040 $183,941 $83,085
- ------------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or
contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The shares in any one portfolio may be offered in separate
classes.
With respect to the Fund, as of the date of this prospectus, the
Trustees have
established two classes of shares known as Institutional Service Shares
and Cash
II Shares. This prospectus relates only to Institutional Service Shares
of the
Fund, which are designed primarily for banks and other institutions that
hold
assets for individuals, trusts, estates, or partnerships, as a
convenient means
of accumulating an interest in a professionally managed, non-diversified
portfolio investing primarily in short-term New York municipal
securities. The
Fund may not be a suitable investment for retirement plans or for non-
New York
taxpayers because it invests in municipal securities of New York. A
minimum
initial investment of $25,000 over a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the personal income taxes imposed by New York
State and
New York municipalities consistent with stability of principal. This
investment
objective cannot be changed without shareholder approval. While there is
no
assurance that the Fund will achieve its investment objective, it
endeavors to
do so by following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
New
York municipal securities (as defined below) maturing in 13 months or
less. As a
matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be
exempt from
federal regular income tax and the personal income taxes imposed by New
York
State and New York municipalities. (Federal regular income tax does not
include
the federal individual alternative minimum tax or the federal
alternative
minimum tax for corporations.) The average maturity of the securities in
the
Fund's portfolio, computed on a dollar-weighted basis, will be 90 days
or less.
Unless indicated otherwise, the investment policies may be changed by
the
Trustees without shareholder approval. Shareholders will be notified
before any
material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued
by or on behalf of New York and its political subdivisions and financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and New York state income tax imposed upon
non-corporate taxpayers ("New York municipal securities"). Examples of
New York
municipal securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
- bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in New
York
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying New York
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The New York municipal securities in which the Fund invests
must be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating
categories.
The Fund will follow applicable regulations in determining whether a
security
rated by more than one NRSRO can be treated as being in one of the two
highest
short-term rating categories; currently, such securities must be rated
by two
NRSROs in one of their two highest rating categories. See "Regulatory
Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit-enhanced
securities
based upon the financial condition and ratings of the party providing
the credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit-enhanced by the credit enhancer, in which case the securities
will be
treated as having been issued by both the issuer and the credit
enhancer. The
bankruptcy, receivership, or default of the credit enhancer will
adversely
affect the quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund
may
invest pursuant to its investment objective and policies but which are
subject
to restrictions on resale under federal securities laws. Under criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase, together with other illiquid
securities, to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines that market conditions call for a temporary defensive
posture, the
Fund may invest in tax-exempt or taxable securities such as: obligations
issued
by or on behalf of municipal or corporate issuers; marketable
obligations issued
or guaranteed by the U.S. government, its agencies, or
instrumentalities;
instruments issued by a U.S. branch of a domestic bank or other deposit
institution having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment; and repurchase agreements
(arrangements
in which the organization selling the Fund a temporary investment agrees
at the
time of sale to repurchase it at a mutually agreed upon time and price).
All
temporary investments will satisfy the same credit quality standards as
the
Funds acceptable investments.
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so.
NEW YORK MUNICIPAL SECURITIES
New York municipal securities are generally issued to finance public
works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
New York municipal securities include industrial development bonds
issued by or
on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of New York municipal securities are
"general
obligation" and "revenue" bonds. General obligation bonds are secured by
the
issuer's pledge of its full faith and credit and taxing power for the
payment of
principal and interest. Interest on and principal of revenue bonds,
however, are
payable only from the revenue generated by the facility financed by the
bond or
other specified sources of revenue. Revenue bonds do not represent a
pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on New York municipal securities depend on a variety of factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of New York municipal securities and participation interests, or the
credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of New
York
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in New York municipal securities which are repayable
out of
revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
New York municipal securities could involve an increased risk to the
Fund should
any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of New York municipal securities are subject to
the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under
certain
circumstances, the Fund may borrow up to one-third of the value of its
total
assets and pledge up to 10% of the value of total assets to secure such
borrowings. This investment limitation cannot be changed without
shareholder
approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Combined Statement of Additional Information, in
order to
comply with applicable laws and regulations, including the provisions of
and
regulations under the Investment Company Act of 1940, as amended. In
particular,
the Fund will comply with the various requirements of Rule 2a-7, which
regulates
money market mutual funds. The Fund will determine the effective
maturity of its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees
are responsible for managing the Fund's business affairs and for
exercising all
the Trust's powers except those reserved for the shareholders. An
Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .40 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for
Institutional
Service Shares of the Fund. It is a Pennsylvania corporation organized
on
November 14, 1969, and is the principal distributor for a number of
investment
companies. Federated Securities Corp. is a subsidiary of Federated
Investors.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan
adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution
Plan"),
the Fund may pay to the distributor an amount, computed at an annual
rate of .25
of 1% of the average daily net asset value of
Institutional Service Shares, to finance any activity which is
principally
intended to result in the sale of shares subject to the Distribution
Plan. The
distributor may select financial institutions such as banks,
fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to
provide
sales support services as agents for their clients or customers. In
addition,
the Fund has adopted a Shareholder Services Plan (the "Services Plan")
under
which it will pay Federated Shareholder Services, an affiliate of
Federated
Investors, an amount not exceeding .25 of 1% of the average daily net
asset
value of Institutional Service Shares to provide personal services
and/or
maintenance of shareholder accounts to the Fund and its shareholders.
From time
to time and for such periods as it deems appropriate, Federated
Shareholder
Services may voluntarily reduce the amounts stated above.
Financial institutions will receive fees based upon shares owned by
their
clients or customers. The schedules of such fees and the basis upon
which such
fees will be paid will be determined from time to time by the Fund, the
distributor, or Federated Shareholder Services, as appropriate.
The Distribution Plan is a compensation-type plan. As such, the Fund
makes no
payments to the distributor except as described above. Therefore, the
Fund does
not pay for unreimbursed expenses of the distributor, including amounts
expended
by the distributor in excess of amounts received by it from the Fund,
interest,
carrying or other financing charges in connection with excess amounts
expended,
or the distributor's overhead expenses. However, the distributor may be
able to
recover such amounts or may earn a profit from future payments made by
the Fund
under the Distribution Plan.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may also pay
financial
institutions a fee for providing certain services to shareholders. This
fee is
in addition to the amounts paid under the Distribution Plan and, if
paid, will
be reimbursed by the adviser and not the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a
subsidiary of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services)
necessary to operate the Fund. Federated Administrative Services
provides these
at an annual rate as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
-------------------------------- ---------------------------
- -----
<S> <C>
.15 of 1% on the first $250
million
.125 of 1% on the next $250
million
.10 of 1% on the next $250
million
on assets in excess of
$750
.075 of 1% million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is
custodian for
the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
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- --------
The Fund attempts to stabilize the net asset value of Institutional
Service
Shares at $1.00 by valuing the portfolio securities using the amortized
cost
method. The net asset value per share is determined by subtracting
liabilities
attributable to Institutional Service Shares from the value of Fund
assets
attributable to Institutional Service Shares, and dividing the remainder
by the
number of Institutional Service Shares outstanding. The Fund cannot
guarantee
that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 3:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
INVESTING IN THE FUND
- ------------------------------------------------------------------------
- --------
SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are
open for business. Shares may be purchased either by wire or mail. The
Fund
reserves the right to reject any purchase request.
To make a purchase, open an account by calling Federated Securities
Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase by Federal Reserve wire, call the Fund before 3:00
p.m.,
(Eastern time) to place an order. The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) that
day. Federal funds should be wired as follows: Federated Services
Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE;
For Credit
to: New York Municipal Cash Trust-Institutional Service Shares; Fund
Number
(this number can be found on the account statement or by contacting the
Fund);
Group Number or Order Number; Nominee or Institution Name; and ABA
Number
011000028.
BY MAIL. To purchase by mail, send a check made payable to New York
Municipal
Cash Trust-Institutional Service Shares to: Federated Services Company,
c/o
State Street Bank and Trust Company, P.O. Box 8602, Boston, MA 02266-
8602.
Orders by mail are considered received when payment by check is
converted into
federal funds. This is normally the next business day after the check is
received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be
opened
with a smaller amount as long as the minimum is reached within 90 days.
Minimum
investments will be calculated by combining all accounts maintained with
the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts.
However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping
requirements. The
transfer agent charges a fee based on the level of subaccounting
services
rendered. Financial institutions 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 provided which may be related to the
ownership of
Fund shares. This prospectus should, therefore, be read together with
any
agreement between the customer and the financial institution with regard
to the
services provided, the fees charged for those services and any
restrictions and
limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all
purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund. Shares purchased by wire
before
3:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by
check begin earning dividends the day after the check is converted into
federal
funds.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
- ------------------------------------------------------------------------
- --------
Shares are redeemed at their net asset value next determined after
Federated
Services Company receives the redemption request. Redemptions will be
made on
days on which the Fund computes its net asset value. Redemption requests
must be
received in proper form and can be made as described below.
BY MAIL
Shares may be redeemed by sending a written request to: Federated
Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8602, Boston,
MA
02266-8602. The written request should state: New York Municipal Cash
Trust-Institutional Service Shares; shareholder's name; the account
number; and
the share or dollar amount requested. Sign the request exactly as the
shares are
registered. Shareholders should call the Fund for assistance in
redeeming by
mail.
If share certificates have been issued, they must be properly endorsed
and
should be sent by registered or certified mail with the written request.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund,
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by:
- a trust company or commercial bank whose deposits are insured by
the Bank
Insurance Fund which is administered by the Federal Deposit
Insurance
Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific
Stock
Exchanges;
- a savings bank or savings and loan association whose deposits are
insured
by the Savings Association Insurance Fund, which is administered
by the
FDIC; or
- any other "eligible guarantor institution," as defined in the
Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the transfer agent have adopted standards for accepting
signature
guarantees from the above institutions. The Fund may elect in the future
to
limit eligible signature guarantors to institutions that are members of
the
signature guarantee program. The Fund and its transfer agent reserve the
right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day,
but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a
redemption
request is processed.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions
may be
recorded. If reasonable procedures are not followed by the Fund, it may
be
liable for losses due to unauthorized or fraudulent telephone
instructions. An
authorization form permitting the Fund to accept telephone requests must
first
be completed. Authorization forms and information on this service are
available
from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time),
the
proceeds will be wired the same day to the shareholder's account at a
domestic
commercial bank which is a member of the Federal Reserve System, and
those
shares redeemed will not be entitled to that day's dividend. A daily
dividend
will be paid on shares redeemed if the redemption request is received
after
12:00 noon (Eastern time). However, the proceeds are not wired until the
following business day.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If such a case should occur,
another
method of redemption, such as "By Mail," should be considered. If at any
time
the Fund shall determine it necessary to terminate or modify this method
of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund
may
redeem shares in any account and pay the proceeds to the shareholder if
the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is
notified in
writing and allowed 30 days to purchase additional shares to meet the
minimum
requirement.
SHAREHOLDER INFORMATION
- ------------------------------------------------------------------------
- --------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of all
classes of
each portfolio in the Trust have equal voting rights, except that in
matters
affecting only a particular portfolio or class, only shares of that
portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust
is not
required to hold annual shareholder meetings. Shareholder approval will
be
sought only for certain changes in the Trust's or the Fund's operation
and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
As of January 11, 1995, Charles Schwab & Co., Inc., San Francisco,
California,
owned 34.7% of the voting securities of the Fund, and, therefore, may,
for
certain purposes, be deemed to control the Fund and be able to affect
the
outcome of certain matters presented for a vote of shareholders.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than New
York. Shareholders are urged to consult their own tax advisers regarding
the
status of their accounts under state and local tax laws.
NEW YORK TAXES. Under existing New York laws, distributions made by the
Fund
will not be subject to New York State or New York City personal income
taxes to
the extent that such distributions qualify as exempt-interest dividends
under
the Internal Revenue Code, and represent interest income attributable to
obligations of the State of New York and its political subdivisions, as
well as
certain other obligations, the interest on which is exempt from New York
State
and New York City personal income taxes, such as, for example, certain
obligations of the Commonwealth of Puerto Rico. Conversely, to the
extent that
distributions made by the Fund are derived from other types of
obligations, such
distributions will be subject to New York State and New York City
personal
income taxes.
The Fund cannot predict in advance the exact portion of its dividends
that will
be exempt from New York State and New York City personal income taxes.
However,
the Fund will report to shareholders at least annually what percentage
of the
dividends it actually paid is exempt from such taxes.
Dividends paid by the Fund are exempt from the New York City
unincorporated
business taxes to the same extent that they are exempt from the New York
City
personal income taxes.
Dividends paid by the Fund are not excluded from net income in
determining New
York State or New York City franchise taxes on corporations or financial
institutions.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time, the Fund advertises the yield, effective yield, and
tax-equivalent yield for Institutional Service Shares.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
Institutional Service Shares' tax-exempt yield, assuming a specific tax
rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in Institutional Service Shares after reinvesting all income
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The performance figures will be calculated separately for each class of
shares.
Because each class of shares is subject to different expenses, the
performance
of Institutional Service Shares will exceed the performance of Cash II
Shares
for the same period.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
OTHER CLASSES OF SHARES
- ------------------------------------------------------------------------
- --------
The Fund also offers the following class.
Cash II Shares are sold at net asset value primarily to certain
customers of
financial institutions including corporations, municipalities, and
individual
accounts, seeking a high level of cash management services. Investments
in Cash
II Shares are subject to a minimum initial investment of $25,000. Cash
II Shares
are distributed pursuant to a 12b-1 Plan adopted by the Trust whereby
the
distributor is paid a fee of up to .25 of 1% of the Cash II Shares'
average
daily net assets.
Financial institutions providing distribution or administrative services
may
receive additional compensation depending upon which class of shares of
the Fund
is sold. The distributor pays this compensation and is reimbursed from
sources
other than the assets of the Fund.
The amount of dividends payable to shareholders of any particular class
may be
more or less than that payable to the shareholders of any other class
depending
upon the existence of and differences in class expenses, 12b-1 Plan
expenses,
and Shareholder Services Plan expenses. The stated advisory fee is the
same for
all classes of shares.
NEW YORK MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH II SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants for the year ended October 31, 1994.
Their
report, dated December 14, 1994, on the Fund's financial statements for
the year
ended October 31, 1994, and on the following table for the year ended
October
31, 1994, is included in the Annual Report, which is incorporated by
reference.
The financial statements as of October 31, 1993, as well as the
financial
highlights for the periods ended October 31, 1985, through October 31,
1993,
were audited by other auditors whose report dated December 17, 1993 is
also
included by reference. This table should be read in conjunction with the
Fund's
financial statements and notes thereto, which may be obtained free of
charge
from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
--------------------
- ---------------------
1994 1993
1992 1991*
----- -----
- ----- -----
<S> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00
$1.00 $1.00
- ------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------
Net investment income 0.02 0.02
0.03 0.02
- ------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------
Dividends to shareholders from net
investment income (0.02) (0.02)
(0.03) (0.02)
- ------------------------------------------------ ----- -----
- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00
$1.00 $1.00
- ------------------------------------------------ ----- -----
- ----- -----
TOTAL RETURN** 2.15% 1.98%
2.86% 2.20%
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------
Expenses 0.71% 0.71%
0.73% 0.46%(a)
- ------------------------------------------------
Net investment income 2.19% 1.96%
2.46% 4.08%(a)
- ------------------------------------------------
Expense waiver/reimbursement(b) 0.21% 0.17%
- -- --
- ------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------
Net assets, end of period (000 omitted) $134,051 $58,884
$4,641 $56
- ------------------------------------------------
</TABLE>
* For the period from April 25, 1991 (date of initial public
investment) to
October 31, 1991.
** 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.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C> <C>
New York Municipal Cash Trust
Institutional Service Shares Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Distributor
Federated Securities Corp. Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Investment Adviser
Federated Management Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Custodian
State Street Bank and Trust Company P.O. Box 8602
Boston, MA
02266-8602
- ------------------------------------------------------------------------
- ----------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG
Place
Pittsburgh, PA
15222
- ------------------------------------------------------------------------
- ----------------------
</TABLE>
NEW YORK MUNICIPAL
CASH TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated
Municipal Trust, an Open-End
Management
Investment Company
Prospectus dated February 28, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314229741
G00319-01-SS (2/95)
New York Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Institutional Service Shares, Cash II Shares
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectuses of New York Municipal Cash Trust (the "Fund") dated
February 28, 1995. This Statement is not a prospectus. To receive a
copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
New York Investment Risks 2
Investment Limitations 2
Brokerage Transactions 4
Federated Municipal Trust
Management 5
The Funds 8
Share Ownership 8
Trustees Compensation 9
Trustee Liability 9
Investment Adviser 9
Advisory Fees 10
Fund Administration 10
Distribution and Shareholder
Services Plans 10
Determining Net Asset Value 11
Redemption in Kind 11
The Fund's Tax Status 11
Performance Information 11
Yield 12
Effective Yield 12
Tax-Equivalent Yield 12
Tax-Equivalency Table 12
Total Return 13
Performance Comparisons 13
Investment Policies
Unless indicated otherwise, the policies described below may be changed
by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the
security, the issuer of any demand feature applicable to the security,
or
any guarantor of either the security or any demand feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution
irrevocable letters of credit or guarantees and give the Fund the right
to
demand payment of the principal amounts of the participation interests
plus
accrued interest on short notice (usually within seven days). The
municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation
interests
include the right to demand payment from the issuers of those interests.
By
purchasing participation interests having a seven day demand feature,
the
Fund is buying a security meeting the maturity and quality requirements
of
the Fund and also is receiving the tax-free benefits of the underlying
securities.
Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the
nature of the appropriation for the lease. Furthermore, a lease may
provide
that the participants cannot accelerate lease obligations upon default.
The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the
investment
adviser, under the authority delegated by the Board of Trustees, will
base
its determination on the following factors: whether the lease can be
terminated by the lessee; the potential recovery, if any, from a sale of
the leased property upon termination of the lease; the lessee's general
credit strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit
enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other
than normal transaction costs, are incurred. However, liquid assets of
the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are
marked to market daily and are maintained until the transaction has been
settled. The Fund does not intend to engage in when-issued and delayed
delivery transactions to an extent that would cause the segregation of
more
than 20% of the total value of its assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant
to
repurchase agreements. Repurchase agreements are arrangements in which
banks, brokers/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at
a mutually agreed upon time and price. To the extent that the seller
does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. The Fund or
its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund
will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by
the
Trustees.
New York Investment Risks
The Fund invests in obligations of New York (the "State") issuers which
result in the Fund's performance being subject to risks associated with
the
overall conditions present within the State. The following information
is a
general summary of the State's financial condition and a brief summary
of
the prevailing economic conditions. This information is based on
official
statements relating to securities that are believed to be reliable but
should not be considered as a complete description of all relevant
information.
The State has achieved fiscal balance for the last few years after large
deficits in the middle and late 1980's. Growing social service needs,
education and Medicare expenditures have been the areas of largest
growth
while prudent program cuts and increases in revenues through service
fees
has enabled the state's budget to remain within balance for the last few
years. While the state still has a large accumulated deficit as a
percentage of its overall budget, the fiscal performance in recent years
has demonstrated a changed political environment that has resulted in
realistic revenue and expenditure projections to achieve financially
favorable results. The state also benefits from a high level of per
capita
income that is well above the national average and from significant
amounts
of international trade.
New York's economy is large and diverse. While several upstate counties
benefit from agriculture, manufacturing and high technology industries,
New
York City nonetheless still dominates the State's economy through its
international importance in economic sectors such as advertising,
finance,
and banking. The State's economy has been slow to recover after the late
1980's recession that resulted in the loss of over 400,000 jobs in the
New
York City metropolitan area alone. Any major changes to the financial
condition of New York City would ultimately have an affect on the State.
The overall financial condition of the state can also be illustrated by
changes to its debt ratings. During the period in which the state
experienced financial difficulties, its general obligation long-term
debt
ratings as determined by Moody's Investors Service, Inc. and Standard &
Poor's Ratings Group decreased form A1 and A, respectively, to A and A-.
The Fund's concentration in municipal securities issued by the state and
its political subdivisions provides a greater level of risk than a fund
which is diversified across numerous states and municipal entities. The
ability of the state or its municipalities to meet their obligations
will
depend on the availability of tax and other revenues; economic,
political,
and demographic conditions within the state; and the underlying fiscal
condition of the state, its counties, and its municipalities.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as are
necessary for clearance of transactions.
Borrowing Money
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not
in
excess of 5% of the value of its total assets or in an amount up
to
one-third of the value of its total assets, including the amount
borrowed, in order to meet redemption requests without immediately
selling portfolio instruments. This borrowing provision is not
for
investment leverage but solely to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when
the
liquidation of portfolio instruments would be inconvenient or
disadvantageous. Interest paid on borrowed funds will serve to
reduce
the Fund's income. The Fund will liquidate any such borrowings as
soon as possible and may not purchase any portfolio instruments
while
any borrowings are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except
as necessary to secure permitted borrowings. In those cases, it
may
pledge assets having a market value not exceeding 10% of the value
of
total assets at the time of the pledge.
Investing in Real Estate
The Fund will not purchase or sell real estate, although it may
invest in New York municipal securities secured by real estate or
interests in real estate.
Investing in Commodities and Minerals
The Fund will not purchase or sell commodities, commodity
contracts,
or oil, gas, or other mineral exploration or development programs.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
Making Loans
The Fund will not make loans except that it may acquire publicly
or
non-publicly issued New York municipal securities, in accordance
with
its investment objective, policies, and limitations.
Acquiring Securities
The Fund will not acquire the voting securities of any issuer,
except
as part of a merger, consolidation, reorganization, or acquisition
of
assets.
Investing in Securities of Other Investment Companies
The Fund will not invest in securities issued by any other
investment
company or investment trust.
Investments in Any One Issuer
With respect to securities comprising 75% of its assets, the Fund
will not invest more than 10% of its total assets in the
securities
of any one issuer.
Under this limitation, each governmental subdivision, including
states, territories, possessions of the United States, or their
political subdivisions, agencies, authorities, instrumentalitites,
or
similar entities, will be considered a separate issuer if its
assets
and revenues are separate from those of the government body
creating
it and the security is backed only by its own assets and revenues.
Industrial development bonds backed only by the assets and
revenues
of a non-governmental issuer are considered to be issued solely by
that issuer. If in the case of an industrial development bond or
government issued security, a governmental or other entity
guarantees
the security, such guarantee would be considered a separate
security
issued by the guarantor, as well as the other issuer, subject to
limited exclusions allowed by the Investment Company Act of 1940.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers (or in the alternative,
guarantors,
where applicable) which have records of less than three years of
continuous operations, including the operation of any predecessor.
Investing in Issuers Whose Securities Are Owned by Officers and
Trustees of the Trust
The Fund will not purchase or retain the securities of any issuer
if
the Officers and Trustees of the Trust or its investment adviser,
owning individually more than .50 of 1% of the issuer's
securities,
together own more than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or
any
combination of them, except that the Fund may purchase municipal
securities accompanied by agreements of sellers to repurchase them
at
the Fund's option.
Investing in Illiquid Securities
The Fund will not invest more than 10% of its total assets in
illiquid securities, including repurchase agreements maturing in
more
than seven days.
Issuing Senior Securities
The Fund will not issue senior securities, except as permitted by
the
investment objective and policies and investment limitations of
the
Fund.
The above limitations cannot be changed without shareholder approval.
For purposes of the above limitations, the Fund considers instruments
issued by a U.S. branch of a domestic bank or savings and loan having
capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items." Except with respect to borrowing
money, if a percentage limitation is adhered to at the time of
investment,
a later increase or decrease in percentage resulting from any change in
value or net assets will not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of
the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order
at a favorable price. In working with dealers, the adviser will
generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Board
of Trustees. The adviser may select brokers and dealers who offer
brokerage and research services. These services may be furnished
directly
to the Fund or to the adviser and may include: advice as to the
advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by
brokers
and dealers may be used by the adviser or its affiliates in advising the
Trust and other accounts. To the extent that receipt of these services
may
supplant services for which the adviser or its affiliates might
otherwise
have paid, it would tend to reduce their expenses. The adviser and its
affiliates exercise reasonable business judgment in selecting brokers
who
offer brokerage and research services to execute securities
transactions.
They determine in good faith that commissions charged by such persons
are
reasonable in relationship to the value of the brokerage and research
services provided. During the fiscal years ended October 31, 1994,
1993,
and 1992, the Trust paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type
the Fund may make may also be made by those other accounts. When the
Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
Federated Municipal Trust Management
Officers and Trustees are listed with their addresses, present positions
with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Center
Pittsburgh, PA 15219
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner
of the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate
ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of
the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center-
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of
the
Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation
and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman,
Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds;
Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue
is
the son of John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.;
Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in
the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of
the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes
the
following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Arrow
Funds;
Automated Cash Management Trust; Automated Government Money Trust;
Cash
Trust Series II; Cash Trust Series, Inc.; DG Investor Series; Edward
D.
Jones & Co. Daily Passport Cash Trust; Federated ARMs Fund;
Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government
Trust;
Federated Growth Trust; Federated High Yield Trust; Federated
Income
Securities Trust; Federated Income Trust; Federated Index Trust;
Federated
Institutional Trust; Federated Intermediate Government Trust;
Federated
Master Trust; Federated Short-Intermediate Government Trust;
Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-
Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds;
Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund,
Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund,
Inc.;
Fund for U.S. Government Securities, Inc.; Government Income
Securities,
Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance
Management Series; Intermediate Municipal Trust; International
Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust;
Liberty
Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty
Municipal Securities Fund, Inc.; Liberty U.S. Government Money
Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.;
Liquid
Cash Trust; Managed Series Trust; The Medalist Funds: Money
Market
Management, Inc.; Money Market Obligations Trust; Money Market
Trust;
Municipal Securities Income Trust; 111 Corcoran Funds; Peachtree Funds;
The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut
Funds;
Short-Term Municipal Trust; Star Funds; The Starburst Funds; The
Starburst
Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration
Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial
Institutions; Trust For Government Cash Reserves; Trust for Short-Term
U.S.
Government Securities; Trust for U.S. Treasury Obligations;
World
Investment Series, Inc.
Share Ownership
Officers and Trustees own less than 1% of the Trust's outstanding
shares.
As of January 10, 1995, the following shareholder(s) of record owned 5%
or
more of the outstanding Institutional Service Shares of New York
Municipal
Cash Trust: Fiduciary Trust Company International, New York, New York,
owned approximately 51,028,500 shares (19.05%); Fleet Securities Corp.,
Rochester, New York, owned approximately 49,554,545 shares (18.50%); Key
Trust Company, Cleveland, Ohio, owned approximately 20,011,352 shares
(7.47%); The bank of New York, New York, New York, owned approximately
48,625,378 shares (18.15%).
As of January 10, 1995, the following shareholder(s) of record owned 5%
or
more of the outstanding Cash II Shares of New York Municipal Cash Trust:
Charles Schwab & Co., San Francisco, California, owned approximately
148,756,068 shares (93.34%).
Trustees Compensation
AGGREGATE TOTAL COMPENSATION PAID
NAME , COMPENSATION TO TRUSTEES FROM
POSITION WITH FROM TRUST
TRUST TRUST# AND FUND COMPLEX
John F. Donahue, $ -0- $ -0- for the Trust and
Chairman and Trustee 69 other investment companies in the
Fund Complex
Thomas G. Bigley, $ 719.00 $ 24,991 for the Trust and
Trustee 50 other investment companies in the
Fund Complex
John T. Conroy, Jr., $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
William J. Copeland, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
James E. Dowd, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $ 4,308.00 $ 123,600 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $ 4,757.00 $ 136,100 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Glen R. Johnson, $ -0- $ -0- for the Trust and
President and Trustee 9 other investment companies in the
Fund Complex
Peter E. Madden, $ 4,308.00 $ 104,880 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Gregor F. Meyer, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Wesley W. Posvar, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Marjorie P. Smuts, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
#The aggregate compensation is provided for the Trust which is comprised
of
13 portfolios.
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable
for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject
by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated Management. It is a
subsidiary
of Federated Investors. All the voting securities of Federated
Investors
are owned by a trust, the trustees of which are John F. Donahue, his
wife
and his son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder
of
the Fund for any losses that may be sustained in the purchase, holding,
or
sale of any security or for anything done or omitted by it, except acts
or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with
the
Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the fiscal years ended October 31, 1994, 1993, and 1992, the adviser
earned $1,383,576, $1,065,970, and $839,082, respectively, of which
$364,783, $460,455, and $413,760, respectively, was voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and
extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of
average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets,
the
adviser will reimburse the Fund for its expenses over the
limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the
amount of the excess, subject to an annual adjustment. If the
expense limitation is exceeded, the amount to be reimbursed by the
adviser will be limited, in any single fiscal year, by the amount
of
the investment advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred
to
as the "Administrators".) For the fiscal years ended October 31, 1994,
1993, and 1992, the Administrators earned $292,612, $329,428, and
$280,632,
respectively. Dr. Henry J. Gailliot, an officer of Federated
Management,
the adviser to the Fund, holds approximately 20% of the outstanding
common
stock and serves as a director of Commercial Data Services, Inc., a
company
which provides computer processing services to Federated Administrative
Services.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust
Company, Boston, MA is custodian for the securities and cash of the
Fund.
It provides certain accounting and recordkeeping services with respect
to
the Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains
all necessary shareholder records. For its services, the transfer agent
receives a fee based on size, type, and number of accounts and
transactions
made by shareholders.
Distribution and Shareholder Services Plans
With respect to Cash II Shares and Institutional Service Shares, the
Fund
has adopted a Distribution Plan pursuant to Rule 12b-1 which was
promulgated by the Securities and Exchange Commission pursuant to the
Investment Company Act of 1940. Additionally, the Fund has adopted a
Shareholder Service Plan with respect to both Cash II Shares and
Institutional Service Shares.
These arrangements permit the payment of fees to financial institutions
to
stimulate distribution activities and services to shareholders provided
by
a representative who has knowledge of the shareholder's particular
circumstances and goals. These activities and services may include, but
are not limited to, marketing efforts; providing office space,
equipment,
telephone facilities, and various clerical, supervisory, computer, and
other personnel as necessary or beneficial to establish and maintain
shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Board of Trustees expects that
the
Fund will be able to achieve a more predictable flow of cash for
investment
purposes and to meet redemptions. This will facilitate more efficient
portfolio management and assist the Fund in pursuing its investment
objectives. By identifying potential investors whose needs are served
by
the Fund's objectives, and properly servicing these accounts, it may be
possible to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail;
(3)
enhancing shareholder recordkeeping systems; and (4) responding promptly
to
shareholders' requests and inquiries concerning their accounts.
For the fiscal period ending October 31, 1994, payments in the amount of
$255,897 and $148,378, respectively, were made pursuant to the
Distribution Plan, on behalf of Cash II Shares and Institutional Service
Shares, respectively, of which $105,575 and $47,624 , respectively, was
waived. In addition, for this period, payments in the amount of $105,575
and $47,966, respectively, were made pursuant to the Shareholder
Services
Plan on behalf of Cash II Shares and Institutional Shares, respectively.
Determining Net Asset Value
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.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or
1%
of the Fund's net asset value, whichever is less, for any one
shareholder
within a 90-day period. Any redemption beyond this amount will also be
in
cash unless the Trustees determine that further payments should be in
kind.
In such cases, the Fund will pay all or a portion of the remainder of
the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not as liquid as a cash redemption. If redemption is made in kind,
shareholders who sell these securities could receive less than the
redemption value and could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated
investment
companies, the Fund must, among other requirements: derive at least
90%
of its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested;
changes in interest rates; changes in expenses; and the relative amount
of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for
those
shareholders paying those fees.
Yield
The Fund calculates its yield based upon the seven days ending on the
day
of the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional
shares purchased with dividends earned from the original one share and
all
dividends declared on the original and any purchased shares; dividing
the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
For the seven-day period ended October 31, 1994, the yields for
Institutional Service Shares and Cash II Shares were 3.04%, and 2.85%,
respectively.
Effective Yield
The Fund calculates its effective yield by compounding the unannualized
base period return by: adding 1 to the base period return; raising the
sum
to the 365/7th power; and subtracting 1 from the result.
For the seven-day period ended October 31, 1994, the effective yields
for
Institutional Service Shares and Cash II Shares were 3.08% and 2.89%,
respectively.
Tax-Equivalent Yield
The tax-equivalent yield of the Fund is calculated similarly to the
yield
but is adjusted to reflect the taxable yield that the Fund would have
had
to earn to equal its actual yield, assuming a 39.6% tax rate (the
maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
For the seven-day period ended October 31, 1994, the tax-equivalent
yields
for Institutional Service Shares and Cash II Shares were 5.03% and
4.72%,
respectively.
Tax-Equivalency Table
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free
from state and local taxes as well. As the table below indicates, a
"tax-
free" investment can be an attractive choice for investors, particularly
in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF NEW YORK
TAX BRACKET:
Combined Federal
and State: 22.875% 35.875% 38.875% 43.875%
47.475%
Joint Return$1-39,000$39,001-94,250$94,251-143,600$143,601-256,500
OVER $256,500
Single Return$1-23,350$23,351-56,550$56,551-117,950$117,951-256,500
OVER $256,500
Tax-Exempt Yield Taxable Yield Equivalent
1.50% 1.94% 2.34% 2.45% 2.67% 2.86%
2.00 2.59 3.12 3.27 3.56 3.81
2.50 3.24 3.90 4.09 4.45 4.76
3.00 3.89 4.68 4.91 5.35 5.71
3.50 5.54 5.46 5.73 6.24 6.66
4.00 5.19 6.24 6.54 7.13 7.62
4.50 5.83 7.02 7.36 8.02 8.57
5.00 6.48 7.80 8.18 8.91 9.52
5.50 7.13 8.58 9.00 9.80 10.47
6.00 7.78 9.36 9.82 10.69 11.42
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were
not
used to increase federal deductions. If you itemize deductions,
your
taxable yield equivalent will be lower.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
Total Return
Average annual total return is the average compounded rate of return for
a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
compounded by multiplying the number of shares owned at the end of the
period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number
of
shares purchased at the beginning of the period with $1,000, adjusted
over
the period by any additional shares, assuming the monthly reinvestment
of
all dividends and distributions.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
- Lipper Analytical Services, Inc. ranks funds in various fund
categories based on total return, which assumes the reinvestment
of
all income dividends and capital gains distributions, if any.
- Donoghue's Money Fund Report publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the
same
money funds.
- Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day
effective
yield.
8120103B SAI (2/95)
MARYLAND MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
PROSPECTUS
The shares of Maryland Municipal Cash Trust (the "Fund") offered by this
prospectus represent interests in a non-diversified portfolio of
Federated
Municipal Trust (the "Trust"), an open-end management investment company
(a
mutual fund). The Fund invests in short-term Maryland municipal
securities to
achieve current income exempt from federal regular income tax and the
personal
income taxes imposed by the State of Maryland and Maryland
municipalities
consistent with stability of principal and liquidity.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated
February 28,
1995, with the Securities and Exchange Commission. The information
contained in
the Statement of Additional Information is incorporated by reference
into this
prospectus. You may request a copy of the Statement of Additional
Information
free of charge by calling 1-800-235-4669. To obtain other information,
or make
inquiries about the Fund, contact the Fund at the address listed in the
back of
this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
Maryland Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
7
- ------------------------------------------------------
Management of the Trust
7
Distribution of Shares
8
Administration of the Fund
9
Expenses of the Fund
9
NET ASSET VALUE
10
- ------------------------------------------------------
HOW TO PURCHASE SHARES
10
- ------------------------------------------------------
Special Purchase Features
11
HOW TO REDEEM SHARES
11
- ------------------------------------------------------
Special Redemption Features
12
ACCOUNT INFORMATION
13
- ------------------------------------------------------
Dividends
13
Capital Gains
13
Certificates and Confirmations
13
Accounts With Low Balances
13
SHAREHOLDER INFORMATION
13
- ------------------------------------------------------
Voting Rights
13
Massachusetts Partnership Law
14
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
15
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
ADDRESSES
16
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)................................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)................................................. None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as
applicable)............................... None
Redemption Fee (as a percentage of amount redeemed, if
applicable).................... None
Exchange
Fee.....................................................................
..... None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)
(1)..................................................... 0.00%
12b-1
Fee.....................................................................
........ None
Total Other Expenses (after expense
reimbursement).................................... 0.65%
Shareholder Services
Fee................................................... 0.25%
Total Fund Operating Expenses
(2)................................................ 0.65%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of the
management fee. The adviser can terminate this voluntary waiver at any
time at
its sole discretion. The maximum management fee is 0.50%.
(2) The Total Fund Operating Expenses in the table above are based on
expenses
expected during the fiscal year ending October 31, 1995. The Total Fund
Operating Expenses were 0.46% for the fiscal year ended October 31, 1994
and
were 0.99% absent the voluntary waiver of the management fee and the
voluntary
reimbursement of certain other operating expenses.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of the Fund will bear,
either
directly or indirectly. For more complete descriptions of the various
costs and
expenses, see "How to Purchase Shares" and "Trust Information." Wire-
transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years
- ------------------------------------------------------------------------
- --------------------
<S>
<C> <C>
You would pay the following expenses on a $1,000 investment assuming,
(1) 5% annual return and (2) redemption at the end of each time
period..... $ 7 $ 21
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
MARYLAND MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for the period presented, is included in the Annual
Report,
which is incorporated by reference. This table should be read in
conjunction
with the Fund's financial statements and notes thereto, which may be
obtained
free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1994*
-
- ------------------
<S>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD
$1.00
- --------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------
Net investment income
0.01
- --------------------------------------------------------------------
- -----
LESS DISTRIBUTIONS
- --------------------------------------------------------------------
Dividends to shareholders from net investment income
(0.01)
- --------------------------------------------------------------------
- -----
NET ASSET VALUE, END OF PERIOD
$1.00
- --------------------------------------------------------------------
- -----
TOTAL RETURN**
1.30%
- --------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------
Expenses
0.46%(b)
- --------------------------------------------------------------------
Net investment income
2.68%(b)
- --------------------------------------------------------------------
Expense waiver/reimbursement (a)
0.53%(b)
- --------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------
Net assets, end of period (000 omitted)
$56,275
- --------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 9, 1994 (date of initial
public
investment) to October 31, 1994. For the period from April 25, 1994
(start of
business) to May 9, 1994, the Fund had no investment activity.
** Based on net asset value, which does not reflect the sales load or
contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The Fund is designed for financial institutions acting in an
agency
or fiduciary capacity as a convenient means of accumulating an interest
in a
professionally managed, non-diversified portfolio investing primarily in
short-term Maryland municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Maryland taxpayers because it
invests
in municipal securities of Maryland. A minimum initial investment of
$10,000
over a 90-day period is required.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the personal income taxes imposed by the State of
Maryland and Maryland municipalities consistent with stability of
principal and
liquidity. This investment objective cannot be changed without
shareholder
approval. While there is no assurance that the Fund will achieve its
investment
objective, it endeavors to do so by following the investment policies
described
in this prospectus.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Maryland municipal securities (as defined below) maturing in 13 months
or less.
As a matter of investment policy, which cannot be changed without
shareholder
approval, at least 80% of the Fund's annual interest income will be
exempt from
federal regular income tax and Maryland state and local income tax.
(Federal
regular income tax does not include the federal individual alternative
minimum
tax or the federal alternative minimum tax for corporations.) The
average
maturity of the securities in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated
otherwise, the
investment policies may be changed by the Trustees without shareholder
approval.
Shareholders will be notified before any material change in these
policies
becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued
by or on behalf of Maryland and its political subdivisions and financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and Maryland state and local income tax ("Maryland municipal
securities").
Examples of Maryland municipal securities include, but are not limited
to:
- tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
- bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in
Maryland
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying Maryland
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The Maryland municipal securities in which the Fund invests
must be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating
categories. The Fund will follow applicable regulations in determining
whether a
security rated by more than one NRSRO can be treated as being in one of
the two
highest short-term rating categories; currently, such securities must be
rated
by two NRSROs in one of their two highest rating categories. See
"Regulatory
Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit-enhanced
securities
based upon the financial condition and ratings of the party providing
the credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit-
enhanced by the credit enhancer, in which case the securities will be
treated as
having been issued by both the issuer and the credit enhancer. The
bankruptcy,
receivership, or default of the credit enhancer will adversely affect
the
quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund
may
invest pursuant to its investment objective and policies but which are
subject
to restrictions on resale under federal securities laws. Under criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase, together with other illiquid
securities, to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines that market conditions call for a temporary defensive
posture, the
Fund may invest in tax-exempt or taxable securities such as: obligations
issued
by or on behalf of municipal or corporate issuers having the same
quality
characteristics as described above; obligations issued or guaranteed by
the U.S.
government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so. However, the interest from certain
Maryland
municipal securities is subject to the federal alternative minimum tax.
MARYLAND MUNICIPAL SECURITIES
Maryland municipal securities are generally issued to finance public
works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
Maryland municipal securities include industrial development bonds
issued by or
on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Maryland municipal securities are
"general
obligation" and "revenue" bonds. General obligation bonds are secured by
the
issuer's pledge of its full faith and credit and taxing power for the
payment of
principal and interest. Interest on and principal of revenue bonds,
however, are
payable only from the revenue generated by the facility financed by the
bond or
other specified sources of revenue. Revenue bonds do not represent a
pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Maryland municipal securities depend on a variety of factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of Maryland municipal securities and participation interests, or the
credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of
Maryland
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in Maryland municipal securities which are repayable
out of
revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
Maryland municipal securities could involve an increased risk to the
Fund should
any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Maryland municipal securities are subject to
the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under
certain
circumstances, the Fund may borrow up to one-third of the value of its
total
assets and pledge assets to secure such borrowings. This investment
limitation
cannot be changed without shareholder approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Statement of Additional Information, in order to
comply with
applicable laws and regulations, including the provisions of and
regulations
under the Investment Company Act of 1940, as amended. In particular, the
Fund
will comply with the various requirements of Rule 2a-7, which regulates
money
market mutual funds. The Fund will determine the effective maturity of
its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees
are responsible for managing the Trust's business affairs and for
exercising all
the Trust's powers except those reserved for the shareholders. An
Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .50 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of
the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is
the
principal distributor for a number of investment companies. Federated
Securities
Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services
Plan
(the "Services Plan") under which it will pay Federated Shareholder
Services, an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of the Fund to provide personal services
and/or
maintenance of shareholder accounts to the Fund and its shareholders.
From time
to time and for such periods as deemed appropriate, the amount stated
above may
be reduced voluntarily.
Federated Shareholder Services may elect to pay financial institutions
fees
based upon shares owned by their clients or customers for services
provided to
those clients or customers. The schedules of such fees and the basis
upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds,
investment
advisers, and broker/dealers to provide certain
services to shareholders. These services may include, but are not
limited to,
distributing prospectuses and other information, providing accounting
assistance, and communicating or facilitating purchases and redemptions
of
shares. Any fees paid for these services by the distributor will be
reimbursed
by the adviser and not the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a
subsidiary of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
---------------------------- -----------------------------
- ------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750
million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is
custodian for
the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
EXPENSES OF THE FUND
Holders of shares pay their allocable portion of Fund and Trust
expenses.
The Trust expenses for which holders of shares pay their allocable
portion
include, but are not limited to: the cost of organizing the Trust and
continuing
its existence; registering the Trust with federal and
state securities authorities; Trustees' fees; auditors' fees; the cost
of
meetings of Trustees; legal fees of the Trust; association membership
dues; and
such non-recurring and extraordinary items as may arise.
The Fund expenses for which holders of shares pay their allocable
portion
include, but are not limited to: registering the Fund and shares of the
Fund;
investment advisory services; taxes and commissions; custodian fees;
insurance
premiums; auditors' fees; and such non-recurring and extraordinary items
as may
arise.
At present, no expenses are allocated to the shares as a class. However
the
Board of Trustees reserves the right to allocate certain expenses to
holders of
shares as it deems appropriate ("Class Expenses"). In any case, Class
Expenses
would be limited to: transfer agent fees as identified by the transfer
agent as
attributable to holders of shares; printing and postage expenses related
to
preparing and distributing materials such as shareholder reports,
prospectuses
and proxies to current shareholders; registration fees paid to the
Securities
and Exchange Commission and registration fees paid to state securities
commissions; expenses related to administrative personnel and services
as
required to support holders of shares; legal fees relating solely to
shares; and
Trustees' fees incurred as a result of issues relating solely to shares.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of its shares at
$1.00 by
valuing the portfolio securities using the amortized cost method. The
net asset
value per share is determined by subtracting total liabilities from
total assets
and dividing the remainder by the number of shares outstanding. The Fund
cannot
guarantee that its net asset value will always remain at $1.00 per
share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
HOW TO PURCHASE SHARES
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- --------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased as described below either through a financial institution
(such as
a bank or broker/dealer) or by wire or by check directly from the Fund,
with a
minimum initial investment of $10,000. (Financial institutions may
impose
different minimum investment requirements on their customers.)
In connection with any sale, Federated Securities Corp. may from time to
time
offer certain items of nominal value to any shareholder or investor. The
Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and
returning
the new account form available from the Fund before shares can be
purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may
purchase
shares through a financial institution which has a sales agreement with
the
distributor. Orders are considered received when the Fund receives
payment by
wire or converts payment by check from the financial institution into
federal
funds. It is the financial institution's responsibility to transmit
orders
promptly. Financial institutions may charge additional fees for their
services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling
the Fund
before 1:00 p.m. (Eastern time). The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) in
order to begin earning dividends that same day. Federal funds should be
wired as
follows: Federated Services Company, c/o State Street Bank and Trust
Company,
Boston, MA; Attention; EDGEWIRE; For Credit to: Maryland Municipal Cash
Trust;
Fund Number (this number can be found on the account statement or by
contacting
the Fund); Group Number or Order Number; Nominee or Institution Name;
and ABA
Number 011000028. Shares cannot be purchased by wire on holidays when
wire
transfers are restricted.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check
made
payable to Maryland Municipal Cash Trust to: Federated Services Company,
c/o
State Street Bank and Trust Company, P.O. Box 8604, Boston, MA 02266-
8604.
Orders by mail are considered received when payment by check is
converted into
federal funds (normally the business day after the check is received)
and shares
begin earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM. A minimum of $100 can be automatically
withdrawn
periodically from the shareholder's checking account at an Automated
Clearing
House ("ACH") member and invested in Fund shares. Shareholders should
contact
their financial institution or the Fund to participate in this program.
HOW TO REDEEM SHARES
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- --------
Shares are redeemed at their net asset value next determined after a
Fund
receives the redemption request. Redemptions will be made on days on
which the
Fund computes its net asset value. Redemption requests must be received
in
proper form and can be made as described below.
REDEEMING SHARES THROUGH A FINANCIAL INSTITUTION. Shares may be
redeemed by
contacting the shareholder's financial institution. Shares will be
redeemed at
the net asset value next determined after Federated Services Company
receives
the redemption request. According to the shareholder's instructions,
redemption
proceeds can be sent to the financial institution or to the shareholder
by check
or by wire. The financial institution is responsible for promptly
submitting
redemption requests and providing proper written redemption
instructions.
Customary fees and commissions may be charged by the financial
institution for
this service.
REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by
calling
the Fund provided the Fund has a properly completed authorization form.
These
forms can be obtained from Federated Securities Corp. Proceeds from
redemption
requests received before 12:00 noon (Eastern time) will be wired the
same day to
the shareholder's account at a domestic commercial bank which is
a member of the Federal Reserve System, but will not include that day's
dividend. Proceeds from redemption requests received after that time
will
include that day's dividends but will be wired the following business
day. Under
limited circumstances, arrangements may be made with the distributor for
same-day payment of proceeds, without that day's dividend, for
redemption
requests received before 2:00 p.m. (Eastern time). Proceeds from
redeemed shares
purchased by check or through ACH will not be wired until that method of
payment
has cleared.
Telephone instructions may be recorded and if reasonable procedures are
not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares
By Mail"
should be considered. If at any time the Fund shall determine it
necessary to
terminate or modify the telephone redemption privilege, shareholders
would be
promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by
mailing a
written request together with properly endorsed certificates, if issued,
to:
Federated Services Company, c/o State Street Bank and Trust Company,
P.O. Box
8604, Boston, MA 02266-8604. The written request should state: Maryland
Municipal Cash Trust; the account name as registered with the Fund; the
account
number; and the number of shares to be redeemed or the dollar amount
requested.
All owners of the account must sign the request exactly as the shares
are
registered. Any share certificates should be sent by registered or
certified
mail with the written request. Normally, a check for the proceeds is
mailed
within one business day, but in no event more than seven days, after
receipt of
a proper written redemption request. Dividends are paid up to and
including the
day that a redemption request is processed.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by: a commercial or savings bank, trust company or
savings
and loan association whose deposits are insured by an organization which
is
administered by the Federal Deposit Insurance Corporation; a member firm
of a
domestic stock exchange; or any other "eligible guarantor institution,"
as
defined in the Securities Exchange Act of 1934. The Fund does not accept
signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to
allow
shareholders to redeem their fund shares. A fee will be charged for this
service. The check writing service allows the shareholder to receive the
daily
dividend declared on the shares to be redeemed until the check is
presented to
State Street Bank for payment. However, checks should never be made
payable or
sent to State Street Bank or the Fund to redeem shares, and a check may
not be
written to close an account. Canceled checks are sent to the shareholder
each
month.
DEBIT CARD. Upon request, a debit account will be established. This
account
allows shareholders to redeem shares by using a debit card. A fee will
be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value
of at
least $10,000, a systematic withdrawal program may be established
whereby
automatic redemptions are made from the account and transferred
electronically
to any commercial bank, savings bank, or credit union that is an
ACH member. Shareholders may apply for participation in this program
through
their financial institution or the Fund.
ACCOUNT INFORMATION
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DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing. Monthly
confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, if an
account
balance falls below $10,000 due to shareholder redemptions, the Fund may
redeem
all of the remaining shares in that account (except accounts maintained
by
retirement plans) and pay the proceeds to the shareholder. Before shares
are
redeemed to close an account, the shareholder will be notified in
writing and
allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
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VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of each
portfolio
in the Trust have equal voting rights, except that in matters affecting
only a
particular portfolio, only shares of that portfolio are entitled to
vote. As a
Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for
certain
changes in the Trust's or the Fund's operation and for the election of
Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
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FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
Maryland. Shareholders are urged to consult their own tax advisers
regarding the
status of their accounts under state and local tax laws.
MARYLAND TAXES. Under existing Maryland laws, distributions made by the
Fund
will not be subject to Maryland state or local income taxes to the
extent that
such distributions qualify as exempt-interest dividends under the
Internal
Revenue Code, and represent (i) interest on tax-exempt obligations of
Maryland
or its political subdivisions or authorities; (ii) interest on
obligations of
the United States or an authority, commission, instrumentality,
possession or
territory of the United States; or (iii) gain realized by the Fund from
the sale
or exchange of bonds issued by Maryland, a political subdivision of
Maryland, or
the United States government (excluding obligations issued by the
District of
Columbia, a territory or possession of the United States, or a
department,
agency, instrumentality, or political subdivision of the District,
territory or
possession). Conversely, to the extent that distributions made by the
Fund are
derived from other types of obligations, such distributions will be
subject to
Maryland income taxes.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time the Fund advertises its yield, effective yield, and
tax-equivalent yield.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
the Fund's tax exempt yield, assuming a specific tax rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is
expressed as
a percentage.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain
indices.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C> <C>
Maryland Municipal Cash Trust
Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Distributor
Federated Securities Corp. Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Investment Adviser
Federated Management Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Custodian
State Street Bank and Trust Company P.O. Box 8604
Boston, MA
02266-8604
- ------------------------------------------------------------------------
- ----------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated
Investors Tower
Pittsburgh, PA
15222-3779
- ------------------------------------------------------------------------
- ----------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG
Place
Pittsburgh, PA
15222
- ------------------------------------------------------------------------
- ----------------------
</TABLE>
MARYLAND MUNICIPAL
CASH TRUST
PROSPECTUS
A Non-Diversified Portfolio of
Federated
Municipal Trust, an Open-End
Management
Investment Company
Prospectus dated February 28, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314229774
G00105-01-A (2/95)
Maryland Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of Maryland Municipal Cash Trust (the "Fund") dated
February 28, 1995. This Statement is not a prospectus. To receive a
copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
Maryland Investment Risks 2
Investment Limitations 2
Brokerage Transactions 4
Federated Municipal Trust
Management 5
The Funds 8
Share Ownership 9
Trustees Compensation 10
Trustee Liability 10
Investment Advisory Services 11
Investment Adviser 11
Advisory Fees 11
Shareholder Services Plan 12
Determining Net Asset Value 12
Redemption in Kind 12
The Fund's Tax Status 12
Performance Information 13
Yield 13
Effective Yield 13
Tax-Equivalent Yield 13
Tax-Equivalency Tables 13
Total Return 15
Performance Comparisons 16
Investment Policies
Unless indicated otherwise, the policies described below may be changed
by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the
security, the issuer of any demand feature applicable to the security,
or
any guarantor of either the security or any demand feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution
irrevocable letters of credit or guarantees and give the Fund the right
to
demand payment of the principal amounts of the participation interests
plus
accrued interest on short notice (usually within seven days). The
municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation
interests
include the right to demand payment from the issuers of those interests.
By
purchasing participation interests having a seven day demand feature,
the
Fund is buying a security meeting the maturity and quality requirements
of
the Fund and also is receiving the tax-free benefits of the underlying
securities.
Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the
nature of the appropriation for the lease. Furthermore, a lease may
provide
that the participants cannot accelerate lease obligations upon default.
The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the
investment
adviser, under the authority delegated by the Board of Trustees, will
base
its determination on the following factors: whether the lease can be
terminated by the lessee; the potential recovery, if any, from a sale of
the leased property upon termination of the lease; the lessee's general
credit strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit
enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other
than normal transaction costs, are incurred. However, liquid assets of
the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are
marked
to market daily and are maintained until the transaction has been
settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than
20%
of the total value of its assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant
to
repurchase agreements. Repurchase agreements are arrangements in which
banks, brokers/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at
a mutually agreed upon time and price. To the extent that the seller
does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. The Fund or
its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund
will
only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which
are
deemed by the Fund's adviser to be creditworthy pursuant to guidelines
established by the Trustees.
Maryland Investment Risks
The State of Maryland's economy differs from that of the nation, with a
far
smaller contribution to jobs and earnings coming from manufacturing, and
a
heavier dependence on government, services (particularly business,
engineering, and management services), and trade. Much of Maryland's
economic structure reflects its location adjacent to Washington, DC. The
State was little affected by the recession of the early 1980's with
total
jobs growing at a pace 23% faster than the nation's during the entire
decade. In the 1990-1991 recession, the state experienced significant
job
losses in the construction and retail trade sectors; however, throughout
the recession and during the past few years, the state's unemployment
rate
remained below that of the nation.
State finances are well managed with strong administrative control
exercised by the State Board of Public Works, which is comprised of the
governor, the treasurer, and the controller. The revenue stream is
diversified, relying on sales and income taxes; state property tax
continues to be levied to provide for a portion of debt service. The
State
experienced moderate financial strain from 1990 through 1992, requiring
successive budgetary adjustments and remedial action to control
operating
deficits. The fiscal 1994 budget relied on conservative revenue
estimates
and economic growth, which enabled the State to report an operating
surplus
for the second consecutive year.
Maryland has been among the most heavily indebted of the states,
although
its position is more moderate given the borrowing associated with the
State's assumption of local school construction costs. Closely following
the annual recommendation of its capital debt affordability committee,
the
State has restrained borrowing in recent years, yielding a more modest
relative debt position.
The Fund's concentration in securities issued by the State and its
political subdivisions provides a greater level of risk than a fund
which
is diversified across numerous states and municipal entities. The
ability
of the State or its municipalities to meet their obligations will depend
on
the availability of tax and other revenues; economic, political, and
demographic conditions within the State; and the underlying fiscal
condition of the State and it municipalities.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as may
be
necessary for clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements in
amounts up to one-third of the value of its net assets, including
the
amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of
the portfolio by enabling the Fund to meet redemption requests
when
the liquidation of portfolio securities is deemed to be
inconvenient
or disadvantageous. The Fund will not purchase any securities
while
borrowings in excess of 5% of its total assets are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except
as necessary to secure permitted borrowings. In those cases, it
may
pledge assets having a market value not exceeding the lesser of
the
dollar amounts borrowed or 15% of the value of its total assets at
the time of the pledge.
Lending Cash or Securities
The Fund will not lend any of its assets, except that it may
acquire
publicly or nonpublicly issued Maryland municipal securities or
temporary investments or enter into repurchase agreements in
accordance with its investment objective, policies, limitations,
or
Declaration of Trust.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts,
or commodity futures contracts.
Investing in Real Estate
The Fund will not purchase or sell real estate or real estate
limited
partnerships, although it may invest in securities of issuers
whose
business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real
estate.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
Concentration of Investments
The Fund will not purchase securities, if, as a result of such
purchases, 25% or more of the value of its total assets would be
invested in any one industry or in industrial development bonds or
other securities, the interest upon which is paid from revenues of
similar types of projects. However, the Fund may invest as
temporary
investments more than 25% of the value of its assets in cash or
cash
items, securities issued or guaranteed by the U.S. government, its
agencies, or instrumentalities, or instruments secured by these
money
market instruments, such as repurchase agreements.
The above limitations cannot be changed without shareholder approval.
The
following investment limitations, however, may be changed by the
Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Investing in Restricted Securities
The Fund will not invest more than 10% of its total assets in
securities subject to restrictions on resale under the Securities
Act
of 1933.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its net
assets
in illiquid securities.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment
companies,
except as part of a merger, consolidation, or other acquisition.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers (including companies responsible
for
paying principal and interest on industrial development bonds)
which
have records of less than three years of continuous operations,
including the operation of any predecessor.
Investing for Control
The Fund will not invest in securities of a company for the
purpose
of exercising control or management.
Investing in Issuers Whose Securities Are Owned by Officers and
Trustees
of the Trust
The Fund will not purchase or retain the securities of any issuer
if
the Officers and Trustees of the Trust or its investment adviser,
owning individually more than .50 of 1% of the issuer's securities
together own more than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or
any
combination of them.
Investing in Minerals
The Fund will not purchase or sell interests in oil, gas, or other
mineral exploration or development programs or leases, although it
may purchase the securities of issuers which invest in or sponsor
such programs.
For purposes of the above limitations, the Fund considers instruments
issued by a U.S. branch of a domestic bank or savings and loan having
capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items." Except with respect to borrowing
money, if a percentage limitation is adhered to at the time of
investment,
a later increase or decrease in percentage resulting from any change in
value or net assets will not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of
the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order
at a favorable price. In working with dealers, the adviser will
generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Board
of Trustees. The adviser may select brokers and dealers who offer
brokerage
and research services. These services may be furnished directly to the
Fund
or to the adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic
studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may
be
used by the adviser or its affiliates in advising the Trust and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid,
it would tend to reduce their expenses. The adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. During the period from May 9, 1994 (date of initial
public investment) to October 31, 1994, the Fund paid no brokerage
commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type
the Fund may make may also be made by those other accounts. When the
Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
Federated Municipal Trust Management
Officers and Trustees are listed with their addresses, present positions
with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Center
Pittsburgh, PA 15219
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner
of the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate
ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of
the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of
the
Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation
and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman,
Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds;
Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue
is
the son of John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.;
Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in
the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes
the
following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Arrow
Funds;
Automated Cash Management Trust; Automated Government Money Trust;
Cash
Trust Series II; Cash Trust Series, Inc.; DG Investor Series; Edward
D.
Jones & Co. Daily Passport Cash Trust; Federated ARMs Fund;
Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government
Trust;
Federated Growth Trust; Federated High Yield Trust; Federated
Income
Securities Trust; Federated Income Trust; Federated Index Trust;
Federated
Institutional Trust; Federated Intermediate Government Trust;
Federated
Master Trust; Federated Short-Intermediate Government Trust;
Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-
Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds;
Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund,
Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund,
Inc.;
Fund for U.S. Government Securities, Inc.; Government Income
Securities,
Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance
Management Series; Intermediate Municipal Trust; International
Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust;
Liberty
Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty
Municipal Securities Fund, Inc.; Liberty U.S. Government Money
Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.;
Liquid
Cash Trust; Managed Series Trust; The Medalist Funds; Money
Market
Management, Inc.; Money Market Obligations Trust; Money Market
Trust;
Municipal Securities Income Trust; 111 Corcoran Funds; Peachtree Funds;
The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut
Funds;
Short-Term Municipal Trust; Star Funds; The Starburst Funds; The
Starburst
Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration
Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial
Institutions; Trust For Government Cash Reserves; Trust for Short-Term
U.S.
Government Securities; Trust for U.S. Treasury Obligations;
World
Investment Series, Inc.
Share Ownership
Officers and Trustees own less than 1% of the Trust's outstanding
shares.
As of January 10, 1995, the following shareholder(s) of record owned 5%
or
more of the outstanding shares of the Fund: Charles Bresler, Washington,
D.C., owned approximately 5,746,589 shares (11.65%), Lawrence Lucchino,
Bethesda, Maryland, owned approximately 2,767,804 shares (5.61%), United
Communications Group, Rockville, Maryland, owned approximately 3,100,000
shares (6.28%), and C.S.S. Tower, Inc., Baltimore, Maryland, owned
approximately 3,012,714 shares (6.11%).
Trustees Compensation
AGGREGATE TOTAL COMPENSATION PAID
NAME , COMPENSATION TO TRUSTEES FROM
POSITION WITH FROM TRUST
TRUST TRUST# AND FUND COMPLEX
John F. Donahue, $ -0- $ -0- for the Trust and
Chairman and Trustee 69 other investment companies in the
Fund Complex
Thomas G. Bigley, $ 719.00 $ 24,991 for the Trust and
Trustee 50 other investment companies in the
Fund Complex
John T. Conroy, Jr., $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
William J. Copeland, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
James E. Dowd, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $ 4,308.00 $ 123,600 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $ 4,757.00 $ 136,100 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Glen R. Johnson, $ -0- $ -0- for the Trust and
President and Trustee 9 other investment companies in the
Fund Complex
Peter E. Madden, $ 4,308.00 $ 104,880 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Gregor F. Meyer, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Wesley W. Posvar, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Marjorie P. Smuts, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
#The aggregate compensation is provided for the Trust which is comprised
of
13 portfolios.
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable
for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject
by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated Management. It is a
subsidiary
of Federated Investors. All the voting securities of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue, his
wife
and his son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder
of
the Fund for any losses that may be sustained in the purchase, holding,
or
sale of any security or for anything done or omitted by it, except acts
or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with
the
Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the period from April 25, 1994 (start of business) to October 31,
1994,
the adviser earned $137,219, of which $137,147 was voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and
extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of
average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets,
the
adviser will reimburse the Fund for its expenses over the
limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the
amount of the excess, subject to an annual adjustment. If the
expense
limitation is exceeded, the amount to be reimbursed by the adviser
will be limited, in any single fiscal year, by the amount of the
investment advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the period from April 25, 1994 (start
of
business) to October 31, 1994, the Administrator earned $20,890. Dr.
Henry
J. Gailliot, an officer of Federated Management, the adviser to the
Fund,
holds approximately 20% of the outstanding common stock and serves as a
director of Commercial Data Services, Inc., a company which provides
computer processing services to Federated Administrative Services.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust
Company,
Boston, MA is custodian for the securities and cash of the Fund. It also
provides certain accounting and recordkeeping services with respect to
the
Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains
all necessary shareholder records. For its services, the transfer agent
receives a fee based on size, type and number of accounts and
transactions
made by shareholders.
Shareholder Services Plan
This arrangement permits the payment of fees to Federated Shareholder
Services and financial institutions to cause services to be provided
which
are necessary for the maintenance of shareholder accounts and to
encourage
personal services to shareholders by a representative who has knowledge
of
the shareholder's particular circumstances and goals. These activities
and
services may include, but are not limited to: providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish
and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balance; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses. By
adopting
the Shareholder Services Plan, the Board of Trustees expects that the
Fund
will benefit by: (1) providing personal services to shareholders;
(2) investing shareholder assets with a minimum of delay and
administrative
detail; (3) enhancing shareholder recordkeeping systems; and (4)
responding
promptly to shareholders' requests and inquiries concerning their
accounts.
For the period ending October 31, 1994, payments in the amount of
$68,610
were made pursuant to the Shareholder Services Plan.
Determining Net Asset Value
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.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or
1%
of the Fund's net asset value, whichever is less, for any one
shareholder
within a 90-day period. Any redemption beyond this amount will also be
in
cash unless the Trustees determine that further payments should be in
kind.
In such cases, the Fund will pay all or a portion of the remainder of
the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not
as liquid as a cash redemption. If redemption is made in kind,
shareholders
who sell these securities could receive less than the redemption value
and
could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated
investment
companies, the Fund must, among other requirements: derive at least 90%
of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested;
changes in interest rates; changes in expenses; and the relative amount
of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for
those
shareholders paying those fees.
Yield
The Fund calculates its yield based upon the seven days ending on the
day
of the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional
shares purchased with dividends earned from the original one share and
all
dividends declared on the original and any purchased shares; dividing
the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
The Fund's yield for the seven-day period ended October 31, 1994, was
2.81%.
Effective Yield
The Fund calculates its effective yield by compounding the unannualized
base period return by: adding 1 to the base period return; raising the
sum
to the 365/7th power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended October 31,
1994,
was 2.85%.
Tax-Equivalent Yield
The tax-equivalent yield of the Fund is calculated similarly to the
yield
but is adjusted to reflect the taxable yield that the Fund would have
had
to earn to equal its actual yield, assuming a 39.6% tax rate (the
maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
The Fund's tax-equivalent yield for the seven-day period ended October
31,
1994, was 5.54%.
Tax-Equivalency Tables
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free
from state and local taxes as well. As the tables below indicate, a "tax-
free" investment can be an attractive choice for investors, particularly
in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF MARYLAND
INCLUDING LOCAL INCOME TAX
COMBINED FEDERAL, STATE, AND COUNTY INCOME TAX BRACKET:
22.50% 35.50% 38.50% 40.00% 45.00%
48.60%
SINGLE $1- $23,351- $56,551- $100,001- $117,951-
OVER
RETURN 23,350 56,550 100,000 117,950 256,500
$256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
2.00% 2.58% 3.10% 3.25% 3.33% 3.64%
3.89%
2.50% 3.23% 3.88% 4.07% 4.17% 4.55%
4.86%
3.00% 3.87% 4.65% 4.88% 5.00% 5.45%
5.84%
3.50% 4.52% 5.43% 5.69% 5.83% 6.36%
6.81%
4.00% 5.16% 6.20% 6.50% 6.67% 7.27%
7.78%
4.50% 5.81% 6.98% 7.32% 7.50% 8.18%
8.75%
5.00% 6.45% 7.75% 8.13% 8.33% 9.09%
9.73%
5.50% 7.10% 8.53% 8.94% 9.17% 10.00%
10.70%
6.00% 7.74% 9.30% 9.76% 10.00% 10.91%
11.67%
6.5.% 8.39% 10.08% 10.57% 10.83% 11.82%
12.65%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING
THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL STATE AND
LOCAL TAXES PAID
ON COMPARABLE TAXABLE INVESTMENTS WERE NOT USED TO INCREASE FEDERAL
DEDUCTIONS.
THE LOCAL INCOME TAX RATE IS ASSUMED TO BE 50% OF THE STATE RATE
FOR ALL COUNTIES
EXCLUDING ALLEGHANY, BALTIMORE, MONTGOMERY, PRINCE GEORGE'S,
TALBOT, AND
WORCESTER.
The chart above is for illustrative purposes only. It is not an
indicator
of past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF MARYLAND
INCLUDING LOCAL INCOME TAX
COMBINED FEDERAL, STATE, AND COUNTY INCOME TAX BRACKET:
22.50% 35.50% 38.50% 40.00% 45.00%
48.60%
JOINT $1- $39,001- $94,251- $100,001- $143,601-
OVER
RETURN 39,000 94,250 100,000 143,600 256,500
$256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
2.00% 2.58% 3.10% 3.25% 3.33% 3.64%
3.89%
2.50% 3.23% 3.88% 4.07% 4.17% 4.55%
4.86%
3.00% 3.87% 4.65% 4.88% 5.00% 5.45%
5.84%
3.50% 4.52% 5.43% 5.69% 5.83% 6.36%
6.81%
4.00% 5.16% 6.20% 6.50% 6.67% 7.27%
7.78%
4.50% 5.81% 6.98% 7.32% 7.50% 8.18%
8.75%
5.00% 6.45% 7.75% 8.13% 8.33% 9.09%
9.73%
5.50% 7.10% 8.53% 8.94% 9.17% 10.00%
10.70%
6.00% 7.74% 9.30% 9.76% 10.00% 10.91%
11.67%
6.5.% 8.39% 10.08% 10.57% 10.83% 11.82%
12.65%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
STATE AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENTS WERE
NOT
USED TO INCREASE FEDERAL DEDUCTIONS. THE LOCAL INCOME TAX RATE IS
ASSUMED TO BE 50% OF THE STATE RATE FOR ALL COUNTIES EXCLUDING
ALLEGHANY, BALTIMORE, MONTGOMERY, PRINCE GEORGE'S, TALBOT, AND
WORCESTER.
The chart above is for illustrative purposes only. It is not an
indicator
of past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
Total Return
Average annual total return is the average compounded rate of return for
a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the
period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares
purchased at the beginning listed over the period by any additional
shares,
assuming the monthly reinvestment of all dividends and distributions.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
- Lipper Analytical Services, Inc. ranks funds in various fund
categories based on total return, which assumes the reinvestment
of
all income dividends and capital gains distributions, if any.
- Donoghue's Money Fund Report publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the
same
money funds.
- Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day
effective
yield.
314229774
G00105-02-B (2/95)
OHIO MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
CASH II SHARES
PROSPECTUS
The Cash II Shares of Ohio Municipal Cash Trust (the "Fund") offered by
this
prospectus represent interests in a non-diversified portfolio of
Federated
Municipal Trust (the "Trust"), an open-end management investment company
(a
mutual fund). The Fund invests in short-term Ohio municipal securities
to
achieve current income exempt from federal regular income tax and the
personal
income taxes imposed by the State of Ohio and Ohio municipalities
consistent
with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information
dated
February 28, 1995, with the Securities and Exchange Commission. The
information
contained in the Combined Statement of Additional Information is
incorporated by
reference into this prospectus. You may request a copy of the Combined
Statement
of Additional Information free of charge by calling 1-800-235-4669. To
obtain
other information, or make inquiries about the Fund, contact the Fund at
the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CASH II SHARES
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
Ohio Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Cash II Shares
8
Administration of the Fund
9
NET ASSET VALUE
10
- ------------------------------------------------------
HOW TO PURCHASE SHARES
10
- ------------------------------------------------------
Special Purchase Features
11
HOW TO REDEEM SHARES
11
- ------------------------------------------------------
Special Redemption Features
12
ACCOUNT INFORMATION
13
- ------------------------------------------------------
Dividends
13
Capital Gains
13
Certificates and Confirmations
13
Accounts With Low Balances
13
SHAREHOLDER INFORMATION
13
- ------------------------------------------------------
Voting Rights
13
Massachusetts Partnership Law
14
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
15
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
OTHER CLASSES OF SHARES
16
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
17
- ------------------------------------------------------
ADDRESSES
18
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
CASH II SHARES
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)..................................................................
..... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as
applicable).............................................................
. None
Redemption Fee (as a percentage of amount redeemed, if
applicable).......................................... None
Exchange
Fee.....................................................................
........................... None
ANNUAL CASH II SHARES OPERATING
EXPENSES
(As a percentage of average net
assets)
Management Fee (after waiver)
(1).....................................................................
...... 0.35%
12b-1 Fee (after waiver)
(2).....................................................................
........... 0.05%
Total Other
Expenses................................................................
........................ 0.47%
Shareholder Services
Fee.....................................................................
0.25%
Total Cash II Shares Operating Expenses
(3)........................................................ 0.87%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of a
portion of the management fee. The adviser can terminate this
voluntary
waiver at any time at its sole discretion. The maximum management
fee is
0.40%.
(2) The maximum 12b-1 fee is 0.30%.
(3) The Total Cash II Shares Operating Expenses in the table above are
based on
expenses expected during the fiscal year ending October 31, 1995.
The Total
Cash II Shares Operating Expenses were 0.85% for the fiscal year
ended
October 31, 1994, and would have been 1.09% absent the voluntary
waivers of
a portion of the management fee and a portion of the 12b-1 fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of Cash II Shares of the
Fund will
bear, either directly or indirectly. For more complete descriptions of
the
various costs and expenses, see "How to Purchase Shares" and "Trust
Information." Wire-transferred redemptions of less than $5,000 may be
subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years 5 years 10 years
<S>
<C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1)
5% annual return and (2) redemption at the end of each time
period....... $9 $28 $48 $107
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the foregoing table and example relates
only to
Cash II Shares of the Fund. The Fund also offers another class of shares
called
Institutional Shares. Cash II Shares and Institutional Shares are
subject to
certain of the same expenses; however, Institutional Shares are not
subject to a
12b-1 fee. See "Other Classes of Shares."
OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH II SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1994 1993 1992 1991*
<S> <C>
<C> <C> <C>
- ----------------------------------------------------------------- -----
- ---- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $
1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------
Net investment income
0.02 0.02 0.03 0.02
- ----------------------------------------------------------------- -----
- ---- --------- --------- ---------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------
Dividends to shareholders from net investment income
(0.02) (0.02) (0.03) (0.02)
- ----------------------------------------------------------------- -----
- ---- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $
1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------- -----
- ---- --------- --------- ---------
TOTAL RETURN**
2.10% 2.02% 2.90% 2.27%
- -----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------
Expenses
0.85% 0.78% 0.76% 0.63%(b)
- -----------------------------------------------------------------
Net investment income
2.09% 2.01% 2.86% 4.18%(b)
- -----------------------------------------------------------------
Expense waiver/reimbursement (a)
0.24% 0.19% 0.25% 0.34%(b)
- -----------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------
Net assets, end of period (000 omitted)
$156,051 $127,017 $133,877 $94,081
- -----------------------------------------------------------------
</TABLE>
* Reflects operations for the period from April 22, 1991 (date of
initial
public investment) to October 31, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The shares in any one portfolio may be offered in separate
classes.
With respect to the Fund, as of the date of this prospectus, the
Trustees have
established two classes of shares known as Cash II Shares and
Institutional
Shares. This prospectus relates only to Cash II Shares of the Fund,
which are
designed primarily for the retail customers of financial institutions as
a
convenient means of accumulating an interest in a professionally
managed,
non-diversified portfolio investing primarily in short-term Ohio
municipal
securities. The Fund may not be a suitable investment for retirement
plans or
for non-Ohio taxpayers because it invests in municipal securities of
Ohio. A
minimum initial investment of $25,000 over a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the personal income taxes imposed by the State of
Ohio
and Ohio municipalities consistent with stability of principal. This
investment
objective cannot be changed without shareholder approval. While there is
no
assurance that the Fund will achieve its investment objective, it
endeavors to
do so by following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Ohio
municipal securities (as defined below) maturing in 13 months or less.
As a
matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be
exempt from
federal regular income tax and Ohio state income taxes. (Federal regular
income
tax does not include the federal individual alternative minimum tax or
the
federal alternative minimum tax for corporations.) The average maturity
of the
securities in the Fund's portfolio, computed on a dollar-weighted basis,
will be
90 days or less. Unless indicated otherwise, the investment policies may
be
changed by the Trustees without shareholder approval. Shareholders will
be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by
or on behalf of Ohio and its political subdivisions and financing
authorities,
and obligations of other states, territories, and possessions of the
United
States, including the District of Columbia, and any political
subdivision or
financing authority of any of these, the income from which is, in the
opinion of
qualified legal counsel, exempt from federal regular income tax and Ohio
state
income tax imposed upon non-corporate taxpayers ("Ohio municipal
securities").
Examples of Ohio municipal securities include, but are not limited to:
tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
municipal commercial paper and other short-term notes;
variable rate demand notes;
municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Ohio
municipal
securities from financial institutions such as commercial and
investment
banks, savings and loan associations, and insurance companies.
These
interests may take the form of participations, beneficial interests
in a
trust, partnership interests or any other form of indirect
ownership that
allows the Fund to treat the income from the investment as exempt
from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying Ohio municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The Ohio municipal securities in which the Fund invests must be
rated
in one of the two highest short-term rating categories by one or more
nationally
recognized statistical rating organizations ("NRSROs") or be of
comparable
quality to securities having such ratings. An NRSRO's two highest rating
categories are determined without regard for sub-categories and
gradations. For
example, securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's
Ratings
Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc.
("Moody's"), or
FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc. ("Fitch") are
all
considered rated in one of the two highest short-term rating categories.
The
Fund will follow applicable regulations in determining whether a
security rated
by more than one NRSRO can be treated as being in one of the two highest
short-
term rating categories; currently, such securities must be rated by two
NRSROs
in one of their two highest rating categories. See "Regulatory
Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit-enhanced
securities
based upon the financial condition and ratings of the party providing
the credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit-enhanced by the credit enhancer, in which case the securities
will be
treated as having been issued by both the issuer and the credit
enhancer. The
bankruptcy, receivership, or default of the credit enhancer will
adversely
affect the quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED SECURITIES. As a matter of fundamental policy, the Fund may
invest in
restricted securities. Restricted securities are any securities in which
the
Fund may invest pursuant to its investment objective and policies but
which are
subject to restrictions on resale under federal securities laws. Under
criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines
that market conditions call for a temporary defensive posture, the Fund
may
invest in tax-exempt or taxable securities such as: obligations issued
by or on
behalf of municipal or corporate issuers having the same quality
characteristics
as described above; obligations issued or guaranteed by the U.S.
government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so. However, the interest from certain Ohio
municipal
securities is subject to the federal alternative minimum tax.
OHIO MUNICIPAL SECURITIES
Ohio municipal securities are generally issued to finance public works,
such as
airports, bridges, highways, housing, hospitals, mass transportation
projects,
schools, streets, and water and sewer works. They are also issued to
repay
outstanding obligations, to raise funds for general operating expenses,
and to
make loans to other public institutions and facilities.
Ohio municipal securities include industrial development bonds issued by
or on
behalf of public authorities to provide financing aid to acquire sites
or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Ohio municipal securities are
"general
obligation" and "revenue" bonds. General obligation bonds are secured by
the
issuer's pledge of its full faith and credit and taxing power for the
payment of
principal and interest. Interest on and principal of revenue bonds,
however, are
payable only from the revenue generated by the facility financed by the
bond or
other specified sources of revenue. Revenue bonds do not represent a
pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Ohio municipal securities depend on a variety of factors,
including:
the general conditions of the short-term municipal note market and of
the
municipal bond market; the size of the particular offering; the maturity
of the
obligations; and the rating of the issue. The ability of the Fund to
achieve its
investment objective also depends on the continuing ability of the
issuers of
Ohio municipal securities and participation interests, or the credit
enhancers
of either, to meet their obligations for the payment of interest and
principal
when due. In addition, from time to time, the supply of Ohio municipal
securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Ohio municipal securities which are repayable out
of
revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
Ohio municipal securities could involve an increased risk to the Fund
should any
of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Ohio municipal securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase
agreements
(arrangements in which the Fund sells a money market instrument for a
percentage
of its cash value with an agreement to buy it back on a set date) or
pledge
securities except, under certain circumstances, the Fund may borrow up
to
one-third of the value of its total assets and pledge up to 15% of the
value of
total assets to secure such borrowings. This investment limitation
cannot be
changed without shareholder approval.
As a matter of fundamental policy, the Fund will not invest more than
10% of its
net assets in illiquid securities.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Combined Statement of Additional Information, in
order to
comply with applicable laws and regulations, including the provisions of
and
regulations under the Investment Company Act of 1940, as amended. In
particular,
the Fund will comply with the various requirements of Rule 2a-7, which
regulates
money market mutual funds. The Fund will determine the effective
maturity of its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are
responsible for managing the Trust's business affairs and for exercising
all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .40 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF CASH II SHARES
Federated Securities Corp. is the principal distributor for Cash II
Shares of
the Fund. It is a Pennsylvania corporation organized on November 14,
1969, and
is the principal distributor for a number of investment companies.
Federated
Securities Corp. is a subsidiary of Federated Investors.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan
adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution
Plan"),
the Fund may pay to the distributor an amount, computed at an annual
rate of .30
of 1% of the average daily net asset value of Cash II Shares to finance
any
activity which is principally intended to result in the sale of shares
subject
to the Distribution Plan. The distributor may select financial
institutions such
as banks, fiduciaries, custodians for public funds, investment advisers,
and
broker/dealers to provide sales support services as agents for their
clients or
customers. In addition, the Fund has adopted a Shareholder Services Plan
(the
"Services Plan") under which it will pay Federated Shareholder Services,
an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of Cash II Shares to provide personal
services
and/or maintenance of shareholder accounts to the Fund and its
shareholders.
From time to time and for such periods as it deems appropriate, the
amounts
stated above may be reduced voluntarily.
Financial institutions will receive fees based upon shares owned by
their
clients or customers. The schedules of such fees and the basis upon
which such
fees will be paid will be determined from time to time by the Fund, the
distributor, or Federated Shareholder Services, as appropriate.
The Distribution Plan is a compensation-type plan. As such, the Fund
makes no
payments to the distributor except as described above. Therefore, the
Fund does
not pay for unreimbursed expenses of the distributor, including amounts
expended
by the distributor in excess of amounts received by it from the Fund,
interest,
carrying or other financing charges in connection with excess amounts
expended,
or the distributor's overhead expenses. However, the distributor may be
able to
recover such amounts or may earn a profit from future payments made by
the Fund
under the Distribution Plan.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may also pay
financial
institutions a fee for providing certain services to shareholders. This
fee is
in addition to the amounts paid under the Distribution Plan and, if
paid, will
be reimbursed by the adviser and not the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary
of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian
for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of Cash II Shares at
$1.00 by
valuing the portfolio securities using the amortized cost method. The
net asset
value per share is determined by subtracting liabilities attributable to
Cash II
Shares from the value of Fund assets attributable to Cash II Shares, and
dividing the remainder by the number of Cash II Shares outstanding. The
Fund
cannot guarantee that its net asset value will always remain at $1.00
per share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
HOW TO PURCHASE SHARES
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Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased as described below either through a financial institution
(such as
a bank or broker/dealer) or by wire or by check directly from the Fund,
with a
minimum initial investment of $25,000. (Financial institutions may
impose
different minimum investment requirements on their customers.)
In connection with any sale, Federated Securities Corp. may from time to
time
offer certain items of nominal value to any shareholder or investor. The
Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and
returning
the new account form available from the Fund before shares can be
purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may
purchase shares
through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives
payment by
wire or converts payment by check from the financial institution into
federal
funds. It is the financial institution's responsibility to transmit
orders
promptly. Financial institutions may charge additional fees for their
services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling
the Fund
before 3:00 p.m. (Eastern time). The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) in
order to begin earning dividends that same day. Federal funds should be
wired as
follows: Federated Services Company, c/o State Street Bank and Trust
Company,
Boston, MA; Attention; EDGEWIRE; For Credit to: Ohio Municipal Cash
Trust-- Cash
II Shares; Fund Number (this number can be found on the account
statement or by
contacting the Fund); Group Number or Order Number; Nominee or
Institution Name;
and ABA Number 011000028. Shares cannot be purchased by wire on holidays
when
wire transfers are restricted.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check
made
payable to Ohio Municipal Cash Trust--Cash II Shares to: Federated
Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8604, Boston,
MA
02266-8604. Orders by mail are considered received when payment by check
is
converted into federal funds (normally the business day after the check
is
received) and shares begin earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM. A minimum of $500 can be automatically
withdrawn
periodically from the shareholder's checking account at an Automated
Clearing
House ("ACH") member and invested in Fund shares. Shareholders should
contact
their financial institution or the Fund to participate in this program.
HOW TO REDEEM SHARES
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Shares are redeemed at their net asset value next determined after a
Fund
receives the redemption request. Redemptions will be made on days on
which the
Fund computes its net asset value. Redemption requests must be received
in
proper form and can be made as described below.
REDEEMING SHARES THROUGH A FINANCIAL INSTITUTION. Shares may be redeemed
by
contacting the shareholder's financial institution. Shares will be
redeemed at
the net asset value next determined after Federated Services Company
receives
the redemption request. According to the shareholder's instructions,
redemption
proceeds can be sent to the financial institution or to the shareholder
by check
or by wire. The financial institution is responsible for promptly
submitting
redemption requests and providing proper written redemption
instructions.
Customary fees and commissions may be charged by the financial
institution for
this service.
REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by
calling
the Fund provided the Fund has a properly completed authorization form.
These
forms can be obtained from Federated Securities Corp. Proceeds from
redemption
requests received before 12:00 noon (Eastern time) will be wired the
same day to
the shareholder's account at a domestic commercial bank which is a
member of the
Federal Reserve System, but will not include that day's dividend.
Proceeds from
redemption requests received after that time will include that day's
dividends
but will be wired the following business day. Under limited
circumstances,
arrangements may be made with the distributor for same-day payment of
proceeds,
without that day's dividend, for redemption requests received before
2:00 p.m.
(Eastern time). Proceeds from redeemed shares purchased by check or
through ACH
will not be wired until that method of payment has cleared.
Telephone instructions may be recorded and if reasonable procedures are
not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares
By Mail"
should be considered. If at any time the Fund shall determine it
necessary to
terminate or modify the telephone redemption privilege, shareholders
would be
promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by
mailing a
written request together with properly endorsed certificates, if issued,
to:
Federated Services Company, c/o State Street Bank and Trust Company,
P.O. Box
8604, Boston, MA 02266-8604. The written request should state: Ohio
Municipal
Cash Trust--Cash II Shares; the account name as registered with the
Fund; the
account number; and the number of shares to be redeemed or the dollar
amount
requested. All owners of the account must sign the request exactly as
the shares
are registered. Any share certificates should be sent by registered or
certified
mail with the written request. Normally, a check for the proceeds is
mailed
within one business day, but in no event more than seven days, after
receipt of
a proper written redemption request. Dividends are paid up to and
including the
day that a redemption request is processed.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by: a commercial or savings bank, trust company or
savings
and loan association whose deposits are insured by an organization which
is
administered by the Federal Deposit Insurance Corporation; a member firm
of a
domestic stock exchange; or any other "eligible guarantor institution,"
as
defined in the Securities Exchange Act of 1934. The Fund does not accept
signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to
allow
shareholders to redeem their fund shares. A fee will be charged for this
service. The check writing service allows the shareholder to receive the
daily
dividend declared on the shares to be redeemed until the check is
presented to
State Street Bank for payment. However, checks should never be made
payable or
sent to State Street Bank or the Fund to redeem shares, and a check may
not be
written to close an account. Canceled checks are sent to the shareholder
each
month.
DEBIT CARD. Upon request, a debit account will be established. This
account
allows shareholders to redeem shares by using a debit card. A fee will
be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of
at
least $10,000, a systematic withdrawal program may be established
whereby
automatic redemptions are made from the account and transferred
electronically
to any commercial bank, savings bank, or credit union that is an ACH
member.
Shareholders may apply for participation in this program through their
financial
institution or the Fund.
ACCOUNT INFORMATION
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DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing. Monthly
confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, if an
account
balance falls below $25,000 due to shareholder redemptions, the Fund may
redeem
all of the remaining shares in that account (except accounts maintained
by
retirement plans) and pay the proceeds to the shareholder. Before shares
are
redeemed to close an account, the shareholder will be notified in
writing and
allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
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VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of all
classes of
each portfolio in the Trust have equal voting rights, except that in
matters
affecting only a particular portfolio or class, only shares of that
portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust
is not
required to hold annual shareholder meetings. Shareholder approval will
be
sought only for certain changes in the Trust's or the Fund's operation
and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
As of January 10, 1995, Gradison & Company, Inc., Cincinnati, Ohio,
owned 75.30%
of the voting securities of the Fund, and, therefore, may, for certain
purposes,
be deemed to control the Fund and be able to affect the outcome of
certain
matters presented for a vote of shareholders.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
Ohio. Shareholders are urged to consult their own tax advisers regarding
the
status of their accounts under state and local tax laws.
OHIO TAXES. Under existing Ohio laws, distributions made by the Fund
will not be
subject to Ohio individual income taxes to the extent that such
distributions
qualify as exempt-interest dividends under the Internal Revenue Code,
and
represent (i) interest from obligations of Ohio or its subdivisions
which is
exempt from federal income tax; or (ii) interest or dividends from
obligations
issued by the United States and its territories or possessions or by any
authority, commission or instrumentality of the United States which are
exempt
from state income tax under federal laws. Conversely, to the extent that
distributions made by the Fund are derived from other types of
obligations, such
distributions will be subject to Ohio individual income taxes.
Distributions made by the Fund will not be subject to Ohio corporation
franchise
tax to the extent that such distributions qualify as exempt-interest
dividends
under the Code, and represent (i) interest from obligations of Ohio or
its
subdivisions which is exempt from federal income tax; or (ii) net
interest
income from obligations issued by the United States and its territories
or
possessions or by any authority, commission or instrumentality of the
United
States, which is included in federal taxable income and which is exempt
from
state income tax under federal laws.
Exempt-interest dividends that represent interest from obligations held
by the
Fund which are issued by Ohio or its political subdivisions will be
exempt from
any Ohio municipal income tax (even if the municipality is permitted
under Ohio
law to levy a tax on intangible income).
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time, the Fund advertises its yield, effective yield, and
tax-equivalent yield for Cash II Shares.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
Cash II Shares' tax-exempt yield, assuming a specific tax rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in Cash II Shares after reinvesting all income distributions.
It is
calculated by dividing that change by the initial investment and is
expressed as
a percentage.
The performance figures will be calculated separately for each class of
shares.
Because each class of shares is subject to different expenses, the
yield,
effective yield, and tax-equivalent yield of Institutional Shares will
exceed
the yield, effective yield, and tax-equivalent yield of Cash II Shares
for the
same period.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
OTHER CLASSES OF SHARES
- ------------------------------------------------------------------------
- --------
The Fund also offers the following class.
Institutional Shares are sold at net asset value primarily to financial
institutions acting in a fiduciary or agency capacity. Investments in
Institutional Shares are subject to a minimum initial investment of
$25,000.
Institutional Shares are sold with no 12b-1 fees.
Financial institutions providing distribution or administrative services
may
receive additional compensation depending upon which class of shares of
the Fund
is sold. The distributor pays this compensation and is reimbursed from
sources
other than the assets of the Fund.
The amount of dividends payable to shareholders of any particular class
may be
more or less than that payable to the shareholders of any other class
depending
upon the existence of and differences in class expenses, 12b-1 Plan
expenses,
and Shareholder Services Plan expenses. The stated advisory fee is the
same for
all classes of shares.
OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1994 1993 1992 1991*
<S> <C>
<C> <C> <C>
- ----------------------------------------------------------------- -----
- ---- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $
1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------
Net investment income
0.02 0.02 0.03 0.02
- ----------------------------------------------------------------- -----
- ---- --------- --------- ---------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------
Dividends to shareholders from net investment income
(0.02) (0.02) (0.03) (0.02)
- ----------------------------------------------------------------- -----
- ---- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $
1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------------- -----
- ---- --------- --------- ---------
TOTAL RETURN**
2.41% 2.33% 3.21% 2.40%
- -----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------
Expenses
0.55% 0.48% 0.46% 0.35%(b)
- -----------------------------------------------------------------
Net investment income
2.36% 2.30% 3.10% 4.46%(b)
- -----------------------------------------------------------------
Expense waiver/reimbursement (a)
0.07% 0.19% 0.25% 0.32%(b)
- -----------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------
Net assets, end of period (000 omitted)
$62,499 $81,748 $73,342 $44,771
- -----------------------------------------------------------------
</TABLE>
* Reflects operations for the period from April 22, 1991 (date of
initial
public investment) to October 31, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C>
<C>
Ohio Municipal Cash Trust
Cash II Shares
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Investment Adviser
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 8604
Boston, MA 02266-8604
- ------------------------------------------------------------------------
- -----------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Independent Public Accountants
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
- ------------------------------------------------------------------------
- -----------------------------------------------
</TABLE>
OHIO MUNICIPAL
CASH TRUST
CASH II SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated February 28, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314229840
1030105A-CII (2/95)
OHIO MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares of Ohio Municipal Cash Trust (the "Fund")
offered by
this prospectus represent interests in a non-diversified portfolio of
Federated
Municipal Trust (the "Trust"), an open-end management investment company
(a
mutual fund). The Fund invests in short-term Ohio municipal securities
to
achieve current income exempt from federal regular income tax and the
personal
income taxes imposed by the State of Ohio and Ohio municipalities
consistent
with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information
dated
February 28, 1995, with the Securities and Exchange Commission. The
information
contained in the Combined Statement of Additional Information is
incorporated by
reference into this prospectus. You may request a copy of the Combined
Statement
of Additional Information free of charge by calling 1-800-235-4669. To
obtain
other information, or make inquiries about the Fund, contact the Fund at
the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
Ohio Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Institutional Shares
9
Administration of the Fund
9
NET ASSET VALUE
10
- ------------------------------------------------------
INVESTING IN THE FUND
10
- ------------------------------------------------------
Share Purchases
10
Minimum Investment Required
11
Subaccounting Services
11
Certificates and Confirmations
11
Dividends
11
Capital Gains
12
REDEEMING SHARES
12
- ------------------------------------------------------
By Mail
12
Telephone Redemption
13
Accounts with Low Balances
13
SHAREHOLDER INFORMATION
13
- ------------------------------------------------------
Voting Rights
13
Massachusetts Partnership Law
13
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
14
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
OTHER CLASSES OF SHARES
16
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CASH II SHARES
17
- ------------------------------------------------------
ADDRESSES
18
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)..................................................................
... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)..................................................................
... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as
applicable)............................................................
None
Redemption Fee (as a percentage of amount redeemed, if
applicable)........................................ None
Exchange
Fee.....................................................................
......................... None
ANNUAL INSTITUTIONAL SHARES OPERATING
EXPENSES
(As a percentage of average net
assets)
Management Fee (after waiver)
(1).....................................................................
.... 0.35%
12b-1
Fee.....................................................................
............................ None
Total Other
Expenses................................................................
...................... 0.22%
Shareholder Services Fee (after waiver)
(2)................................................ 0.00%
Total Institutional Shares Operating Expenses
(3)................................................ 0.57%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of a
portion of the management fee. The adviser can terminate this
voluntary
waiver at any time at its sole discretion. The maximum management
fee is
0.40%.
(2) The maximum shareholder services fee is 0.25%.
(3) The Total Institutional Shares Operating Expenses in the table above
are
based on expenses expected during the fiscal year ending October 31,
1995.
The Total Institutional Shares Operating Expenses were 0.55% for the
fiscal
year ended October 31, 1994, and would have been 0.62% absent the
voluntary
waiver of a portion of the management fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of Institutional Shares of
the
Fund will bear, either directly or indirectly. For more complete
descriptions of
the various costs and expenses, see "Investing in the Fund" and "Trust
Information." Wire-transferred redemptions of less than $5,000 may be
subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years 5 years 10 years
<S>
<C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1)
5% annual return and (2) redemption at the end of each time
period....... $6 $18 $32 $71
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the foregoing table and example relates
only to
Institutional Shares of the Fund. The Fund also offers another class of
shares
called Cash II Shares. Institutional Shares and Cash II Shares are
subject to
certain of the same expenses; however, Cash II Shares are subject to a
12b-1 fee
of up to 0.30%. See "Other Classes of Shares."
OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1994
1993 1992 1991*
<S> <C>
<C> <C> <C>
- ------------------------------------------------------------- ---------
- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
$ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------
Net investment income 0.02
0.02 0.03 0.02
- ------------------------------------------------------------- ---------
- --------- --------- ---------
LESS DISTRIBUTIONS
- -------------------------------------------------------------
Dividends to shareholders from net investment income
(0.02) (0.02) (0.03) (0.02)
- ------------------------------------------------------------- ---------
- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00
$ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------- ---------
- --------- --------- ---------
TOTAL RETURN**
2.41% 2.33% 3.21% 2.40%
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------
Expenses
0.55% 0.48% 0.46% 0.35%(b)
- -------------------------------------------------------------
Net investment income
2.36% 2.30% 3.10% 4.46%(b)
- -------------------------------------------------------------
Expense waiver/reimbursement (a)
0.07% 0.19% 0.25% 0.32%(b)
- -------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------
Net assets, end of period (000 omitted) $62,499
$81,748 $74,342 $44,771
- -------------------------------------------------------------
</TABLE>
* Reflects operations for the period from April 22, 1991 (date of
initial
public investment) to October 31, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The shares in any one portfolio may be offered in separate
classes.
With respect to the Fund, as of the date of this prospectus, the
Trustees have
established two classes of shares known as Institutional Shares and Cash
II
Shares. This prospectus relates only to Institutional Shares of the
Fund, which
are designed primarily for financial institutions acting in a fiduciary
or
agency capacity as a convenient means of accumulating an interest in a
professionally managed, non-diversified portfolio investing primarily in
short-term Ohio municipal securities. The Fund may not be a suitable
investment
for retirement plans or for non-Ohio taxpayers because it invests in
municipal
securities of Ohio. A minimum initial investment of $25,000 over a 90-
day period
is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the personal income taxes imposed by the State of
Ohio
and Ohio municipalities consistent with stability of principal. This
investment
objective cannot be changed without shareholder approval. While there is
no
assurance that the Fund will achieve its investment objective, it
endeavors to
do so by following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Ohio
municipal securities (as defined below) maturing in 13 months or less.
As a
matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be
exempt from
federal regular income tax and Ohio state incomes taxes. (Federal
regular income
tax does not include the federal individual alternative minimum tax or
the
federal alternative minimum tax for corporations.) The average maturity
of the
securities in the Fund's portfolio, computed on a dollar-weighted basis,
will be
90 days or less. Unless indicated otherwise, the investment policies may
be
changed by the Trustees without shareholder approval. Shareholders will
be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by
or on behalf of Ohio and its political subdivisions and financing
authorities,
and obligations of other states, territories, and possessions of the
United
States, including the District of Columbia, and any political
subdivision or
financing authority of any of these, the income from which is, in the
opinion of
qualified legal counsel, exempt from federal regular income tax and Ohio
state
income tax imposed upon non-corporate taxpayers ("Ohio municipal
securities").
Examples of Ohio municipal securities include, but are not limited to:
tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
municipal commercial paper and other short-term notes;
variable rate demand notes;
municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Ohio
municipal
securities from financial institutions such as commercial and
investment
banks, savings and loan associations, and insurance companies.
These
interests may take the form of participations, beneficial interests
in a
trust, partnership interests or any other form of indirect
ownership that
allows the Fund to treat the income from the investment as exempt
from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying Ohio municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The Ohio municipal securities in which the Fund invests must be
rated
in one of the two highest short-term rating categories by one or more
nationally
recognized statistical rating organizations ("NRSROs") or be of
comparable
quality to securities having such ratings. An NRSRO's two highest rating
categories are determined without regard for sub-categories and
gradations. For
example, securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's
Ratings
Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc.
("Moody's"), or
FIN-1+, FIN-1, or
FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all considered
rated in one
of the two highest short-term rating categories. The Fund will follow
applicable
regulations in determining whether a security rated by more than one
NRSRO can
be treated as being in one of the two highest short-term rating
categories;
currently, such securities must be rated by two NRSROs in one of their
two
highest rating categories. See "Regulatory Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit-enhanced
securities
based upon the financial condition and ratings of the party providing
the credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit-enhanced by the credit enhancer, in which case the securities
will be
treated as having been issued by both the issuer and the credit
enhancer. The
bankruptcy, receivership, or default of the credit enhancer will
adversely
affect the quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED SECURITIES. As a matter of fundamental policy, the Fund may
invest in
restricted securities. Restricted securities are any securities in which
the
Fund may invest pursuant to its investment objective and policies but
which are
subject to restrictions on resale under federal securities laws. Under
criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines
that market conditions call for a temporary defensive posture, the Fund
may
invest in tax-exempt or taxable securities such as: obligations issued
by or on
behalf of municipal or corporate issuers having the same quality
characteristics
as described above; obligations issued or guaranteed by the U.S.
government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so. However, the interest from certain Ohio
municipal
securities is subject to the federal alternative minimum tax.
OHIO MUNICIPAL SECURITIES
Ohio municipal securities are generally issued to finance public works,
such as
airports, bridges, highways, housing, hospitals, mass transportation
projects,
schools, streets, and water and sewer works. They are also issued to
repay
outstanding obligations, to raise funds for general operating expenses,
and to
make loans to other public institutions and facilities.
Ohio municipal securities include industrial development bonds issued by
or on
behalf of public authorities to provide financing aid to acquire sites
or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Ohio municipal securities are
"general
obligation" and "revenue" bonds. General obligation bonds are secured by
the
issuer's pledge of its full faith and credit and taxing power for the
payment of
principal and interest. Interest on and principal of revenue bonds,
however, are
payable only from the revenue generated by the facility financed by the
bond or
other specified sources of revenue. Revenue bonds do not represent a
pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Ohio municipal securities depend on a variety of factors,
including:
the general conditions of the short-term municipal note market and of
the
municipal bond market; the size of the particular offering; the maturity
of the
obligations; and the rating of the issue. The ability of the Fund to
achieve its
investment objective also depends on the continuing ability of the
issuers of
Ohio municipal securities and participation interests, or the credit
enhancers
of either, to meet their obligations for the payment of interest and
principal
when due. In addition, from time to time, the supply of Ohio municipal
securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Ohio municipal securities which are repayable out
of
revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
Ohio municipal securities could involve an increased risk to the Fund
should any
of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Ohio municipal securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase
agreements
(arrangements in which the Fund sells a money market instrument for a
percentage
of its cash value with an agreement to buy it back on a set date) or
pledge
securities except, under certain circumstances, the Fund may borrow up
to
one-third of the value of its total assets and pledge up to 15% of the
value of
total assets to secure such borrowings. This investment limitation
cannot be
changed without shareholder approval.
As a matter of nonfundamental policy, the Fund will not invest more than
10% of
its net assets in illiquid securities.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Combined Statement of Additional Information, in
order to
comply with applicable laws and regulations, including the provisions of
and
regulations under the Investment Company Act of 1940, as amended. In
particular,
the Fund will comply with the various requirements of Rule 2a-7, which
regulates
money market mutual funds. The Fund will determine the effective
maturity of its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
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- --------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are
responsible for managing the Trust's business affairs and for exercising
all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .40 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for
Institutional Shares
of the Fund. It is a Pennsylvania corporation organized on November 14,
1969,
and is the principal distributor for a number of investment companies.
Federated
Securities Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services
Plan (the
"Services Plan") under which it will pay Federated Shareholder Services,
an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of the Institutional Shares to provide
personal
services and/or maintenance of shareholder accounts to the Fund and its
shareholders. From time to time and for such periods as deemed
appropriate, the
amount stated above may be reduced voluntarily.
Federated Shareholder Services may elect to pay financial institutions
fees
based upon shares owned by their clients or customers for services
provided to
those clients or customers. The schedules of such fees and the basis
upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds,
investment
advisers, and broker/dealers to provide certain services to
shareholders. These
services may include, but are not limited to, distributing prospectuses
and
other information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of shares. Any fees paid for
these
services by the distributor will be reimbursed by the adviser and not
the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary
of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian
for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
- ------------------------------------------------------------------------
- --------
The Fund attempts to stabilize the net asset value of Institutional
Shares at
$1.00 by valuing the portfolio securities using the amortized cost
method. The
net asset value per share is determined by subtracting liabilities
attributable
to Institutional Shares from the value of Fund assets attributable to
Institutional Shares, and dividing the remainder by the number of
Institutional
Shares outstanding. The Fund cannot guarantee that its net asset value
will
always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
INVESTING IN THE FUND
- ------------------------------------------------------------------------
- --------
SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased either by wire or mail. The Fund reserves the right to
reject any
purchase request.
To make a purchase, open an account by calling Federated Securities
Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase by Federal Reserve wire, call the Fund before 1:00
p.m.
(Eastern time) to place an order. The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) that
day. Federal funds should be wired as follows: Federated Services
Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE;
For Credit
to: Ohio Municipal Cash Trust--Institutional Shares; Fund Number (this
number
can be found on the account statement or by contacting the Fund); Group
Number
or Order Number; Nominee or Institution Name; and ABA Number 011000028.
BY MAIL. To purchase by mail, send a check made payable to Ohio
Municipal Cash
Trust-- Institutional Shares to: Federated Services Company, c/o State
Street
Bank and Trust Company, P.O. Box 8602, Boston, MA 02266-8602. Orders by
mail are
considered received when payment by check is converted into federal
funds. This
is normally the next business day after the check is received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be
opened
with a smaller amount as long as the minimum is reached within 90 days.
Minimum
investments will be calculated by combining all accounts maintained with
the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts.
However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping
requirements. The
transfer agent charges a fee based on the level of subaccounting
services
rendered. Financial institutions 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 provided which may be related to the
ownership of
Fund shares. This prospectus should, therefore, be read together with
any
agreement between the customer and the financial institution with regard
to the
services provided, the fees charged for those services and any
restrictions and
limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all
purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund.
Shares purchased by wire before 3:00 p.m. (Eastern time) begin earning
dividends
that day. Shares purchased by check begin earning dividends the day
after the
check is converted into federal funds.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
- ------------------------------------------------------------------------
- --------
Shares are redeemed at their net asset value next determined after
Federated
Services Company receives the redemption request. Redemptions will be
made on
days on which the Fund computes its net asset value. Redemption requests
must be
received in proper form and can be made as described below.
BY MAIL
Shares may be redeemed by sending a written request to: Federated
Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8602, Boston,
MA
02266-8602. The written request should state: Ohio Municipal Cash
Trust--Institutional Shares; shareholder's name; the account number; and
the
share or dollar amount requested. Sign the request exactly as the shares
are
registered. Shareholders should call the Fund for assistance in
redeeming by
mail.
If share certificates have been issued, they must be properly endorsed
and
should be sent by registered or certified mail with the written request.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund,
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by:
a trust company or commercial bank whose deposits are insured by
the Bank
Insurance Fund which is administered by the Federal Deposit
Insurance
Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific
Stock
Exchanges;
a savings bank or savings and loan association whose deposits are
insured
by the Savings Association Insurance Fund, which is administered
by the
FDIC; or
any other "eligible guarantor institution," as defined in the
Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the transfer agent have adopted standards for accepting
signature
guarantees from the above institutions. The Fund may elect in the future
to
limit eligible signature guarantors to institutions that are members of
the
signature guarantee program. The Fund and its transfer agent reserve the
right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day,
but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a
redemption
request is processed.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions
may be
recorded. If reasonable procedures are not followed by the Fund, it may
be
liable for losses due to unauthorized or fraudulent telephone
instructions. An
authorization form permitting the Fund to accept telephone requests must
first
be completed. Authorization forms and information on this service are
available
from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time),
the
proceeds will be wired the same day to the shareholder's account at a
domestic
commercial bank which is a member of the Federal Reserve System, and
those
shares redeemed will not be entitled to that day's dividend. A daily
dividend
will be paid on shares redeemed if the redemption request is received
after
12:00 noon (Eastern time). However, the proceeds are not wired until the
following business day.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If such a case should occur,
another
method of redemption, such as "By Mail," should be considered. If at any
time
the Fund shall determine it necessary to terminate or modify this method
of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund
may
redeem shares in any account and pay the proceeds to the shareholder if
the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is
notified in
writing and allowed 30 days to purchase additional shares to meet the
minimum
requirement.
SHAREHOLDER INFORMATION
- ------------------------------------------------------------------------
- --------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of all
classes of
each portfolio in the Trust have equal voting rights, except that in
matters
affecting only a particular portfolio or class, only shares of that
portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust
is not
required to hold annual shareholder meetings. Shareholder approval will
be
sought only for certain changes in the Trust's or the Fund's operation
and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of the Trust. These documents require notice of this
disclaimer to
be given in each agreement, obligation, or instrument the Trust or its
Trustees
enter into or sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
Ohio. Shareholders are urged to consult their own tax advisers regarding
the
status of their accounts under state and local tax laws.
OHIO TAXES. Under existing Ohio laws, distributions made by the Fund
will not be
subject to Ohio individual income taxes to the extent that such
distributions
qualify as exempt-interest dividends under the Internal Revenue Code,
and
represent (i) interest from obligations of Ohio or its subdivisions
which is
exempt from federal income tax; or (ii) interest or dividends from
obligations
issued by the United States and its territories or possessions or by any
authority, commission or instrumentality of the United States which are
exempt
from state income tax under federal laws. Conversely, to the extent that
distributions made by the Fund are derived from other types of
obligations, such
distributions will be subject to Ohio individual income taxes.
Distributions made by the Fund will not be subject to Ohio corporation
franchise
tax to the extent that such distributions qualify as exempt-interest
dividends
under the Code, and represent (i) interest from obligations of Ohio or
its
subdivisions which is exempt from federal income tax; or (ii) net
interest
income from obligations issued by the United States and its territories
or
possessions or by any authority, commission or instrumentality of the
United
States, which is included in federal taxable income and which is exempt
from
state income tax under federal laws.
Exempt-interest dividends that represent interest from obligations held
by the
Fund which are issued by Ohio or its political subdivisions will be
exempt from
any Ohio municipal income tax (even if the municipality is permitted
under Ohio
law to levy a tax on intangible income).
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time the Fund advertises its yield, effective yield, and
tax-equivalent yield for Institutional Shares.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
Institutional Shares' tax exempt yield, assuming a specific tax rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in Institutional Shares after reinvesting all income
distributions.
It is calculated by dividing that change by the initial investment and
is
expressed as a percentage.
The performance figures will be calculated separately for each class of
shares.
Because each class of shares is subject to different expenses, the
yield,
effective yield, and tax-equivalent yield of Institutional Shares will
exceed
the yield, effective yield, and tax-equivalent yield of Cash II Shares
for the
same period.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
OTHER CLASSES OF SHARES
- ------------------------------------------------------------------------
- --------
The Fund also offers the following class.
Cash II Shares are sold at net asset value primarily to retail customers
of
financial institutions. Investments in Cash II Shares are subject to a
minimum
initial investment of $25,000. Cash II Shares are distributed pursuant
to a
12b-1 Plan adopted by the Trust where by the distributor is paid a fee
of .30 of
1% of Cash II Shares' average daily net assets.
Financial institutions providing distribution or administrative services
may
receive additional compensation depending upon which class of shares of
the Fund
is sold. The distributor pays this compensation and is reimbursed from
sources
other than the assets of the Fund.
The amount of dividends payable to shareholders of any particular class
may be
more or less than that payable to the shareholders of any other class
depending
upon the existence of and differences in class expenses, 12b-1 Plan
expenses,
and Shareholder Services Plan expenses. The stated advisory fee is the
same for
all classes of shares.
OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH II SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C>
<C> <C> <C>
---------
- ---------------------------------
<CAPTION>
1994
1993 1992 1991*
<S> <C>
<C> <C> <C>
- ------------------------------------------------------------- ---------
- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
$ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------
Net investment income 0.02
0.02 0.03 0.02
- ------------------------------------------------------------- ---------
- --------- --------- ---------
LESS DISTRIBUTIONS
- -------------------------------------------------------------
Dividends to shareholders from net investment income
(0.02) (0.02) (0.03) (0.02)
- ------------------------------------------------------------- ---------
- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00
$ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------- ---------
- --------- --------- ---------
TOTAL RETURN**
2.10% 2.02% 2.90% 2.27%
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------
Expenses
0.85% 0.78% 0.76% 0.63%(b)
- -------------------------------------------------------------
Net investment income
2.09% 2.01% 2.86% 4.18%(b)
- -------------------------------------------------------------
Expense waiver/reimbursement (a)
0.24% 0.19% 0.25% 0.34%(b)
- -------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------
Net assets, end of period (000 omitted) $156,051
$127,017 $133,877 $94,081
- -------------------------------------------------------------
</TABLE>
* Reflects operations for the period from April 22, 1991 (date of
initial
public investment) to October 31, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C>
<C>
Ohio Municipal Cash Trust
Institutional Shares
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Investment Adviser
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 8602
Boston, MA 02266-8602
- ------------------------------------------------------------------------
- -----------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Independent Public Accountants
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
- ------------------------------------------------------------------------
- -----------------------------------------------
</TABLE>
OHIO MUNICIPAL
CASH TRUST
INSTITUTIONAL SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated February 28, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314229857
1030105A-IS (2/95)
Ohio Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Cash II Shares
Institutional Shares
Combined Statement of Additional Information
This Combined Statement of Additional Information should be read
with
the prospectus(es) of Ohio Municipal Cash Trust (the "Fund") dated
February 28, 1995. This Statement is not a prospectus. To receive a
copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
Reverse Repurchase Agreements 2
Ohio Investment Risks 2
Investment Limitations 2
Brokerage Transactions 4
Federated Municipal Trust
Management 5
The Funds 8
Share Ownership 9
Trustees Compensation 10
Trustee Liability 10
Investment Adviser 11
Advisory Fees 11
Fund Administration 11
Distribution and Shareholder
Services Plans 12
Determining Net Asset Value 12
Redemption in Kind 12
The Fund's Tax Status 13
Performance Information 13
Yield 13
Effective Yield 13
Tax-Equivalent Yield 13
Tax-Equivalency Tables 14
Total Return 15
Performance Comparisons 15
Investment Policies
Unless indicated otherwise, the policies described below may be changed
by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the
security, the issuer of any demand feature applicable to the security,
or
any guarantor of either the security or any demand feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution
irrevocable letters of credit or guarantees and give the Fund the right
to
demand payment of the principal amounts of the participation interests
plus
accrued interest on short notice (usually within seven days). The
municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation
interests
include the right to demand payment from the issuers of those interests.
By
purchasing participation interests having a seven day demand feature,
the
Fund is buying a security meeting the maturity and quality requirements
of
the Fund and also is receiving the tax-free benefits of the underlying
securities.
Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the
nature of the appropriation for the lease. Furthermore, a lease may
provide
that the participants cannot accelerate lease obligations upon default.
The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the
investment
adviser, under the authority delegated by the Board of Trustees, will
base
its determination on the following factors: whether the lease can be
terminated by the lessee; the potential recovery, if any, from a sale of
the leased property upon termination of the lease; the lessee's general
credit strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit
enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other
than normal transaction costs, are incurred. However, liquid assets of
the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are
marked
to market daily and are maintained until the transaction has been
settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than
20%
of the total value of its assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant
to
repurchase agreements. Repurchase agreements are arrangements in which
banks, brokers/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at
a mutually agreed upon time and price. To the extent that the seller
does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. The Fund or
its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund
will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by
the
Trustees.
Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument in
return for a percentage of the instrument's market value in cash and
agrees
that on a stipulated date in the future the Fund will repurchase the
portfolio instrument by remitting the original consideration plus
interest
at an agreed upon rate. The use of reverse repurchase agreements may
enable
the Fund to avoid selling portfolio instruments at a time when a sale
may
be deemed to be disadvantageous, but does not ensure this result. When
effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be
purchased, are: segregated on the Fund's records at the trade date;
marked
to market daily; and maintained until the transaction is settled.
Ohio Investment Risks
The Fund invests in obligations of Ohio (the "State") issuers which
result
in the Fund's performance being subject to risks associated with the
overall conditions present within the State. The following information
is a
brief summary of the prevailing economic conditions and general summary
of
the State's financial condition. This information is based on official
statements relating to securities that are believed to be reliable but
should not be considered as a complete description of all relevant
information.
The State fully depleted the budget stabilization fund that exceeded
$300
million, to achieve balanced budgets as a result of the most recent
recession. The State has acted promptly in addressing the fall in
revenue
with an expansion of the sales tax base and cuts in budgetary
appropriations. As a result of prudent financial management, the State
restored $21 million to the Budget Stabilization Fund in Fiscal 1993.
Reserves are still well below the levels of 1990 however.
The Ohio economy is largely composed of manufacturing which is
concentrated
in the automobile sector and other durable goods. The exposure to these
industries, particularly the auto sector, leaves the State vulnerable to
an
economic slowdown associated with business cycles. The State has
diversified its economy somewhat over the past decade with services and
trade compromising roughly 50% of the economy. Unemployment in Ohio over
the past two years has been below the national average, but population
growth as in many great lakes states has been stagnated.
The overall condition of the State is further demonstrated by its debt
ratings. Ohio, rated Aaa by Moody's Investors Service, Inc. in the
1970's,
was downgraded to Aa in 1979 and has maintained this rating since the
downgrade. Standard & Poor's Ratings Group first rated the State in 1984
at
AA; that has remained unchanged.
The Fund's concentration in securities issued by the State and its
political subdivisions provides a greater level of risk than a fund
whose
assets are diversified across numerous states and municipal issuers. The
ability of the State or its municipalities to meet their obligations
will
depend on the availability of tax and other revenues; economic,
political,
and demographic conditions within the State; and the underlying fiscal
condition of the State, its counties, and its municipalities.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as are
necessary for the clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money and engage in reverse repurchase agreements in
amounts
up to one-third of the value of its total assets, including the
amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary or emergency measure or to facilitate management of
the
portfolio by enabling the Fund to meet redemption requests when
the
liquidation of portfolio securities is deemed to be inconvenient
or
disadvantageous. The Fund will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding.
During the period any reverse repurchase agreements are
outstanding,
the Fund will restrict the purchase of portfolio securities to
money
market instruments maturing on or before the expiration date of
the
reverse repurchase agreements, but only to the extent necessary to
assure completion of the reverse repurchase agreements.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except
to secure permitted borrowings. In those cases, it may pledge
assets
having a market value not exceeding the lesser of the dollar
amounts
borrowed or 15% of the value of total assets at the time of the
pledge.
Lending Cash or Securities
The Fund will not lend any of its assets except that it may
acquire
publicly or nonpublicly issued Ohio municipal securities or
temporary
investments or enter into repurchase agreements, in accordance
with
its investment objective, policies, limitations, or Declaration of
Trust.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts,
or commodity futures contracts.
Investing in Restricted Securities
The Fund will not invest more than 10% of its net assets in
securities subject to restrictions on resale under the Securities
Act
of 1933.
Investing in Real Estate
The Fund will not purchase or sell real estate or real estate
limited
partnerships, although it may invest in securities of issuers
whose
business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real
estate.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
Concentration of Investments
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would be
invested in any one industry or in industrial development bonds or
other securities, the interest upon which is paid from revenues of
similar types of projects. However, the Fund may invest as
temporary
investments more than 25% of the value of its assets in cash or
cash
items, securities issued or guaranteed by the U.S. government, its
agencies, or instrumentalities, or instruments secured by these
money
market instruments, such as repurchase agreements.
The above limitations cannot be changed without shareholder approval.
The
following investment limitations, however, may be changed by the
Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its net
assets
in illiquid securities.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment
companies,
except as part of a merger, consolidation, or other acquisition.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers (including companies responsible
for
paying principal and interest on industrial development bonds)
which
have records of less than three years of continuous operations,
including the operation of any predecessor.
Investing for Control
The Fund will not invest in securities of a company for the
purpose
of exercising control or management.
Investing in Issuers Whose Securities Are Owned by Officers and
Trustees
of the Trust
The Fund will not purchase or retain the securities of any issuer
if
the Officers and Trustees of the Trust or its investment adviser,
owning individually more than .50 of 1% of the issuer's
securities,
together own more than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or
any
combination of them.
Investing in Minerals
The Fund will not purchase or sell interests in oil, gas, or other
mineral exploration or development programs or leases, although it
may purchase the securities of issuers which invest in or sponsor
such programs.
For purposes of the above limitations, the Fund considers instruments
issued by a U.S. branch of a domestic bank or savings and loan having
capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items." Except with respect to borrowing
money, if a percentage limitation is adhered to at the time of
investment,
a later increase or decrease in percentage resulting from any change in
value or net assets will not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of
the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order
at a favorable price. In working with dealers, the adviser will
generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Board
of Trustees. The adviser may select brokers and dealers who offer
brokerage
and research services. These services may be furnished directly to the
Fund
or to the adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic
studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may
be
used by the adviser or its affiliates in advising the Trust and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid,
it would tend to reduce their expenses. The adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. During the fiscal years ended October 31, 1994, 1993
and
1992, the Fund paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type
the Fund may make may also be made by those other accounts. When the
Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
Federated Municipal Trust Management
Officers and Trustees are listed with their addresses, present positions
with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Center
Pittsburgh, PA 15219
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner
of the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate
ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of
the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of
the
Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation
and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman,
Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds;
Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue
is
the son of John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.;
Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in
the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes
the
following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Arrow
Funds;
Automated Cash Management Trust; Automated Government Money Trust;
Cash
Trust Series II; Cash Trust Series, Inc.; DG Investor Series; Edward
D.
Jones & Co. Daily Passport Cash Trust; Federated ARMs Fund;
Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government
Trust;
Federated Growth Trust; Federated High Yield Trust; Federated
Income
Securities Trust; Federated Income Trust; Federated Index Trust;
Federated
Institutional Trust; Federated Intermediate Government Trust;
Federated
Master Trust; Federated Short-Intermediate Government Trust;
Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-
Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds;
Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund,
Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund,
Inc.;
Fund for U.S. Government Securities, Inc.; Government Income
Securities,
Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance
Management Series; Intermediate Municipal Trust; International
Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust;
Liberty
Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty
Municipal Securities Fund, Inc.; Liberty U.S. Government Money
Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.;
Liquid
Cash Trust; Managed Series Trust; The Medalist Funds; Money
Market
Management, Inc.; Money Market Obligations Trust; Money Market
Trust;
Municipal Securities Income Trust; 111 Corcoran Funds; Peachtree Funds;
The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut
Funds;
Short-Term Municipal Trust; Star Funds; The Starburst Funds; The
Starburst
Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration
Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial
Institutions; Trust For Government Cash Reserves; Trust for Short-Term
U.S.
Government Securities; Trust for U.S. Treasury Obligations;
World
Investment Series, Inc.
Share Ownership
Officers and Trustees own less than 1% of the Trust's outstanding
shares.
As of January 10, 1995, the following shareholder(s) of record owned 5%
or
more of the outstanding Cash II Shares of the Fund: First National Bank
of
Ohio, Akron, Ohio, owned approximately 9,507,588 shares (6.04%),
Gradison &
Company Inc., Cincinnati, Ohio, owned approximately 118,442,434 shares
(75.25%), and Chempower, Inc., Akron, Ohio, owned 9,006,541 shares
(5.72%).
As of January 10, 1995, the following shareholder(s) of record owned 5%
or
more of the outstanding Institutional Shares of the Fund: Society Asset
Management, Inc., owned approximately 8,699,638 shares (12.24%),
Mahoning
National Bank, Youngstown, Ohio, owned approximately 4,156,557 shares
(5.85%), Panabco, Newark, Ohio, owned approximately 6,096,152 shares
(8.58%), Society Bank, Dayton, Ohio, owned approximately 9,323,217
shares
(13.12%), Parcol & Co., Akron, Ohio owned approximately 12,058,445
shares
(16.97%), Grand Old Co., Zanesville, Ohio, owned approximately 3,871,467
shares (5.45%), DEFCO, Defiance, Ohio, owned approximately 4,005,881
shares
(5.63%), and SNBSO & Co., Springfield, Ohio owned approximately
4,875,068
shares (6.86%).
Trustees Compensation
AGGREGATE TOTAL COMPENSATION PAID
NAME , COMPENSATION TO TRUSTEES FROM
POSITION WITH FROM TRUST
TRUST TRUST# AND FUND COMPLEX
John F. Donahue, $ -0- $ -0- for the Trust and
Chairman and Trustee 69 other investment companies in the
Fund Complex
Thomas G. Bigley, $ 719.00 $ 24,991 for the Trust and
Trustee 50 other investment companies in the
Fund Complex
John T. Conroy, Jr., $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
William J. Copeland, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
James E. Dowd, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $ 4,308.00 $ 123,600 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $ 4,757.00 $ 136,100 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Glen R. Johnson, $ -0- $ -0- for the Trust and
President and Trustee 9 other investment companies in the
Fund Complex
Peter E. Madden, $ 4,308.00 $ 104,880 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Gregor F. Meyer, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Wesley W. Posvar, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Marjorie P. Smuts, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
#The aggregate compensation is provided for the Trust which is comprised
of
13 portfolios.
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable
for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject
by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated Management. It is a
subsidiary
of Federated Investors. All the voting securities of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue, his
wife
and his son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder
of
the Fund for any losses that may be sustained in the purchase, holding,
or
sale of any security or for anything done or omitted by it, except acts
or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with
the
Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the fiscal years ended October 31, 1994, 1993, and 1992, the adviser
earned $818,742, $813,048, and $681,466, respectively, of which
$133,035,
$392,961, and $422,901, respectively, was voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and
extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of
average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets,
the
adviser will reimburse the Fund for its expenses over the
limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the
amount of the excess, subject to an annual adjustment. If the
expense
limitation is exceeded, the amount to be reimbursed by the adviser
will be limited, in any single fiscal year, by the amount of the
investment advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred
to
as the "Administrators".) For the fiscal year ended October 31, 1994,
the
Administrators collectively earned $ 209,077. For the fiscal years ended
October 31, 1993 and 1992, Federated Administrative Services, Inc.
earned
$325,056 and $267,671, respectively. Dr. Henry J. Gailliot, an officer
of
Federated Management, the adviser to the Fund, holds approximately 20%
of
the outstanding common stock and serves as a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust
Company,
Boston, MA is custodian for the securities and cash of the Fund. It also
provides certain accounting and recordkeeping services with respect to
the
Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains
all necessary shareholder records. For its services, the transfer agent
receives a fee based on size, type and number of accounts and
transactions
made by shareholders.
Distribution and Shareholder Services Plans
With respect to Cash II Shares, the Fund has adopted a Distribution Plan
pursuant to Rule 12b-1 which was promulgated by the Securities and
Exchange
Commission pursuant to the Investment Company Act of 1940. Additionally,
the Fund has adopted a Shareholder Service Plan with respect to both
Cash
II Shares and Institutional Shares.
These arrangements permit the payment of fees to financial institutions
to
stimulate distribution activities and services to shareholders provided
by
a representative who has knowledge of the shareholder's particular
circumstances and goals. These activities and services may include, but
are
not limited to, marketing efforts; providing office space, equipment,
telephone facilities, and various clerical, supervisory, computer, and
other personnel as necessary or beneficial to establish and maintain
shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Board of Trustees expects that
the
Fund will be able to achieve a more predictable flow of cash for
investment
purposes and to meet redemptions. This will facilitate more efficient
portfolio management and assist the Fund in pursuing its investment
objectives. By identifying potential investors whose needs are served by
the Fund's objectives, and properly servicing these accounts, it may be
possible to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail;
(3)
enhancing shareholder recordkeeping systems; and (4) responding promptly
to
shareholders' requests and inquiries concerning their accounts.
For the fiscal period ending October 31, 1994, payments in the amount of
$415,490 were made pursuant to the Distribution Plan, all of which was
paid
to financial institutions. In addition, for this period, payments in the
amount of $234,497 were made pursuant to the Shareholder Services Plan
on
behalf of Cash II Shares.
Determining Net Asset Value
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.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or
1%
of the Fund's net asset value, whichever is less, for any one
shareholder
within a 90-day period. Any redemption beyond this amount will also be
in
cash unless the Trustees determine that further payments should be in
kind.
In such cases, the Fund will pay all or a portion of the remainder of
the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not
as liquid as a cash redemption. If redemption is made in kind,
shareholders
who sell these securities could receive less than the redemption value
and
could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated
investment
companies, the Fund must, among other requirements: derive at least 90%
of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested;
changes in interest rates; changes in expenses; and the relative amount
of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for
those
shareholders paying those fees.
Yield
The Fund calculates its yield based upon the seven days ending on the
day
of the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional
shares purchased with dividends earned from the original one share and
all
dividends declared on the original and any purchased shares; dividing
the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
For the seven-day period ended October 31, 1994, the yields for Cash II
Shares and Institutional Shares were 2.64% and 2.94% , respectively.
Effective Yield
The Fund calculates its effective yield by compounding the unannualized
base period return by: adding 1 to the base period return; raising the
sum
to the 365/7th power; and subtracting 1 from the result.
For the seven-day period ended October 31, 1994, the effective yields
for
Cash II Shares and Institutional Shares were 2.68% and 2.98%,
respectively.
Tax-Equivalent Yield
The tax-equivalent yield of the Fund is calculated similarly to the
yield
but is adjusted to reflect the taxable yield that the Fund would have
had
to earn to equal its actual yield, assuming a 39.6% tax rate (the
maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
For the seven-day period ended October 31, 1994, the tax-equivalent
yields
for Cash II Shares and Institutional Shares were 4.99% and 5.56%,
respectively.
Tax-Equivalency Tables
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free
from state and local taxes as well. As the table below indicates, a "tax-
free" investment can be an attractive choice for investors, particularly
in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF OHIO
FEDERAL TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
19.475% 33.201% 37.900% 43.500%
47.100%
SINGLE $1- $23,351- $56,551- $117,951- OVER
RETURN 23,350 56,550 117,950 256,500 256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
1.50% 1.86% 2.25% 2.42% 2.65% 2.84%
2.00% 2.48% 2.99% 3.22% 3.54% 3.78%
2.50% 3.10% 3.74% 4.03% 4.42% 4.73%
3.00% 3.72% 4.49% 4.83% 5.31% 5.67%
3.50% 4.35% 5.24% 5.64% 6.19% 6.62%
4.00% 4.97% 5.99% 6.44% 7.08% 7.56%
4.50% 5.59% 6.74% 7.25% 7.96% 8.51%
5.00% 6.21% 7.49% 8.05% 8.85% 9.45%
5.50% 6.83% 8.23% 8.86% 9.73% 10.40%
6.00% 7.45% 8.98% 9.66% 10.62% 11.34%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
STATE AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENTS WERE
NOT
USED TO INCREASE FEDERAL DEDUCTIONS.
The chart above is for illustrative purposes only. It is not an
indicator
of past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF OHIO
FEDERAL TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
20.201% 34.900% 37.900% 43.500%
47.100%
JOINT $1- $39,001- $94,251- $143,601- OVER
RETURN 39,000 94,250 143,600 256,500 256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
1.50% 1.86% 2.25% 2.42% 2.65% 2.84%
2.00% 2.48% 2.99% 3.22% 3.54% 3.78%
2.50% 3.10% 3.74% 4.03% 4.42% 4.73%
3.00% 3.72% 4.49% 4.83% 5.31% 5.67%
3.50% 4.35% 5.24% 5.64% 6.19% 6.62%
4.00% 4.97% 5.99% 6.44% 7.08% 7.56%
4.50% 5.59% 6.74% 7.25% 7.96% 8.51%
5.00% 6.21% 7.49% 8.05% 8.85% 9.45%
5.50% 6.83% 8.23% 8.86% 9.73% 10.40%
6.00% 7.45% 8.98% 9.66% 10.62% 11.34%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
STATE AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENTS WERE
NOT
USED TO INCREASE FEDERAL DEDUCTIONS.
The chart above is for illustrative purposes only. It is not an
indicator
of past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
Total Return
Average annual total return is the average compounded rate of return for
a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the
period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, adjusted over the
period by any additional shares, assuming the monthly reinvestment of
all
dividends and distributions.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
- Lipper Analytical Services, Inc. ranks funds in various fund
categories based on total return, which assumes the reinvestment
of
all income dividends and capital gains distributions, if any.
- Donoghue's Money Fund Report publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the
same
money funds.
- Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day
effective
yield.
314229840
314229857
1030105B (2/95)
PENNSYLVANIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
CASH SERIES SHARES
PROSPECTUS
The Cash Series Shares of Pennsylvania Municipal Cash Trust (the "Fund")
offered
by this prospectus represent interests in a non-diversified portfolio of
Federated Municipal Trust (the "Trust"), an open-end management
investment
company (a mutual fund). The Fund invests in short-term Pennsylvania
municipal
securities to achieve current income exempt from federal regular income
tax and
the personal income taxes imposed by the Commonwealth of Pennsylvania
consistent
with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information
dated
February 28, 1995, with the Securities and Exchange Commission. The
information
contained in the Combined Statement of Additional Information is
incorporated by
reference into this prospectus. You may request a copy of the Combined
Statement
of Additional Information free of charge by calling 1-800-235-4669. To
obtain
other information, or make inquiries about the Fund, contact the Fund at
the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
Pennsylvania Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
8
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Cash Series Shares
9
Administration of the Fund
10
NET ASSET VALUE
10
- ------------------------------------------------------
HOW TO PURCHASE SHARES
11
- ------------------------------------------------------
Special Purchase Features
12
HOW TO REDEEM SHARES
12
- ------------------------------------------------------
Special Redemption Features
13
ACCOUNT INFORMATION
13
- ------------------------------------------------------
Dividends
13
Capital Gains
13
Certificates and Confirmations
13
Accounts with Low Balances
14
SHAREHOLDER INFORMATION
14
- ------------------------------------------------------
Voting Rights
14
Massachusetts Partnership Law
14
TAX INFORMATION
15
- ------------------------------------------------------
Federal Income Tax
15
State and Local Taxes
15
PERFORMANCE INFORMATION
16
- ------------------------------------------------------
OTHER CLASSES OF SHARES
16
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SERVICE SHARES
17
- ------------------------------------------------------
ADDRESSES
18
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
CASH SERIES SHARES
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)..................................................................
... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)..................................................................
... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as
applicable)............................................................
None
Redemption Fee (as a percentage of amount redeemed, if
applicable)........................................ None
Exchange
Fee.....................................................................
......................... None
ANNUAL CASH SERIES SHARES OPERATING
EXPENSES
(As a percentage of average net
assets)
Management Fee (after waiver)
(1).....................................................................
.... 0.49%
12b-1 Fee (after waiver)
(2).....................................................................
......... 0.16%
Total Other
Expenses................................................................
...................... 0.40%
Shareholder Services Fee (after waiver)
(3)................................................ 0.24%
Total Cash Series Shares Operating Expenses
(4).................................................. 1.05%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of a
portion of the management fee. The adviser can terminate this
voluntary
waiver at any time at its sole discretion. The maximum management
fee is
0.50%.
(2) The maximum 12b-1 fee is 0.40%.
(3) The maximum shareholder services fee is 0.25%.
(4) The Total Cash Series Shares Operating Expenses in the table above
are based
on expenses expected during the fiscal year ending October 31, 1995.
The
Total Cash Series Shares Operating Expenses were 1.04% for the
fiscal year
ended October 31, 1994, and would have been 1.22% absent the
voluntary
waivers of a portion of the management fee and a portion of the 12b-
1 fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of Cash Series Shares of
the Fund
will bear, either directly or indirectly. For more complete descriptions
of the
various costs and expenses, see "How to Purchase Shares" and "Trust
Information." Wire-transferred redemptions of less than $5,000 may be
subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years 5 years 10 years
<S>
<C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1)
5% annual return and (2) redemption at the end of each time
period....... $11 $33 $58 $128
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the foregoing table and example relates
only to
Cash Series Shares of the Fund. The Fund also offers another class of
shares
called Institutional Service Shares. Cash Series Shares and
Institutional
Service Shares are subject to certain of the same expenses; however,
Institutional Service Shares are not subject to a 12b-1 fee. See "Other
Classes
of Shares."
PENNSYLVANIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S>
<C> <C> <C> <C>
1994 1993 1992 1991*
NET ASSET VALUE, BEGINNING OF PERIOD $
1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------
Net investment income
0.02 0.02 0.03 0.03
- -------------------------------------------------------------------- --
- ------- --------- --------- ---------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------
Dividends to shareholders from net investment
income
(0.02) (0.02) (0.03) (0.03)
- -------------------------------------------------------------------- --
- ------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $
1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------- --
- ------- --------- --------- ---------
TOTAL RETURN**
1.84% 1.83% 2.67% 3.55%
- --------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------
Expenses
1.04% 0.97% 0.96% 0.78%(b)
- --------------------------------------------------------------------
Net investment income
1.73% 1.88% 2.64% 3.92%(b)
- --------------------------------------------------------------------
Expense waiver/reimbursement (a)
0.18% 0.12% 0.12% 0.28%(b)
- --------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------
Net assets, end of period (000 omitted)
$18,352 $18,561 $24,694 $19,846
- --------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from January 25, 1991 (date of
initial
public offering) to October 31, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The shares in any one portfolio may be offered in separate
classes.
With respect to the Fund, as of the date of this prospectus, the
Trustees have
established two classes of shares known as Cash Series Shares and
Institutional
Service Shares. This prospectus relates only to Cash Series Shares of
the Fund,
which are designed primarily for the retail customers of financial
institutions
as a convenient means of accumulating an interest in a professionally
managed,
non-diversified portfolio investing primarily in short-term Pennsylvania
municipal securities. The Fund may not be a suitable investment for
retirement
plans or for non-Pennsylvania taxpayers because it invests in municipal
securities of Pennsylvania. A minimum initial investment of $10,000 over
a
90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the personal income taxes imposed by the
Commonwealth of
Pennsylvania consistent with stability of principal. This investment
objective
cannot be changed without shareholder approval. While there is no
assurance that
the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Pennsylvania municipal securities (as defined below) maturing in 13
months or
less. As a matter of investment policy, which cannot be changed without
shareholder approval, at least 80% of the Fund's annual interest income
will be
exempt from federal regular income tax and the personal income taxes
imposed by
the Commonwealth of Pennsylvania. (Federal regular income tax does not
include
the federal individual alternative minimum tax or the federal
alternative
minimum tax for corporations.) The average maturity of the securities in
the
Fund's portfolio, computed on a dollar-weighted basis, will be 90 days
or less.
Unless indicated otherwise, the investment policies may be changed by
the
Trustees without shareholder approval. Shareholders will be notified
before any
material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by
or on behalf of Pennsylvania and its political subdivisions and
financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and Pennsylvania state income
tax imposed upon non-corporate taxpayers ("Pennsylvania municipal
securities").
Examples of Pennsylvania municipal securities include, but are not
limited to:
tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
municipal commercial paper and other short-term notes;
variable rate demand notes;
municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in
Pennsylvania
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying Pennsylvania
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The Pennsylvania municipal securities in which the Fund invests
must be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group
("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"),
or
FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc. ("Fitch") are
all
considered rated in one of the two highest short-term rating categories.
The
Fund will follow applicable regulations in determining whether a
security rated
by more than one NRSRO can be treated as being in one of the two highest
short-term rating categories; currently, such securities must be rated
by two
NRSROs in one of their two highest rating categories. See "Regulatory
Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit-enhanced
securities
based upon the financial condition and ratings of the party providing
the credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit-enhanced by the credit enhancer, in which case the securities
will be
treated as having been issued by both the issuer and the credit
enhancer. The
bankruptcy, receivership, or default of the credit enhancer will
adversely
affect the quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED SECURITIES. As a matter of fundamental policy, the Fund may
invest
in restricted securities. Restricted securities are any securities in
which the
Fund may invest pursuant to its investment objective and policies but
which are
subject to restrictions on resale under federal securities laws. Under
criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines
that market conditions call for a temporary defensive posture, the Fund
may
invest in tax-exempt or taxable securities such as: obligations issued
by or on
behalf of municipal or corporate issuers having the same quality
characteristics
as described above; obligations issued or guaranteed by the U.S.
government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so. However, the interest from certain
Pennsylvania
municipal securities is subject to the federal alternative minimum tax.
PENNSYLVANIA MUNICIPAL SECURITIES
Pennsylvania municipal securities are generally issued to finance public
works,
such as airports, bridges, highways, housing, hospitals, mass
transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
Pennsylvania municipal securities include industrial development bonds
issued by
or on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Pennsylvania municipal securities
are
"general obligation" and "revenue" bonds. General obligation bonds are
secured
by the issuer's pledge of its full faith and credit and taxing power for
the
payment of principal and interest. Interest on and principal of revenue
bonds,
however, are payable only from the revenue generated by the facility
financed by
the bond or other specified sources of revenue. Revenue bonds do not
represent a
pledge of credit or create any debt of or charge against the general
revenues of
a municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Pennsylvania municipal securities depend on a variety of
factors,
including: the general conditions of the short-term municipal note
market and
of the municipal bond market; the size of the particular offering; the
maturity
of the obligations; and the rating of the issue. The ability of the Fund
to
achieve its investment objective also depends on the continuing ability
of the
issuers of Pennsylvania municipal securities and participation
interests, or
the credit enhancers of either, to meet their obligations for the
payment of
interest and principal when due. In addition, from time to time, the
supply of
Pennsylvania municipal securities acceptable for purchase by the Fund
could
become limited.
The Fund may invest in Pennsylvania municipal securities which are
repayable out
of revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
Pennsylvania municipal securities could involve an increased risk to the
Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Pennsylvania Municipal Securities are subject
to the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under
certain
circumstances, the Fund may borrow up to one-third of the value of its
total
assets and pledge up to 15% of the value of total assets to secure such
borrowings.
The Fund will invest in securities for income earnings rather than
trading for
profit. The Fund will not vary its investments, except to: (i) eliminate
unsafe
investments and investments not consistent with the preservation of the
capital
or the tax status of the investments of the Fund; (ii) honor redemption
orders,
meet anticipated redemption requirements, and negate gains from discount
purchases; (iii) maintain a constant net asset value per unit pursuant
to, and
in compliance with, an order or rule of the United States Securities and
Exchange Commission; (iv) reinvest the earnings from securities in like
securities; or (v) defray normal administrative expenses (the
"Pennsylvania
Investment Restrictions.")
The above investment limitations cannot be changed without shareholder
approval.
As a matter of nonfundamental policy, the Fund will not invest more than
10% of
its net assets in illiquid securities.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Combined Statement of Additional Information, in
order to
comply with applicable laws and regulations, including the provisions of
and
regulations under the Investment Company Act of 1940, as amended. In
particular,
the Fund will comply with the various requirements of Rule 2a-7, which
regulates
money market mutual funds. The Fund will determine the effective
maturity of its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are
responsible for managing the Trust's business affairs and for exercising
all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .50 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF CASH SERIES SHARES
Federated Securities Corp. is the principal distributor for Cash Series
shares
of the Fund. It is a Pennsylvania corporation organized on November 14,
1969,
and is the principal distributor for a number of investment companies.
Federated
Securities Corp. is a subsidiary of Federated Investors.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan
adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution
Plan"),
the Fund may pay to the distributor an amount, computed at an annual
rate of .40
of 1% of the average daily net asset value of Cash Series Shares to
finance any
activity which is principally intended to result in the sale of shares
subject
to the Distribution Plan. The distributor may select financial
institutions such
as banks, fiduciaries, custodians for public funds, investment advisers,
and
broker/dealers to provide sales support services as agents for their
clients or
customers. In addition, the Fund has adopted a Shareholder Services Plan
(the
"Services Plan") under which it will pay Federated Shareholder Services,
an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of Cash Series Shares to provide personal
services
and/or maintenance of shareholder accounts to the Fund and its
shareholders.
From time to time and for such periods as it deems appropriate, the
amounts
stated above may be reduced voluntarily.
Financial institutions will receive fees based upon shares owned by
their
clients or customers. The schedules of such fees and the basis upon
which such
fees will be paid will be determined from time to time by the Fund, the
distributor, or Federated Shareholder Services, as appropriate.
The Distribution Plan is a compensation-type plan. As such, the Fund
makes no
payments to the distributor except as described above. Therefore, the
Fund does
not pay for unreimbursed expenses of the distributor, including amounts
expended
by the distributor in excess of amounts received by it from the Fund,
interest,
carrying or other financing charges in connection with excess amounts
expended,
or the distributor's overhead expenses. However, the distributor may be
able to
recover such amounts or may earn a profit from future payments made by
the Fund
under the Distribution Plan.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may also pay
financial
institutions a fee for providing certain services to shareholders. This
fee is
in addition to the amounts paid under the Distribution Plan and, if
paid, will
be reimbursed by the adviser and not the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary
of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian
for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of Cash Series Shares
at
$1.00 by valuing the portfolio securities using the amortized cost
method. The
net asset value per share is determined by subtracting liabilities
attributable
to Cash Series Shares from the value of Fund assets attributable to Cash
Series
Shares, and dividing the remainder by the number of Cash Series Shares
outstanding. The Fund cannot guarantee that its net asset value will
always
remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
HOW TO PURCHASE SHARES
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Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased as described below either through a financial institution
(such as
a bank or broker/dealer) or by wire or by check directly from the Fund,
with a
minimum initial investment of $10,000. (Financial institutions may
impose
different minimum investment requirements on their customers.)
In connection with any sale, Federated Securities Corp. may from time to
time
offer certain items of nominal value to any shareholder or investor. The
Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and
returning
the new account form available from the Fund before shares can be
purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may
purchase shares
through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives
payment by
wire or converts payment by check from the financial institution into
federal
funds. It is the financial institution's responsibility to transmit
orders
promptly. Financial institutions may charge additional fees for their
services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling
the Fund
before 1:00 p.m. (Eastern time). The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) in
order to begin earning dividends that same day. Federal funds should be
wired as
follows: Federated Services Company, c/o State Street Bank and Trust
Company,
Boston, MA; Attention; EDGEWIRE; For Credit to: Pennsylvania Municipal
Cash
Trust--Cash Series Shares; Fund Number (this number can be found on the
account
statement or by contacting the Fund); Group Number or Order Number;
Nominee or
Institution Name; and ABA Number 011000028. Shares cannot be purchased
by wire
on holidays when wire transfers are restricted.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check
made
payable to Pennsylvania Municipal Cash Trust--Cash Series Shares to:
Federated
Services Company, c/o State Street Bank and Trust Company, P.O. Box
8604,
Boston, MA 02266-8604. Orders by mail are considered received when
payment by
check is converted into federal funds (normally the business day after
the check
is received) and shares begin earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM. A minimum of $100 can be automatically
withdrawn
periodically from the shareholder's checking account at an Automated
Clearing
House ("ACH") member and invested in Fund shares. Shareholders should
contact
their financial institution or the Fund to participate in this program.
HOW TO REDEEM SHARES
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Shares are redeemed at their net asset value next determined after a
Fund
receives the redemption request. Redemptions will be made on days on
which the
Fund computes its net asset value. Redemption requests must be received
in
proper form and can be made as described below.
REDEEMING SHARES THROUGH A FINANCIAL INSTITUTION. Shares may be redeemed
by
contacting the shareholder's financial institution. Shares will be
redeemed at
the net asset value next determined after Federated Services Company
receives
the redemption request. According to the shareholder's instructions,
redemption
proceeds can be sent to the financial institution or to the shareholder
by check
or by wire. The financial institution is responsible for promptly
submitting
redemption requests and providing proper written redemption
instructions.
Customary fees and commissions may be charged by the financial
institution for
this service.
REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by
calling
the Fund provided the Fund has a properly completed authorization form.
These
forms can be obtained from Federated Securities Corp. Proceeds from
redemption
requests received before 12:00 noon (Eastern time) will be wired the
same day to
the shareholder's account at a domestic commercial bank which is a
member of the
Federal Reserve System, but will not include that day's dividend.
Proceeds from
redemption requests received after that time will include that day's
dividends
but will be wired the following business day. Under limited
circumstances,
arrangements may be made with the distributor for same-day payment of
proceeds,
without that day's dividend, for redemption requests received before
2:00 p.m.
(Eastern time). Proceeds from redeemed shares purchased by check or
through ACH
will not be wired until that method of payment has cleared.
Telephone instructions may be recorded and if reasonable procedures are
not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares
By Mail"
should be considered. If at any time the Fund shall determine it
necessary to
terminate or modify the telephone redemption privilege, shareholders
would be
promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by
mailing a
written request together with properly endorsed certificates, if issued,
to:
Federated Services Company, c/o State Street Bank and Trust Company,
P.O. Box
8604, Boston, MA 02266-8604. The written request should state:
Pennsylvania
Municipal Cash Trust--Cash Series Shares; the account name as registered
with
the Fund; the account number; and the number of shares to be redeemed or
the
dollar amount requested. All owners of the account must sign the request
exactly
as the shares are registered. Any share certificates should be sent by
registered or certified mail with the written request. Normally, a check
for the
proceeds is mailed within one business day, but in no event more than
seven
days, after receipt of a proper written redemption request. Dividends
are paid
up to and including the day that a redemption request is processed.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by: a commercial or savings bank, trust company or
savings
and loan association whose deposits are insured by an organization which
is
administered by the Federal Deposit Insurance Corporation; a member firm
of a
domestic stock exchange; or any other "eligible guarantor institution,"
as
defined in the Securities Exchange Act of 1934. The Fund does not accept
signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to
allow
shareholders to redeem their fund shares. A fee will be charged for this
service. The check writing service allows the shareholder to receive the
daily
dividend declared on the shares to be redeemed until the check is
presented to
State Street Bank for payment. However, checks should never be made
payable or
sent to State Street Bank or the Fund to redeem shares, and a check may
not be
written to close an account. Canceled checks are sent to the shareholder
each
month.
DEBIT CARD. Upon request, a debit account will be established. This
account
allows shareholders to redeem shares by using a debit card. A fee will
be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of
at
least $10,000, a systematic withdrawal program may be established
whereby
automatic redemptions are made from the account and transferred
electronically
to any commercial bank, savings bank, or credit union that is an ACH
member.
Shareholders may apply for participation in this program through their
financial
institution or the Fund.
ACCOUNT INFORMATION
- ------------------------------------------------------------------------
- --------
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing. Monthly
confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, if an
account
balance falls below $10,000 due to shareholder redemptions, the Fund may
redeem
all of the remaining shares in that account (except accounts maintained
by
retirement plans) and pay the proceeds to the shareholder. Before shares
are
redeemed to close an account, the shareholder will be notified in
writing and
allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- ------------------------------------------------------------------------
- --------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of all
classes of
each portfolio in the Trust have equal voting rights, except that in
matters
affecting only a particular portfolio or class, only shares of that
portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust
is not
required to hold annual shareholder meetings. Shareholder approval will
be
sought only for certain changes in the Trust's or the Fund's operation
and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
Pennsylvania. Shareholders are urged to consult their own tax advisers
regarding
the status of their accounts under state and local tax laws.
PENNSYLVANIA TAXES. The Fund received a ruling from the Commonwealth of
Pennsylvania Department of Revenue that interest or gain derived by the
Fund
from obligations free from state taxation in Pennsylvania is not taxable
on
pass-through to Fund shareholders for purposes of Pennsylvania personal
income
taxes. This was based on the existence of the Pennsylvania Investment
Restrictions (see "Investment Limitations"). However, legislation
enacted in
December 1993, eliminates the necessity of the Pennsylvania Investment
Restrictions. This legislation also generally repeals the Pennsylvania
personal
income tax exemption for gains from the sale of tax-exempt obligations,
including the exemption for distributions from the Fund to the extent
that they
are derived from gains from tax-exempt obligations. Fund shares are
exempt from
personal property taxes imposed by counties in Pennsylvania to the
extent that
the Fund invests in obligations that are exempt from such taxes.
In the opinion of Houston, Houston & Donnelly, counsel to the Fund, the
Fund is
not subject to Pennsylvania corporate or personal property taxes.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time the Fund advertises its yield, effective yield, and
tax-equivalent yield for Cash Series Shares.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
Cash Series Shares' tax exempt yield, assuming a specific tax rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in Cash Series Shares after reinvesting all income
distributions. It
is calculated by dividing that change by the initial investment and is
expressed
as a percentage.
The performance figures will be calculated separately for each class of
shares.
Because each class of shares is subject to different expenses, the
yield,
effective yield, and tax-equivalent yield of Institutional Service
Shares will
exceed the yield, effective yield, and tax-equivalent yield of Cash
Series
Shares for the same period.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
OTHER CLASSES OF SHARES
- ------------------------------------------------------------------------
- --------
The Fund also offers the following class.
Institutional Service Shares are sold at net asset value primarily to
financial
institutions acting in an agency capacity. Investments in Institutional
Service
Shares are subject to a minimum initial investment of $25,000.
Institutional
Service Shares are sold with no 12b-1 fees.
Financial institutions providing distribution or administrative services
may
receive additional compensation depending upon which class of shares of
the Fund
is sold. The distributor pays this compensation and is reimbursed from
sources
other than the assets of the Fund.
The amount of dividends payable to shareholders of any particular class
may be
more or less than that payable to the shareholders of any other class
depending
upon the existence of and differences in class expenses, 12b-1 Plan
expenses,
and Shareholder Services Plan expenses. The stated advisory fee is the
same for
all classes of shares.
PENNSYLVANIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C>
<C> <C> <C>
1994 1993
1992 1991 1990*
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $
1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------
Net investment income 0.02
0.02 0.03 0.05 0.05
- ---------------------------------------------------- --------- -------
- -- --------- --------- ---------
LESS DISTRIBUTIONS
- ----------------------------------------------------
Dividends to shareholders from
net investment income (0.02)
(0.02) (0.03) (0.05) (0.05)
- ---------------------------------------------------- --------- -------
- -- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $
1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------- --------- -------
- -- --------- --------- ---------
TOTAL RETURN** 2.25%
2.24% 3.08% 4.64% 5.78%
- ----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------
Expenses 0.64%
0.57% 0.56% 0.55% 0.50%(b)
- ----------------------------------------------------
Net investment income 2.19%
2.21% 3.04% 4.53% 5.56%(b)
- ----------------------------------------------------
Expense waiver/reimbursement (a) 0.02%
0.12% 0.12% 0.11% 0.18%(b)
- ----------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------
Net assets, end of period (000 omitted) $229,160
$318,518 $308,200 $317,165 $275,882
- ----------------------------------------------------
</TABLE>
* Reflects operations for the period from November 21, 1989 (date of
initial
public investment) to October 31, 1990.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C>
<C>
Pennsylvania Municipal Cash Trust
Cash Series Shares
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Investment Adviser
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 8604
Boston, MA 02266-8604
- ------------------------------------------------------------------------
- -----------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Independent Public Accountants
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
- ------------------------------------------------------------------------
- -----------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL
CASH TRUST
CASH SERIES SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated February 28, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314229881
9101005A-CSS (2/95)
PENNSYLVANIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares of Pennsylvania Municipal Cash Trust
(the
"Fund") offered by this prospectus represent interests in a non-
diversified
portfolio of Federated Municipal Trust (the "Trust"), an open-end
management
investment company (a mutual fund). The Fund invests in short-term
Pennsylvania
municipal securities to achieve current income exempt from federal
regular
income tax and the personal income taxes imposed by the Commonwealth of
Pennsylvania consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information
dated
February 28, 1995, with the Securities and Exchange Commission. The
information
contained in the Combined Statement of Additional Information is
incorporated by
reference into this prospectus. You may request a copy of the Combined
Statement
of Additional Information free of charge by calling 1-800-235-4669. To
obtain
other information, or make inquiries about the Fund, contact the Fund at
the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SERVICE SHARES
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
Pennsylvania Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
8
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Institutional Service
Shares
9
Administration of the Fund
9
NET ASSET VALUE
10
- ------------------------------------------------------
INVESTING IN THE FUND
11
- ------------------------------------------------------
Share Purchases
11
Minimum Investment Required
11
Subaccounting Services
11
Certificates and Confirmations
12
Dividends
12
Capital Gains
12
REDEEMING SHARES
12
- ------------------------------------------------------
By Mail
12
Telephone Redemption
13
Accounts with Low Balances
13
SHAREHOLDER INFORMATION
14
- ------------------------------------------------------
Voting Rights
14
Massachusetts Partnership Law
14
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
15
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
OTHER CLASSES OF SHARES
16
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES
17
- ------------------------------------------------------
ADDRESSES
18
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
INSTITUTIONAL SERVICE
SHARES
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)..................................................................
..... None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as
applicable).............................................................
. None
Redemption Fee (as a percentage of amount redeemed, if
applicable).......................................... None
Exchange
Fee.....................................................................
........................... None
ANNUAL INSTITUTIONAL SERVICE SHARES
OPERATING EXPENSES
(As a percentage of average net
assets)
Management Fee (after waiver)
(1).....................................................................
...... 0.49%
12b-1
Fee.....................................................................
.............................. None
Total Other
Expenses................................................................
........................ 0.16%
Shareholder Services Fee (after waiver)
(2).................................................. 0.00%
Total Institutional Service Shares Operating Expenses
(3).......................................... 0.65%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of a
portion of the management fee. The adviser can terminate this
voluntary
waiver at any time at its sole discretion. The maximum management
fee is
0.50%.
(2) The maximum shareholder services fee is 0.25%.
(3) The Total Institutional Service Shares Operating Expenses in the
table above
are based on expenses expected during the fiscal year ending October
31,
1995. The Total Institutional Service Shares Operating Expenses were
0.64%
for the fiscal year ended October 31, 1994, and would have been
0.66% absent
the voluntary waiver of a portion of the management fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of Institutional Service
Shares of
the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Investing in the
Fund" and
"Trust Information." Wire-transferred redemptions of less than $5,000
may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE
1 year 3 years 5 years 10 years
<S>
<C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1)
5% annual return and (2) redemption at the end of each time
period....... $7 $21 $36 $81
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the foregoing table and example relates
only to
Institutional Service Shares of the Fund. The Fund also offers another
class of
shares called Cash Series Shares. Institutional Service Shares and Cash
Series
Shares are subject to certain of the same expenses; however, Cash Series
Shares
are subject to a 12b-1 fee of up to 0.40%. See "Other Classes of
Shares."
PENNSYLVANIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1994
1993 1992 1991 1990*
<S> <C>
<C> <C> <C> <C>
- ------------------------------------------------------------ ---------
- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
$ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------
Net investment income 0.02
0.02 0.03 0.05 0.05
- ------------------------------------------------------------ ---------
- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- ------------------------------------------------------------
Dividends to shareholders from net investment income (0.02)
(0.02) (0.03) (0.05) (0.05)
- ------------------------------------------------------------ ---------
- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00
$ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------ ---------
- --------- --------- --------- ---------
TOTAL RETURN** 2.25%
2.24% 3.08% 4.64% 5.78%
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------
Expenses 0.64%
0.57% 0.56% 0.55% 0.50%(b)
- ------------------------------------------------------------
Net investment income 2.19%
2.21% 3.04% 4.53% 5.56%(b)
- ------------------------------------------------------------
Expense waiver/reimbursement (a) 0.02%
0.12% 0.12% 0.11% 0.18%(b)
- ------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------
Net assets, end of period (000 omitted) $229,160
$318,518 $308,200 $317,165 $275,882
- ------------------------------------------------------------
</TABLE>
* Reflects operations for the period from November 21, 1989 (date of
initial
public investment) to October 31, 1990.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The shares in any one portfolio may be offered in separate
classes.
With respect to the Fund, as of the date of this prospectus, the
Trustees have
established two classes of shares known as Institutional Service Shares
and Cash
Series Shares. This prospectus relates only to Institutional Service
Shares of
the Fund, which are designed primarily for financial institutions acting
in an
agency capacity as a convenient means of accumulating an interest in a
professionally managed, non-diversified portfolio investing primarily in
short-term Pennsylvania municipal securities. The Fund may not be a
suitable
investment for retirement plans or for non-Pennsylvania taxpayers
because it
invests in municipal securities of Pennsylvania. A minimum initial
investment of
$25,000 over a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the personal income taxes imposed by the
Commonwealth of
Pennsylvania consistent with stability of principal. This investment
objective
cannot be changed without shareholder approval. While there is no
assurance that
the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Pennsylvania municipal securities (as defined below) maturing in 13
months or
less. As a matter of investment policy, which cannot be changed without
shareholder approval, at least 80% of the Fund's annual interest income
will be
exempt from federal regular income tax and the personal income taxes
imposed by
the Commonwealth of Pennsylvania. (Federal regular income tax does not
include
the federal individual alternative minimum tax or the federal
alternative
minimum tax for corporations.) The average maturity of the securities in
the
Fund's portfolio, computed on a dollar-weighted basis, will be 90 days
or less.
Unless indicated otherwise, the investment policies may be changed by
the
Trustees without shareholder approval. Shareholders will be notified
before any
material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by
or on behalf of Pennsylvania and its political subdivisions and
financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and Pennsylvania state income
tax imposed upon non-corporate taxpayers ("Pennsylvania municipal
securities").
Examples of Pennsylvania municipal securities include, but are not
limited to:
tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
municipal commercial paper and other short-term notes;
variable rate demand notes;
municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in
Pennsylvania
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying Pennsylvania
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The Pennsylvania municipal securities in which the Fund invests
must be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or
FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all considered
rated in one
of the two highest short-term rating categories. The Fund will follow
applicable
regulations in determining whether a security rated by more than one
NRSRO can
be treated as being in one of the two highest short-term rating
categories;
currently, such securities must be rated by two NRSROs in one of their
two
highest rating categories. See "Regulatory Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit-enhanced
securities
based upon the financial condition and ratings of the party providing
the credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit-enhanced by the credit enhancer, in which case the securities
will be
treated as having been issued by both the issuer and the credit
enhancer. The
bankruptcy, receivership, or default of the credit enhancer will
adversely
affect the quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED SECURITIES. As a matter of fundamental policy, the Fund may
invest in
restricted securities. Restricted securities are any securities in which
the
Fund may invest pursuant to its investment objective and policies but
which are
subject to restrictions on resale under federal securities laws. Under
criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines
that market conditions call for a temporary defensive posture, the Fund
may
invest in tax-exempt or taxable securities such as: obligations issued
by or on
behalf of municipal or corporate issuers having the same quality
characteristics
as described above; obligations issued or guaranteed by the U.S.
government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so. However, the interest from certain
Pennsylvania
municipal securities is subject to the federal alternative minimum tax.
PENNSYLVANIA MUNICIPAL SECURITIES
Pennsylvania municipal securities are generally issued to finance public
works,
such as airports, bridges, highways, housing, hospitals, mass
transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
Pennsylvania municipal securities include industrial development bonds
issued by
or on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Pennsylvania municipal securities
are
"general obligation" and "revenue" bonds. General obligation bonds are
secured
by the issuer's pledge of its full faith and credit and taxing power for
the
payment of principal and interest. Interest on and principal of revenue
bonds,
however, are payable only from the revenue generated by the facility
financed by
the bond or other specified sources of revenue. Revenue bonds do not
represent a
pledge of credit or create any debt of or charge against the general
revenues of
a municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Pennsylvania municipal securities depend on a variety of
factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of Pennsylvania municipal securities and participation interests, or the
credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of
Pennsylvania
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in Pennsylvania municipal securities which are
repayable out
of revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
Pennsylvania municipal securities could involve an increased risk to the
Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Pennsylvania municipal securities are subject
to the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under
certain
circumstances, the Fund may borrow up to one-third of the value of its
total
assets and pledge up to 15% of the value of total assets to secure such
borrowings.
The Fund will invest in securities for income earnings rather than
trading for
profit. The Fund will not vary its investments, except to: (i) eliminate
unsafe
investments and investments not consistent with the preservation of the
capital
or the tax status of the investments of the Fund; (ii) honor redemption
orders,
meet anticipated redemption requirements, and negate gains from discount
purchases; (iii) maintain a constant net asset value per unit pursuant
to, and
in compliance with, an order or rule of the United States Securities and
Exchange Commission; (iv) reinvest the earnings from securities in like
securities; or (v) defray normal administrative expenses (the
"Pennsylvania
Investment Restrictions.")
The above investment limitations cannot be changed without shareholder
approval.
As a matter of nonfundamental policy, the Fund will not invest more than
10% of
its net assets in illiquid securities.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Combined Statement of Additional Information, in
order to
comply with applicable laws and regulations, including the provisions of
and
regulations under the Investment Company Act of 1940, as amended. In
particular,
the Fund will comply with the various requirements of Rule 2a-7, which
regulates
money market mutual funds. The Fund will determine the effective
maturity of its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are
responsible for managing the Trust's business affairs and for exercising
all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .50 of 1% of the Fund's average daily net assets. The
adviser has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was
founded in 1956 as Federated Investors, Inc., develops and manages
mutual
funds primarily for the financial industry. Federated Investors'
track
record of competitive performance and its disciplined, risk averse
investment philosophy serve approximately 3,500 client institutions
nationwide. Through these same client institutions, individual
shareholders
also have access to this same level of investment expertise.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for
Institutional
Service Shares of the Fund. It is a Pennsylvania corporation organized
on
November 14, 1969, and is the principal distributor for a number of
investment
companies. Federated Securities Corp. is a subsidiary of Federated
Investors.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services
Plan (the
"Services Plan") under which it will pay Federated Shareholder Services,
an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of the Institutional Service Shares to
provide
personal services and/or maintenance of shareholder accounts to the Fund
and its
shareholders. From time to time and for such periods as deemed
appropriate, the
amount stated above may be reduced voluntarily.
Federated Shareholder Services may elect to pay financial institutions
fees
based upon shares owned by their clients or customers for services
provided to
those clients or customers. The schedules of such fees and the basis
upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds,
investment
advisers, and broker/dealers to provide certain services to
shareholders. These
services may include, but are not limited to, distributing prospectuses
and
other information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of shares. Any fees paid for
these
services by the distributor will be reimbursed by the adviser and not
the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary
of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian
for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of Institutional
Service
Shares at $1.00 by valuing the portfolio securities using the amortized
cost
method. The net asset value per share is determined by subtracting
liabilities
attributable to Institutional Service Shares from the value of Fund
assets
attributable to Institutional Service Shares, and dividing the remainder
by the
number of Institutional Service Shares outstanding. The Fund cannot
guarantee
that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
INVESTING IN THE FUND
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SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased either by wire or mail. The Fund reserves the right to
reject any
purchase request.
To make a purchase, open an account by calling Federated Securities
Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase by Federal Reserve wire, call the Fund before 1:00
p.m.
(Eastern time) to place an order. The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) that
day. Federal funds should be wired as follows: Federated Services
Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE;
For Credit
to: Pennsylvania Municipal Cash Trust--Institutional Service Shares;
Fund Number
(this number can be found on the account statement or by contacting the
Fund);
Group Number or Order Number; Nominee or Institution Name; and ABA
Number
011000028.
BY MAIL. To purchase by mail, send a check made payable to Pennsylvania
Municipal Cash Trust-- Institutional Service Shares to: Federated
Service
Company, c/o State Street Bank and Trust Company, P.O. Box 8602, Boston,
MA
02266-8602. Orders by mail are considered received when payment by check
is
converted into federal funds. This is normally the next business day
after the
check is received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be
opened
with a smaller amount as long as the minimum is reached within 90 days.
Minimum
investments will be calculated by combining all accounts maintained with
the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts.
However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping
requirements. The
transfer agent charges a fee based on the level of subaccounting
services
rendered. Financial institutions 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 provided which may be related to the
ownership of
Fund shares. This prospectus should, therefore, be read together with
any
agreement between the customer and the financial institution with regard
to the
services provided, the fees charged for those services and any
restrictions and
limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all
purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund. Shares purchased by wire
before
1:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by
check begin earning dividends the day after the check is converted into
federal
funds.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
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Shares are redeemed at their net asset value next determined after
Federated
Services Company receives the redemption request. Redemptions will be
made on
days on which the Fund computes its net asset value. Redemption requests
must be
received in proper form and can be made as described below.
BY MAIL
Shares may be redeemed by sending a written request to: Federated
Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8602, Boston,
MA
02266-8602. The written request should state: Pennsylvania Municipal
Cash
Trust--Institutional Service Shares; shareholder's name; the account
number; and
the share or dollar amount requested. Sign the request exactly as the
shares are
registered. Shareholders should call the Fund for assistance in
redeeming by
mail.
If share certificates have been issued, they must be properly endorsed
and
should be sent by registered or certified mail with the written request.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund,
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by:
a trust company or commercial bank whose deposits are insured by
the Bank
Insurance Fund which is administered by the Federal Deposit
Insurance
Corporation ("FDIC");
a member of the New York, American, Boston, Midwest, or Pacific
Stock
Exchanges;
a savings bank or savings and loan association whose deposits are
insured
by the Savings Association Insurance Fund, which is administered
by the
FDIC; or
any other "eligible guarantor institution," as defined in the
Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the transfer agent have adopted standards for accepting
signature
guarantees from the above institutions. The Fund may elect in the future
to
limit eligible signature guarantors to institutions that are members of
the
signature guarantee program. The Fund and its transfer agent reserve the
right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day,
but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a
redemption
request is processed.
BY WRITING A CHECK. At the shareholder's request, State Street Bank and
Trust
Company will establish a checking account for redeeming shares. For
further
information, contact the Fund.
With this checking account, shares may be redeemed by writing a check
for
$100.00 or more. The redemption will be made at the net asset value on
the date
that the check is presented to the Fund. A check may not be written to
close an
account. A shareholder may obtain cash by negotiating the check through
the
shareholder's local bank. Checks should never be made payable or sent to
State
Street Bank and Trust Company to redeem shares. Canceled checks are sent
to the
shareholder each month.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions
may be
recorded. If reasonable procedures are not followed by the Fund, it may
be
liable for losses due to unauthorized or fraudulent telephone
instructions. An
authorization form permitting the Fund to accept telephone requests must
first
be completed. Authorization forms and information on this service are
available
from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time),
the
proceeds will be wired the same day to the shareholder's account at a
domestic
commercial bank which is a member of the Federal Reserve System, and
those
shares redeemed will not be entitled to that day's dividend. A daily
dividend
will be paid on shares redeemed if the redemption request is received
after
12:00 noon (Eastern time). However, the proceeds are not wired until the
following business day.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If such a case should occur,
another
method of redemption, such as "By Mail", should be considered. If at any
time
the Fund shall determine it necessary to terminate or modify this method
of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund
may
redeem shares in any account and pay the proceeds to the shareholder if
the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is
notified in
writing and allowed 30 days to purchase additional shares to meet the
minimum
requirement.
SHAREHOLDER INFORMATION
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VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of all
classes of
each portfolio in the Trust have equal voting rights, except that in
matters
affecting only a particular portfolio or class, only shares of that
portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust
is not
required to hold annual shareholder meetings. Shareholder approval will
be
sought only for certain changes in the Trust's or the Fund's operation
and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
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FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
Pennsylvania. Shareholders are urged to consult their own tax advisers
regarding
the status of their accounts under state and local tax laws.
PENNSYLVANIA TAXES. The Fund received a ruling from the Commonwealth of
Pennsylvania Department of Revenue that interest or gain derived by the
Fund
from obligations free from state taxation in Pennsylvania is not taxable
on
pass-through to Fund shareholders for purposes of Pennsylvania personal
income
taxes. This was based on the existence of the Pennsylvania Investment
Restrictions (see "Investment Limitations"). However, legislation
enacted in
December 1993, eliminates the necessity of the Pennsylvania Investment
Restrictions. This legislation also generally repeals the Pennsylvania
personal
income tax exemption for gains from the sale of tax-exempt obligations,
including the exemption for distributions from the Fund to the extent
that they
are derived from gains from tax-exempt obligations. Fund shares are
exempt from
personal property taxes imposed by counties in Pennsylvania to the
extent that
the Fund invests in obligations that are exempt from such taxes.
In the opinion of Houston, Houston & Donnelly, counsel to the Fund, the
Fund is
not subject to Pennsylvania corporate or personal property taxes.
PERFORMANCE INFORMATION
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From time to time the Fund advertises its yield, effective yield, and
tax-equivalent yield for Institutional Service Shares.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
Institutional Service Shares' tax exempt yield, assuming a specific tax
rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in Institutional Service Shares after reinvesting all income
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The performance figures will be calculated separately for each class of
shares.
Because each class of shares is subject to different expenses, the
yield,
effective yield and tax-equivalent yield of Institutional Service Shares
will
exceed the yield, effective yield and tax-equivalent yield of Cash
Series Shares
for the same period.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
OTHER CLASSES OF SHARES
- ------------------------------------------------------------------------
- --------
The Fund also offers the following class.
Cash Series Shares are sold at net asset value primarily to retail
customers of
financial institutions. Investments in Cash Series Shares are subject to
a
minimum initial investment of $10,000. Cash Series Shares are
distributed
pursuant to a 12b-1 Plan adopted by the Trust whereby the distributor is
paid a
fee of .40 of 1% of Cash Series Shares' average daily net assets.
Financial institutions providing distribution or administrative services
may
receive additional compensation depending upon which class of shares of
the Fund
is sold. The distributor pays this compensation and is reimbursed from
sources
other than the assets of the Fund.
The amount of dividends payable to shareholders of any particular class
may be
more or less than that payable to the shareholders of any other class
depending
upon the existence of and differences in class expenses, 12b-1 Plan
expenses,
and Shareholder Services Plan expenses. The stated advisory fee is the
same for
all classes of shares.
PENNSYLVANIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1994 1993 1992 1991*
<S>
<C> <C> <C> <C>
- -----------------------------------------------------------------------
- --------- --------- --------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD
$ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------
Net investment income
0.02 0.02 0.03 0.03
- -----------------------------------------------------------------------
- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------
Dividends to shareholders from net investment income
(0.02) (0.02) (0.03) (0.03)
- -----------------------------------------------------------------------
- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD
$ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------
- --------- --------- --------- ---------
TOTAL RETURN**
1.84% 1.83% 2.67% 3.55%
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------
Expenses
1.04% 0.97% 0.96% 0.78%(b)
- -----------------------------------------------------------------------
Net investment income
1.73% 1.88% 2.64% 3.92%(b)
- -----------------------------------------------------------------------
Expense waiver/reimbursement (a)
0.18% 0.12% 0.12% 0.28%(b)
- -----------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
Net assets, end of period (000 omitted)
$18,352 $18,561 $24,694 $19,846
- -----------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from January 25, 1991 (date of
initial
public offering) to October 31, 1991.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
(b) Computed on an annualized basis.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C>
<C>
Pennsylvania Municipal Cash Trust
Institutional Service Shares
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Investment Adviser
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Custodian
State Street Bank and Trust Company
P.O. Box 8602
Boston, MA 02266-8602
- ------------------------------------------------------------------------
- -----------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------
- -----------------------------------------------
Independent Public Accountants
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
- ------------------------------------------------------------------------
- -----------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL
CASH TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated February 28, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314229204
9101005A-SS (2/95)
Pennsylvania Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Cash Series Shares
Institutional Service Shares
Combined Statement of Additional Information
This Combined Statement of Additional Information should be read
with
the prospectus(es) of Pennsylvania Municipal Cash Trust (the "Fund")
dated February 28, 1995. This Statement is not a prospectus. To
receive a copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
Pennsylvania Investment Risks 2
Investment Limitations 2
Brokerage Transactions 4
Federated Municipal Trust
Management 5
The Funds 8
Share Ownership 9
Trustees Compensation 10
Trustee Liability 10
Investment Advisory Services 11
Investment Adviser 11
Advisory Fees 11
Distribution and Shareholder
Services Plans 12
Determining Net Asset Value 12
Redemption in Kind 12
The Fund's Tax Status 13
Performance Information 13
Yield 13
Effective Yield 13
Tax-Equivalent Yield 13
Tax-Equivalency Table 14
Total Return 14
Performance Comparisons 15
Investment Policies
Unless indicated otherwise, the policies described below may be changed
by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the
security, the issuer of any demand feature applicable to the security,
or
any guarantor of either the security or any demand feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution
irrevocable letters of credit or guarantees and give the Fund the right
to
demand payment of the principal amounts of the participation interests
plus
accrued interest on short notice (usually within seven days). The
municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation
interests
include the right to demand payment from the issuers of those interests.
By
purchasing participation interests having a seven day demand feature,
the
Fund is buying a security meeting the maturity and quality requirements
of
the Fund and also is receiving the tax-free benefits of the underlying
securities.
Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the
nature of the appropriation for the lease. Furthermore, a lease may
provide
that the participants cannot accelerate lease obligations upon default.
The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the
investment
adviser, under the authority delegated by the Board of Trustees, will
base
its determination on the following factors: whether the lease can be
terminated by the lessee; the potential recovery, if any, from a sale of
the leased property upon termination of the lease; the lessee's general
credit strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit
enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other
than normal transaction costs, are incurred. However, liquid assets of
the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are
marked
to market daily and are maintained until the transaction has been
settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than
20%
of the total value of its assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant
to
repurchase agreements. Repurchase agreements are arrangements in which
banks, brokers/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at
a mutually agreed upon time and price. To the extent that the seller
does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. The Fund or
its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund
will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by
the
Trustees.
Pennsylvania Investment Risks
The Fund invests in obligations of Pennsylvania (the "State") issuers
which
result in the Fund's performance being subject to risks associated with
the
overall conditions present within the State. The following information
is a
brief summary of the prevailing economic conditions and general summary
of
the State's financial condition. This information is based on official
statements relating to securities that are believed to be reliable but
should not be considered as a complete description of all relevant
information.
Fiscal operations improved gradually since the $1.1 billion deficit in
1991. The deficit was nearly eliminated in 1992 with the addition of
increased taxes. During fiscal year 1993, Pennsylvania focused on
expenditure reductions while revenues were stabilized and reserves were
increased by $24 million. It should be noted however, due to the length
and
severity of the 1991 recession, several municipalities have undergone
severe financial stress and are still vulnerable to further economic
cycles.
Historically, the Pennsylvania economy was largely composed of heavy
industry that was concentrated in steel production, coal and railroads.
The
exposure to these industries, especially the steel sector, has declined
and
the economy has diversified into services and trade sectors. Presently,
services and trade compose over 50% of the economy. Unemployment in
Pennsylvania over the past two years has surpassed the national average,
and population growth as in many industrial states has been motionless.
The overall condition of the State is further demonstrated by its debt
ratings. Pennsylvania maintains an A-1 rating by Moody's Investors
Service,
Inc. that has been in effect since 1986. Standard & Poor's Ratings Group
rates the State
AA - ; this has remained since 1985.
The Fund's concentration in securities issued by the State and its
political subdivisions provides a greater level of risk than a fund
whose
assets are diversified across numerous states and municipal issuers. The
ability of the State or its municipalities to meet their obligations
will
depend on the availability of tax and other revenues; economic,
political,
and demographic conditions within the State; and the underlying fiscal
condition of the State, its counties, and its municipalities.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as are
necessary for the clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money in amounts up to one-third of the value of its total
assets, including the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather
as
a temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet
redemption
requests when the liquidation of portfolio securities is deemed to
be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of its total assets
are
outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except
as necessary to secure permitted borrowings. In those cases, it
may
pledge assets having a market value not exceeding the lesser of
the
dollar amounts borrowed or 15% of the value of total assets at the
time of the pledge.
Diversification of Investments
At the close of each quarter of each fiscal year, no more than 25%
of
the Fund's total assets will be invested in the securities of a
single issuer, but, with regard to at least 50% of the Fund's
total
assets, no more than 5% of the Fund's total assets are to be
invested
in securities of a single issuer.
Under this limitation, each governmental subdivision, including
states, territories, possessions of the United States, or their
political subdivisions, agencies, authorities, instrumentalities,
or
similar entities, will be considered a separate issuer if its
assets
and revenues are separate from those of the government body
creating
it and the security is backed only by its own assets and revenues.
Industrial development bonds backed only by the assets and
revenues
of a nongovernmental issuer are considered to be issued solely by
that issuer. If in the case of an industrial development bond or
government-issued security, a governmental or other entity
guarantees
the security, such guarantee would be considered a separate
security
issued by the guarantor, as well as the other issuer, subject to
limited exclusions allowed by the Investment Company Act of 1940.
Lending Cash or Securities
The Fund will not lend any of its assets except that it may
acquire
publicly or non publicly issued Pennsylvania municipal securities
or
temporary investments or enter into repurchase agreements, in
accordance with its investment objective, policies, limitations,
and
Declaration of Trust.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts,
or commodity futures contracts.
Investing in Restricted Securities
The Fund will not invest more than 10% of its net assets in
securities subject to restrictions on resale under the Securities
Act
of 1933.
Investing in Real Estate
The Fund will not purchase or sell real estate or real estate
limited
partnerships, although it may invest in securities of issuers
whose
business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real
estate.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
Concentration of Investments
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets in any one
industry or in industrial development bonds or other securities,
the
interest upon which is paid from revenues of similar types of
projects. However, the Fund may invest as temporary investments
more
than 25% of the value of its assets in cash or cash items,
securities
issued or guaranteed by the U.S. government, its agencies, or
instrumentalities, or instruments secured by these money market
instruments, such as repurchase agreements.
The above limitations cannot be changed without shareholder approval.
The
following investment limitations, however, may be changed by the
Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its net
assets
in illiquid securities, including repurchase agreements providing
for
settlement in more than seven days after notice, and certain
restricted securities.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment
companies,
except as part of a merger, consolidation, or other acquisition.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers (including companies responsible
for
paying principal and interest on industrial development bonds)
which
have records of less than three years of continuous operations,
including the operation of any predecessor.
Investing for Control
The Fund will not invest in securities of a company for the
purpose
of exercising control or management.
Investing in Issuers Whose Securities Are Owned by Officers and
Trustees
of the Trust
The Fund will not purchase or retain the securities of any issuer
if
the Officers and Trustees of the Trust or its investment adviser,
owning individually more than .50 of 1% of the issuer's
securities,
together own more than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or
any
combination of them.
Investing in Minerals
The Fund will not purchase or sell interests in oil, gas, or other
mineral exploration or development programs or leases, although it
may purchase the securities of issuers which invest in or sponsor
such programs.
For purposes of the above limitations, the Fund considers instruments
issued by a U.S. branch of a domestic bank or savings and loan having
capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items." Except with respect to borrowing
money, if a percentage limitation is adhered to at the time of
investment,
a later increase or decrease in percentage resulting from any change in
value or net assets will not result in a violation of such limitation.
The
Fund did not borrow money or pledge securities in excess of 5% of the
value
of its net assets during the last fiscal year and has no present intent
to
do so during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order
at a favorable price. In working with dealers, the adviser will
generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Board
of Trustees. The adviser may select brokers and dealers who offer
brokerage
and research services. These services may be furnished directly to the
Fund
or to the adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic
studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may
be
used by the adviser or its affiliates in advising the Trust and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid,
it would tend to reduce their expenses. The adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. During the fiscal years ended October 31, 1994, 1993
and
1992, the Fund paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type
the Fund may make may also be made by those other accounts. When the
Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
Federated Municipal Trust Management
Officers and Trustees are listed with their addresses, present positions
with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Center
Pittsburgh, PA 15219
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner
of the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate
ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of
the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of
the
Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation
and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman,
Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds;
Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue
is
the son of John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.;
Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in
the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes
the
following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Arrow Funds;
Automated Cash Management Trust; Automated Government Money Trust; Cash
Trust Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D.
Jones & Co. Daily Passport Cash Trust; Federated ARMs Fund; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government Trust;
Federated Growth Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust;
Federated
Institutional Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Short-Intermediate Government Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-
Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds; Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund,
Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities,
Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance
Management Series; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty
Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty
Municipal Securities Fund, Inc.; Liberty U.S. Government Money Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.;
Liquid
Cash Trust; Managed Series Trust; The Medalist Funds; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; 111 Corcoran Funds; Peachtree Funds;
The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds;
Short-Term Municipal Trust; Star Funds; The Starburst Funds; The
Starburst
Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for Financial
Institutions; Trust For Government Cash Reserves; Trust for Short-Term
U.S.
Government Securities; Trust for U.S. Treasury Obligations; World
Investment Series, Inc.
Share Ownership
Officers and Trustees own less than 1% of the Trust's outstanding
shares.
As of January 10, 1995, the following shareholder(s) of record owned 5%
or
more of the outstanding Cash Series Shares of the Fund: BHC Securities,
Inc., Philadelphia, Pennsylvania, owned approximately 7,019,542 shares
(23.67%) and Urban Redevelopment DCA Grant, Pittsburgh, Pennsylvania,
owned
approximately 3,006,582 shares (10.13%).
As of January 10, 1995, the following shareholder(s) of record owned 5%
or
more of the outstanding Institutional Service Shares of the Fund:
Meridian
Asset Management, Reading, Pennsylvania, owned approximately 30,225,853
shares (11.82%), ACO, Pittsburgh, Pennsylvania, owned approximately
15,557,154 shares (6.08%), Keystone Financial, Inc., owned approximately
17,795,531 shares (6.96%), Corestates Bank, N.A., Philadelphia,
Pennsylvania, owned approximately 15,878,151 shares (6.21%), Anderson &
Co., Philadelphia, Pennsylvania, owned approximately 32,911,358 shares
(12.87%), Saxon & Co., Philadelphia, Pennsylvania, owned approximately
21,272,153 shares (8.32%), PNC Securities Corp., Pittsburgh,
Pennsylvania,
owned approximately 14,368,843 shares (5.62%), and Mellon Bank Capital
Markets, Pittsburgh, Pennsylvania, owned approximately 15,842,354 shares
(6.19%).
Trustees Compensation
AGGREGATE TOTAL COMPENSATION PAID
NAME , COMPENSATION TO TRUSTEES FROM
POSITION WITH FROM TRUST
TRUST TRUST# AND FUND COMPLEX
John F. Donahue, $ -0- $ -0- for the Trust and
Chairman and Trustee 69 other investment companies in the
Fund Complex
Thomas G. Bigley, $ 719.00 $ 24,991 for the Trust and
Trustee 50 other investment companies in the
Fund Complex
John T. Conroy, Jr., $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
William J. Copeland, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
James E. Dowd, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $ 4,308.00 $ 123,600 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $ 4,757.00 $ 136,100 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Glen R. Johnson, $ -0- $ -0- for the Trust and
President and Trustee 9 other investment companies in the
Fund Complex
Peter E. Madden, $ 4,308.00 $ 104,880 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Gregor F. Meyer, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Wesley W. Posvar, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Marjorie P. Smuts, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
#The aggregate compensation is provided for the Trust which is comprised
of
13 portfolios.
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable
for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject
by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated Management. It is a
subsidiary
of Federated Investors. All the voting securities of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue, his
wife
and his son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder
of
the Fund for any losses that may be sustained in the purchase, holding,
or
sale of any security or for anything done or omitted by it, except acts
or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with
the
Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the fiscal years ended October 31, 1994, 1993, and 1992, the adviser
earned $1,617,472, $1,740,351, and $1,718,171, respectively, of which
$53,564, $415,874, and $415,265, respectively, was voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and
extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of
average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets,
the
adviser will reimburse the Fund for its expenses over the
limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the
amount of the excess, subject to an annual adjustment. If the
expense
limitation is exceeded, the amount to be reimbursed by the adviser
will be limited, in any single fiscal year, by the amount of the
investment advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred
to
as the "Administrators".) For the fiscal year ended October 31, 1994,
the
Administrators collectively earned $274,571. For the fiscal years ended
October 31, 1993 and 1992, Federated Administrative Services, Inc.
earned
$338,801 and $293,498. Dr. Henry J. Gailliot, an officer of Federated
Management, the adviser to the Fund, holds approximately 20% of the
outstanding common stock and serves as a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust
Company,
Boston, MA is custodian for the securities and cash of the Fund. It also
provides certain accounting and recordkeeping services with respect to
the
Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains
all necessary shareholder records. For its services, the transfer agent
receives a fee based on size, type and number of accounts and
transactions
made by shareholders.
Distribution and Shareholder Services Plans
With respect to Cash Series Shares, the Fund had adopted a Distribution
Plan pursuant to Rule 12b-1 which was promulgated by the Securities and
Exchange Commission pursuant to the Investment Company Act of 1940.
Additionally, the Fund has adopted a Shareholder Service Plan with
respect
to both Cash Series Shares and Institutional Service Shares.
These arrangements permit the payment of fees to financial institutions
to
stimulate distribution activities and services to shareholders provided
by
a representative who has knowledge of the shareholder's particular
circumstances and goals. These activities and services may include, but
are
not limited to, marketing efforts; providing office space, equipment,
telephone facilities, and various clerical, supervisory, computer, and
other personnel as necessary or beneficial to establish and maintain
shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Board of Trustees expects that
the
Fund will be able to achieve a more predictable flow of cash for
investment
purposes and to meet redemptions. This will facilitate more efficient
portfolio management and assist the Fund in pursuing its investment
objectives. By identifying potential investors whose needs are served by
the Fund's objectives, and properly servicing these accounts, it may be
possible to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail;
(3)
enhancing shareholder recordkeeping systems; and (4) responding promptly
to
shareholders' requests and inquiries concerning their accounts.
For the fiscal period ending October 31, 1994, payments in the amount of
$86,023 were made pursuant to the Distribution Plan, of which $33,738
was
waived. In addition, for this period, payments in the amount of $33,738
were made pursuant to the Shareholder Services Plan on behalf of Cash
Series Shares.
Determining Net Asset Value
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.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or
1%
of the Fund's net asset value, whichever is less, for any one
shareholder
within a 90-day period. Any redemption beyond this amount will also be
in
cash unless the Trustees determine that further payments should be in
kind.
In such cases, the Fund will pay all or a portion of the remainder of
the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not
as liquid as a cash redemption. If redemption is made in kind,
shareholders
who sell these securities could receive less than the redemption value
and
could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated
investment
companies, the Fund must, among other requirements: derive at least 90%
of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested;
changes in interest rates; changes in expenses; and the relative amount
of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for
those
shareholders paying those fees.
Yield
The Fund calculates its yield based upon the seven days ending on the
day
of the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional
shares purchased with dividends earned from the original one share and
all
dividends declared on the original and any purchased shares; dividing
the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
For the seven-day period ended October 31, 1994, the yields for Cash
Series
Shares and Institutional Service Shares were 2.47% and 2.87%,
respectively.
Effective Yield
The Fund calculates its effective yield by compounding the unannualized
base period return by: adding 1 to the base period return; raising the
sum
to the 365/7th power; and subtracting 1 from the result.
For the seven-day period ended October 31, 1994, the effective yields
for
Cash Series Shares and Institutional Service Shares were 2.50% and
2.91%,
respectively.
Tax-Equivalent Yield
The tax-equivalent yield of the Fund is calculated similarly to the
yield
but is adjusted to reflect the taxable yield that the Fund would have
had
to earn to equal its actual yield, assuming a 39.6% tax rate (the
maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
For the seven-day period ended October 31, 1994, the tax-equivalent
yields
for Cash Series Shares and Institutional Service Shares were 4.34% and
5.05%, respectively.
Tax-Equivalency Table
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free
from state and local taxes as well. As the table below indicates, a "tax-
free" investment can be an attractive choice for investors, particularly
in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF PENNSYLVANIA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
17.80% 30.80% 33.80% 38.80% 42.40%
JOINT $1- $39,001- $94,251- $143,601- OVER
RETURN 39,000 94,250 143,600 256,500
256,500
SINGLE $1- $23,351- $56,550- $117,951- OVER
RETURN 23,350 56,550 117,950 256,500
$256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
1.50% 1.82% 2.17% 2.27% 2.45% 2.60%
2.00% 2.43% 2.89% 3.02% 3.27% 3.47%
2.50% 3.04% 3.61% 3.78% 4.08% 4.34%
3.00% 3.65% 4.34% 4.53% 4.90% 5.21%
3.50% 4.26% 5.06% 5.29% 5.27% 6.08%
4.00% 4.87% 5.78% 6.04% 6.54% 6.94%
4.50% 5.47% 6.50% 6.80% 7.35% 7.81%
5.00% 6.08% 7.23% 7.55% 8.17% 8.68%
5.50% 6.69% 7.95% 8.31% 8.99% 9.55%
6.00% 7.30% 8.67% 9.06% 9.80% 10.42%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
STATE AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENTS WERE
NOT
USED TO INCREASE FEDERAL DEDUCTIONS.
The chart above is for illustrative purposes only. It is not an
indicator
of past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
Total Return
Average annual total return is the average compounded rate of return for
a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the
period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, adjusted over the
period by any additional shares, assuming the monthly reinvestment of
all
dividends and distributions.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
- Lipper Analytical Services, Inc. ranks funds in various fund
categories based on total return, which assumes the reinvestment
of
all income dividends and capital gains distributions, if any.
- Donoghue's Money Fund Report publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the
same
money funds.
- Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day
effective
yield.
314229881
314229204
9101005B (2/95)
VIRGINIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares of Virginia Municipal Cash Trust (the "Fund")
offered
by this prospectus represent interests in a non-diversified portfolio of
Federated Municipal Trust (the "Trust"), an open-end management
investment
company (a mutual fund). The Fund invests in short-term Virginia
municipal
securities to achieve current income exempt from federal regular income
tax and
the income tax imposed by the Commonwealth of Virginia consistent with
stability
of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information
dated
February 28, 1995, with the Securities and Exchange Commission. The
information
contained in the Combined Statement of Additional Information is
incorporated by
reference into this prospectus. You may request a copy of the Combined
Statement
of Additional Information free of charge by calling 1-800-235-4669. To
obtain
other information, or make inquiries about the Fund, contact the Fund at
the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SHARES
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
Virginia Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Institutional Shares
8
Administration of the Fund
9
NET ASSET VALUE
10
- ------------------------------------------------------
INVESTING IN THE FUND
10
- ------------------------------------------------------
Share Purchases
10
Minimum Investment Required
11
Subaccounting Services
11
Certificates and Confirmations
11
Dividends
11
Capital Gains
11
REDEEMING SHARES
12
- ------------------------------------------------------
By Mail
12
Telephone Redemption
12
Accounts with Low Balances
13
SHAREHOLDER INFORMATION
13
- ------------------------------------------------------
Voting Rights
13
Massachusetts Partnership Law
13
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
14
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
OTHER CLASSES OF SHARES
15
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SERVICE SHARES
16
- ------------------------------------------------------
ADDRESSES
17
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)................................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)................................................. None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as
applicable)............................... None
Redemption Fee (as a percentage of amount redeemed, if
applicable).................... None
Exchange
Fee.....................................................................
..... None
ANNUAL INSTITUTIONAL SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)
(1)..................................................... 0.22%
12b-1
Fee.....................................................................
........ None
Total Other
Expenses................................................................
.. 0.27%
Shareholder Services Fee (after waiver)
(2)............................. 0.00%
Total Institutional Shares Operating Expenses
(3)........................... 0.49%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of a
portion of the management fee. The adviser can terminate this
voluntary
waiver at any time at its sole discretion. The maximum management
fee is
0.40%.
(2) The maximum shareholder services fee is 0.25%.
(3) The Total Institutional Shares Operating Expenses in the table above
are
based on expenses expected during the fiscal year ending October 31,
1995.
The Total Institutional Shares Operating Expenses were 0.33% for the
fiscal
year ended October 31, 1994 and were 0.70% absent the voluntary
waiver of a
portion of the management fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of Institutional Shares of
the
Fund will bear, either directly or indirectly. For more complete
descriptions of
the various costs and expenses, see "Investing in the Fund" and "Trust
Information." Wire-transferred redemptions of less than $5,000 may be
subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3
years 5 years 10 years
- -------------------------------------------------------- ------ ---
- ---- ------- --------
<S> <C> <C>
<C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period............. $5
$16 $27 $ 62
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the foregoing table and example
relates only
to Institutional Shares of the Fund. The Fund also offers another class
of
shares called Institutional Service Shares. See "Other Classes of
Shares."
VIRGINIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER
31,
---
- ------------------
1994 1993*
---
- -- ------
<S> <C>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD
$1.00 $1.00
- ----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------
Net investment income
0.03 0.003
- ----------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------
Dividends to shareholders from net investment income
(0.03) (0.003)
- ---------------------------------------------------------------- ---
- -- -----
NET ASSET VALUE, END OF PERIOD
$1.00 $1.00
- ---------------------------------------------------------------- ---
- -- -----
TOTAL RETURN**
2.57% 0.35%
- ----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------
Expenses
0.33% 0.09%(b)
- ----------------------------------------------------------------
Net investment income
2.56% 2.68%(b)
- ----------------------------------------------------------------
Expense waiver/reimbursement (a)
0.37% 1.04%(b)
- ----------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------
Net assets, end of period (000 omitted)
$20,360 $7,210
- ----------------------------------------------------------------
</TABLE>
* Reflects operations for the period from September 16, 1993 (date of
initial
public investment) to October 31, 1993.
** Based on net asset value, which does not reflect the sales load or
contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The shares in any one portfolio may be offered in separate
classes.
With respect to the Fund, as of the date of this prospectus, the
Trustees have
established two classes of shares known as Institutional Shares and
Institutional Service Shares. This prospectus relates only to
Institutional
Shares of the Fund, which are designed primarily for financial
institutions
acting in a fiduciary capacity as a convenient means of accumulating an
interest
in a professionally managed, non-diversified portfolio investing
primarily in
short-term Virginia municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Virginia taxpayers because it
invests
in municipal securities of Virginia. A minimum initial investment of
$25,000
over a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the income tax imposed by the Commonwealth of
Virginia
consistent with stability of principal. This investment objective cannot
be
changed without shareholder approval. While there is no assurance that
the Fund
will achieve its investment objective, it endeavors to do so by
following the
investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Virginia municipal securities (as defined below) maturing in 13 months
or less.
As a matter of investment policy, which cannot be changed without
shareholder
approval, at least 80% of the Fund's annual interest income will be
exempt from
federal regular and Virginia state income tax or at least 80% of its net
assets
will be invested in obligations, the interest income from which is
exempt from
federal regular and Virginia state income tax. (Federal regular income
tax does
not include the federal individual alternative minimum tax or the
federal
alternative minimum tax for corporations.) The average maturity of the
securities in the Fund's portfolio, computed on a dollar-weighted basis,
will be
90 days or less. Unless indicated otherwise, the investment policies may
be
changed by the Trustees without shareholder approval. Shareholders will
be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued
by or on behalf of Virginia and its political subdivisions and financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and the income tax imposed by the Common-
wealth of Virginia ("Virginia municipal securities"). Examples of
Virginia
municipal securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
- bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in
Virginia
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying Virginia
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The Virginia municipal securities in which the Fund invests
must be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating
categories. The Fund will follow applicable regulations in determining
whether a
security rated by more than one
NRSRO can be treated as being in one of the two highest short-term
rating
categories; currently, such securities must be rated by two NRSROs in
one of
their two highest rating categories. See "Regulatory Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit-enhanced
securities
based upon the financial condition and ratings of the party providing
the credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit-
enhanced by the credit enhancer, in which case the securities will be
treated as
having been issued by both the issuer and the credit enhancer. The
bankruptcy,
receivership, or default of the credit enhancer will adversely affect
the
quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund
may
invest pursuant to its investment objective and policies but which are
subject
to restrictions on resale under federal securities laws. Under criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase, together with other illiquid
securities, to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines
that market conditions call for a temporary defensive posture, the Fund
may
invest in tax-exempt or taxable securities such as: obligations issued
by or on
behalf of municipal or corporate issuers having the same quality
characteristics
as described above; obligations issued or guaranteed by the U.S.
government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so. However, the interest from certain
Virginia
municipal securities is subject to the federal alternative minimum tax.
VIRGINIA MUNICIPAL SECURITIES
Virginia municipal securities are generally issued to finance public
works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
Virginia municipal securities include industrial development bonds
issued by or
on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Virginia municipal securities are
"general
obligation" and "revenue" bonds. General obligation bonds are secured by
the
issuer's pledge of its full faith and credit and taxing power for the
payment of
principal and interest. Interest on and principal of revenue bonds,
however, are
payable only from the revenue generated by the facility financed by the
bond or
other specified sources of revenue. Revenue bonds do not represent a
pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Virginia municipal securities depend on a variety of factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of Virginia municipal securities and participation interests, or the
credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of
Virginia
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in Virginia municipal securities which are repayable
out of
revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
Virginia municipal securities could involve an increased risk to the
Fund should
any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Virginia municipal securities are subject to
the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase
agreements
(arrangements in which the Fund sells a money market instrument for a
percentage
of its cash value with an agreement to but it back on a set date) or
pledge
securities except, under certain circumstances, the Fund may borrow up
to
one-third of the value of its total assets and pledge up to 15% of the
value of
total assets to secure such borrowings. This investment limitation
cannot be
changed without shareholder approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Combined Statement of Additional Information, in
order to
comply with applicable laws and regulations, including the provisions of
and
regulations under the Investment Company Act of 1940, as amended. In
particular,
the Fund will comply with the various requirements of Rule 2a-7, which
regulates
money market mutual funds. The Fund will determine the effective
maturity of its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are
responsible for managing the Trust's business affairs and for exercising
all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee equal
to .40 of 1% of the Fund's average daily net assets. The adviser
has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for
Institutional Shares
of the Fund. It is a Pennsylvania corporation organized on November 14,
1969,
and is the principal distributor for a number of investment companies.
Federated
Securities Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services
Plan (the
"Services Plan") under which it will pay Federated Shareholder Services,
an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of the Institutional Shares to
provide personal services and/or maintenance of shareholder accounts to
the Fund
and its shareholders. From time to time and for such periods as deemed
appropriate, the amount stated above may be reduced voluntarily.
Federated Shareholder Services may elect to pay financial institutions
fees
based upon shares owned by their clients or customers for services
provided to
those clients or customers. The schedules of such fees and the basis
upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds,
investment
advisers, and broker/dealers to provide certain services to
shareholders. These
services may include, but are not limited to, distributing prospectuses
and
other information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of shares. Any fees paid for
these
services by the distributor will be reimbursed by the adviser and not
the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary
of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
------------------------------------ --------------------------------
- ----
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750
million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian
for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
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- --------
The Fund attempts to stabilize the net asset value of Institutional
Shares at
$1.00 by valuing the portfolio securities using the amortized cost
method. The
net asset value per share is determined by subtracting liabilities
attributable
to Institutional Shares from the value of Fund assets attributable to
Institutional Shares, and dividing the remainder by the number of
Institutional
Shares outstanding. The Fund cannot guarantee that its net asset value
will
always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
INVESTING IN THE FUND
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- --------
SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased either by wire or mail. The Fund reserves the right to
reject any
purchase request.
To make a purchase, open an account by calling Federated Securities
Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase by Federal Reserve wire, call the Fund before 1:00
p.m.
(Eastern time) to place an order. The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) that
day. Federal funds should be wired as follows: Federated Services
Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE;
For Credit
to: Virginia Municipal Cash Trust--Institutional Shares; Fund Number
(this
number can be found on the account statement or by contacting the Fund);
Group
Number or Order Number; Nominee or Institution Name; and ABA Number
011000028.
BY MAIL. To purchase by mail, send a check made payable to Virginia
Municipal
Cash Trust-- Institutional Shares to: Federated Services Company, c/o
State
Street Bank and Trust Company, P.O. Box 8602, Boston, MA 02266-8602.
Orders by
mail are considered received when payment by check is converted into
federal
funds. This is normally the next business day after the check is
received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be
opened
with a smaller amount as long as the minimum is reached within 90 days.
Minimum
investments will be calculated by combining all accounts maintained with
the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts.
However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping
requirements. The
transfer agent charges a fee based on the level of subaccounting
services
rendered. Financial institutions 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 provided which may be related to the
ownership of
Fund shares. This prospectus should, therefore, be read together with
any
agreement between the customer and the financial institution with regard
to the
services provided, the fees charged for those services and any
restrictions and
limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all
purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund. Shares purchased by wire
before
1:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by
check begin earning dividends the day after the check is converted into
federal
funds.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
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Shares are redeemed at their net asset value next determined after
Federated
Services Company receives the redemption request. Redemptions will be
made on
days on which the Fund computes its net asset value. Redemption requests
must be
received in proper form and can be made as described below.
BY MAIL
Shares may be redeemed by sending a written request to: Federated
Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8602, Boston,
MA
02266-8202. The written request should state: Virginia Municipal Cash
Trust--Institutional Shares; shareholder's name; the account number; and
the
share or dollar amount requested. Sign the request exactly as the shares
are
registered. Shareholders should call the Fund for assistance in
redeeming by
mail.
If share certificates have been issued, they must be properly endorsed
and
should be sent by registered or certified mail with the written request.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund,
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by:
- a trust company or commercial bank whose deposits are insured by
the Bank
Insurance Fund which is administered by the Federal Deposit
Insurance
Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific
Stock
Exchanges;
- a savings bank or savings and loan association whose deposits are
insured
by the Savings Association Insurance Fund, which is administered
by the
FDIC; or
- any other "eligible guarantor institution," as defined in the
Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the transfer agent have adopted standards for accepting
signature
guarantees from the above institutions. The Fund may elect in the future
to
limit eligible signature guarantors to institutions that are members of
the
signature guarantee program. The Fund and its transfer agent reserve the
right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day,
but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a
redemption
request is processed.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions
may be
recorded. If reasonable procedures are not followed by the Fund, it may
be
liable for losses due to unauthorized or fraudulent telephone
instructions. An
authorization form permitting the Fund to accept telephone requests must
first
be completed. Authorization forms and information on this service are
available
from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time),
the
proceeds will be wired the same day to the shareholder's account at a
domestic
commercial bank which is a member of the Federal Reserve System, and
those
shares redeemed will not be entitled to that day's dividend. A daily
dividend
will be paid on shares redeemed if the redemption request is received
after
12:00 noon (Eastern time). However, the proceeds are not wired until the
following business day.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If such a case should occur,
another
method of redemption, such as "By Mail," should be considered. If at any
time
the Fund shall determine it necessary to terminate or modify this method
of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund
may
redeem shares in any account and pay the proceeds to the shareholder if
the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is
notified in
writing and allowed 30 days to purchase additional shares to meet the
minimum
requirement.
SHAREHOLDER INFORMATION
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- --------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of all
classes of
each portfolio in the Trust have equal voting rights, except that in
matters
affecting only a particular portfolio or class, only shares of that
portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust
is not
required to hold annual shareholder meetings. Shareholder approval will
be
sought only for certain changes in the Trust's or the Fund's operation
and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
As of January 10, 1995, Hamac & Co., Richmond, Virginia, owned 27.66% of
the
voting securities of the Fund, and, therefore, may, for certain
purposes, be
deemed to control the Fund and be able to affect the outcome of certain
matters
presented for a vote of shareholders.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
Virginia. Shareholders are urged to consult their own tax advisers
regarding the
status of their accounts under state and local tax laws.
VIRGINIA TAXES. Under existing Virginia laws, distributions made by the
Fund
will not be subject to Virginia income taxes to the extent that such
distributions qualify as exempt-interest dividends under the Internal
Revenue
Code, and represent (i) interest from obligations issued by or on behalf
of the
Commonwealth of Virginia or any political subdivision thereof; or (ii)
interest
from obligations issued by a territory or possession of the United
States or any
political subdivision thereof which federal law exempts from state
income taxes.
Conversely, to the extent that distributions made by the Fund are
attributable
to other types of obligations, such distributions will be subject to
Virginia
income taxes.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time the Fund advertises its yield, effective yield, and
tax-equivalent yield for Institutional Shares.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
the Institutional Shares' tax exempt yield, assuming a specific tax
rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in the Institutional Shares after reinvesting all income
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The performance figures will be calculated separately for each class of
shares.
Because each class of shares is subject to different expenses, the
yield,
effective yield and tax-equivalent yield of Institutional Shares will
exceed the
yield, effective yield and tax-equivalent yield of Institutional Service
Shares
for the same period.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
OTHER CLASSES OF SHARES
- ------------------------------------------------------------------------
- --------
The Fund also offers the following class.
Institutional Service Shares are sold at net asset value primarily to
financial
institutions acting in an agency capacity. Investments in Institutional
Service
Shares are subject to a minimum initial investment of $25,000.
Institutional
Service Shares are sold with no 12-b1 fees.
Financial Institutions providing distribution or administrative services
may
receive additional compensation depending upon which class of shares of
the Fund
is sold. The distributor pays this compensation and is reimbursed from
sources
other than the assets of the Fund.
The amount of dividends payable to shareholders of any particular class
may be
more or less than that payable to the shareholders of any other class
depending
upon the existence of and differences in class expenses, 12b-1 Plan
expenses,
and Shareholder Services Plan expenses. The stated advisory fee is the
same for
all classes of shares.
VIRGINIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER
31,
---
- ------------------
1994 1993*
---
- -- ------
<S> <C>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD
$1.00 $1.00
- ----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------
Net investment income
0.02 0.003
- ----------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------
Dividends to shareholders from net investment income
(0.02) (0.003)
- ---------------------------------------------------------------- ---
- -- -----
NET ASSET VALUE, END OF PERIOD
$1.00 $1.00
- ---------------------------------------------------------------- ---
- -- -----
TOTAL RETURN**
2.44% 0.34%
- ----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------
Expenses
0.40% 0.19%(b)
- ----------------------------------------------------------------
Net investment income
2.42% 2.67%(b)
- ----------------------------------------------------------------
Expense waiver/reimbursement (a)
0.37% 1.04%(b)
- ----------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------
Net assets, end of period (000 omitted)
$100,084 $45,648
- ----------------------------------------------------------------
</TABLE>
* Reflects operations for the period from September 16, 1993 (date of
initial
public investment) to October 31, 1993.
** Based on net asset value, which does not reflect the sales load or
contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
(b) Computed on an annualized basis.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C> <C>
Virginia Municipal Cash Trust
Institutional Shares Federated
Investors Tower
Pittsburgh,
PA 15222-3779
- ------------------------------------------------------------------------
- ------------------------
Distributor
Federated Securities Corp. Federated
Investors Tower
Pittsburgh,
PA 15222-3779
- ------------------------------------------------------------------------
- ------------------------
Investment Adviser
Federated Management Federated
Investors Tower
Pittsburgh,
PA 15222-3779
- ------------------------------------------------------------------------
- ------------------------
Custodian
State Street Bank and P.O. Box
8602
Trust Company Boston, MA
02266-8602
- ------------------------------------------------------------------------
- ------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated
Investors Tower
Pittsburgh,
PA 15222-3779
- ------------------------------------------------------------------------
- ------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One
PPG Place
Pittsburgh,
PA 15222
- ------------------------------------------------------------------------
- ------------------------
</TABLE>
VIRGINIA MUNICIPAL
CASH TRUST
INSTITUTIONAL SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated February 28, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314229816
3080501A-IS (2/95)
VIRGINIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares of Virginia Municipal Cash Trust (the
"Fund")
offered by this prospectus represent interests in a non-diversified
portfolio of
Federated Municipal Trust (the "Trust"), an open-end management
investment
company (a mutual fund). The Fund invests in short-term Virginia
municipal
securities to achieve current income exempt from federal regular income
tax and
the income tax imposed by the Commonwealth of Virginia consistent with
stability
of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN
THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before
you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information
dated
February 28, 1995, with the Securities and Exchange Commission. The
information
contained in the Combined Statement of Additional Information is
incorporated by
reference into this prospectus. You may request a copy of the Combined
Statement
of Additional Information free of charge by calling 1-800-235-4669. To
obtain
other information, or make inquiries about the Fund, contact the Fund at
the
address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated February 28, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
SUMMARY OF FUND EXPENSES
1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SERVICE SHARES
2
- ------------------------------------------------------
GENERAL INFORMATION
3
- ------------------------------------------------------
INVESTMENT INFORMATION
3
- ------------------------------------------------------
Investment Objective
3
Investment Policies
3
Virginia Municipal Securities
6
Investment Risks
6
Non-Diversification
7
Investment Limitations
7
Regulatory Compliance
7
TRUST INFORMATION
8
- ------------------------------------------------------
Management of the Trust
8
Distribution of Institutional Service Shares
8
Administration of the Fund
9
NET ASSET VALUE
10
- ------------------------------------------------------
INVESTING IN THE FUND
10
- ------------------------------------------------------
Share Purchases
10
Minimum Investment Required
11
Subaccounting Services
11
Certificates and Confirmations
11
Dividends
11
Capital Gains
11
REDEEMING SHARES
11
- ------------------------------------------------------
By Mail
12
Telephone Redemption
12
Accounts with Low Balances
13
SHAREHOLDER INFORMATION
13
- ------------------------------------------------------
Voting Rights
13
Massachusetts Partnership Law
13
TAX INFORMATION
14
- ------------------------------------------------------
Federal Income Tax
14
State and Local Taxes
14
PERFORMANCE INFORMATION
15
- ------------------------------------------------------
OTHER CLASSES OF SHARES
15
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SHARES
16
- ------------------------------------------------------
ADDRESSES
17
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S>
<C> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)................................................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering
price)................................................. None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as
applicable)............................... None
Redemption Fee (as a percentage of amount redeemed, if
applicable).................... None
Exchange
Fee.....................................................................
..... None
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING
EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)
(1)..................................................... 0.22%
12b-1
Fee.....................................................................
........ None
Total Other
Expenses................................................................
.. 0.37%
Shareholder Services Fee (after waiver)
(2)............................. 0.10%
Total Institutional Service Shares Operating Expenses
(3)................... 0.59%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver
of a
portion of the management fee. The adviser can terminate this
voluntary
waiver at any time at its sole discretion. The maximum management
fee is
0.40%.
(2) The maximum shareholder services fee is 0.25%.
(3) The Total Institutional Service Shares Operating Expenses in the
table above
are based on expenses expected during the fiscal year ending October
31,
1995. The Total Institutional Service Shares Operating Expenses were
0.40%
for the fiscal year ended October 31, 1994 and were 0.77% absent the
voluntary waiver of a portion of the management fee.
The purpose of this table is to assist an investor in understanding
the
various costs and expenses that a shareholder of Institutional Service
Shares of
the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Investing in the
Fund" and
"Trust Information." Wire-transferred redemptions of less than $5,000
may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3
years 5 years 10 years
- -------------------------------------------------------- ------ ---
- ---- ------- --------
<S> <C> <C>
<C> <C>
You would pay the following expenses on a $1,000 invest-
ment, assuming (1) 5% annual return and (2) redemption
at the end of each time period........................ $6
$19 $33 $74
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the foregoing table and example
relates only
to Institutional Service Shares of the Fund. The Fund also offers
another class
of shares called Institutional Shares. See "Other Classes of Shares."
VIRGINIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER
31,
---
- ------------------
1994 1993*
---
- -- ------
<S> <C>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD
$1.00 $1.00
- ----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------
Net investment income
0.02 0.003
- ----------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------
Dividends to shareholders from net investment income
(0.02) (0.003)
- ---------------------------------------------------------------- ---
- -- -----
NET ASSET VALUE, END OF PERIOD
$1.00 $1.00
- ---------------------------------------------------------------- ---
- -- -----
TOTAL RETURN**
2.44% 0.34%
- ----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------
Expenses
0.40% 0.19%(b)
- ----------------------------------------------------------------
Net investment income
2.42% 2.67%(b)
- ----------------------------------------------------------------
Expense waiver/reimbursement (a)
0.37% 1.04%(b)
- ----------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------
Net assets, end of period (000 omitted)
$100,084 $45,648
- ----------------------------------------------------------------
</TABLE>
* Reflects operations for the period from September 16, 1993 (date of
initial
public investment) to October 31, 1993.
** Based on net asset value, which does not reflect the sales load or
contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
(b) Computed on an annualized basis.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Trust was established as a Massachusetts business trust under a
Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the
Trust to
offer separate series of shares representing interests in separate
portfolios of
securities. The shares in any one portfolio may be offered in separate
classes.
With respect to the Fund, as of the date of this prospectus, the
Trustees have
established two classes of shares known as Institutional Service Shares
and
Institutional Shares. This prospectus relates only to Institutional
Service
Shares of the Fund, which are designed primarily for financial
institutions
acting in an agency capacity as a convenient means of accumulating an
interest
in a professionally managed, non-diversified portfolio investing
primarily in
short-term Virginia municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Virginia taxpayers because it
invests
in municipal securities of Virginia. A minimum initial investment of
$25,000
over a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- ------------------------------------------------------------------------
- --------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from
federal
regular income tax and the income tax imposed by the Commonwealth of
Virginia
consistent with stability of principal. This investment objective cannot
be
changed without shareholder approval. While there is no assurance that
the Fund
will achieve its investment objective, it endeavors to do so by
following the
investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Virginia municipal securities (as defined below) maturing in 13 months
or less.
As a matter of investment policy, which cannot be changed without
shareholder
approval, at least 80% of the Fund's annual interest income will be
exempt from
federal regular tax and Virginia state income tax or at least 80% of its
net
assets will be invested in obligations, the interest income from which
is exempt
from federal regular and Virginia state income tax. (Federal regular
income tax
does not include the federal individual alternative minimum tax or the
federal
alternative minimum tax for corporations.) The average maturity of the
securities in the Fund's portfolio, computed on a dollar-weighted basis,
will be
90 days or less. Unless indicated otherwise, the investment policies may
be
changed by the Trustees without shareholder approval. Shareholders will
be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by
or on behalf of Virginia and its political subdivisions and financing
authorities, and obligations of other states, territories, and
possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from
which is, in
the opinion of qualified legal counsel, exempt from federal regular
income tax
and the income tax imposed by the
Commonwealth of Virginia ("Virginia municipal securities".) Examples of
Virginia
municipal securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance
working
capital needs in anticipation of receiving taxes or other
revenues;
- bond anticipation notes ("BANs") that are intended to be
refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the
foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term debt
instruments that have variable or floating interest rates and
provide the
Fund with the right to tender the security for repurchase at its
stated
principal amount plus accrued interest. Such securities typically
bear
interest at a rate that is intended to cause the securities to
trade at
par. The interest rate may float or be adjusted at regular
intervals
(ranging from daily to annually), and is normally based on a
published
interest rate or interest rate index. Most variable rate demand
notes allow
the Fund to demand the repurchase of the security on not more than
seven
days prior notice. Other notes only permit the Fund to tender the
security
at the time of each interest rate adjustment or at other fixed
intervals.
See "Demand Features." The Fund treats variable rate demand notes
as
maturing on the later of the date of the next interest rate
adjustment or
the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in
Virginia
municipal securities from financial institutions such as commercial
and
investment banks, savings and loan associations, and insurance
companies.
These interests may take the form of participations, beneficial
interests
in a trust, partnership interests or any other form of indirect
ownership
that allows the Fund to treat the income from the investment as
exempt from
federal income tax. The Fund invests in these participation
interests in
order to obtain credit enhancement or demand features that would
not be
available through direct ownership of the underlying Virginia
municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state
and
local governments or authorities to finance the acquisition of
equipment
and facilities. They may take the form of a lease, an installment
purchase
contract, a conditional sales contract, or a participation interest
in any
of the above.
RATINGS. The Virginia municipal securities in which the Fund invests
must be
rated in one of the two highest short-term rating categories by one or
more
nationally recognized statistical rating organizations ("NRSROs") or be
of
comparable quality to securities having such ratings. An NRSRO's two
highest
rating categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard &
Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors
Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating
categories. The Fund will follow applicable regulations in determining
whether a
security rated by more than one NRSRO
can be treated as being in one of the two highest short-term rating
categories;
currently, such securities must be rated by two NRSROs in one of their
two
highest rating categories. See "Regulatory Compliance."
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. The Fund
typically evaluates the credit quality and ratings of credit-enhanced
securities
based upon the financial condition and ratings of the party providing
the credit
enhancement (the "credit enhancer"), rather than the issuer. However,
credit-enhanced securities will not be treated as having been issued by
the
credit enhancer for diversification purposes, unless the Fund has
invested more
than 10% of its assets in securities issued, guaranteed or otherwise
credit-
enhanced by the credit enhancer, in which case the securities will be
treated as
having been issued by both the issuer and the credit enhancer. The
bankruptcy,
receivership, or default of the credit enhancer will adversely affect
the
quality and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities, or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities
on a when-issued or delayed delivery basis. These transactions are
arrangements
in which the Fund purchases securities with payment and delivery
scheduled for a
future time. The seller's failure to complete these transactions may
cause the
Fund to miss a price or yield considered to be advantageous. Settlement
dates
may be a month or more after entering into these transactions, and the
market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter into transactions
to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund
may
invest pursuant to its investment objective and policies but which are
subject
to restrictions on resale under federal securities laws. Under criteria
established by the Trustees, certain restricted securities are
determined to be
liquid. To the extent that restricted securities are not determined to
be
liquid, the Fund will limit their purchase, together with other illiquid
securities, to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines
that market conditions call for a temporary defensive posture, the Fund
may
invest in tax-exempt or taxable securities such as: obligations issued
by or on
behalf of municipal or corporate issuers having the same quality
characteristics
as described above; obligations issued or guaranteed by the U.S.
government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and
repurchase agreements (arrangements in which the organization selling
the Fund a
temporary investment agrees at the time of sale to repurchase it at a
mutually
agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments,
there is
no current intention to do so. However, the interest from certain
Virginia
municipal securities is subject to the federal alternative minimum tax.
VIRGINIA MUNICIPAL SECURITIES
Virginia municipal securities are generally issued to finance public
works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also
issued to
repay outstanding obligations, to raise funds for general operating
expenses,
and to make loans to other public institutions and facilities.
Virginia municipal securities include industrial development bonds
issued by or
on behalf of public authorities to provide financing aid to acquire
sites or
construct and equip facilities for privately or publicly owned
corporations. The
availability of this financing encourages these corporations to locate
within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Virginia municipal securities are
"general
obligation" and "revenue" bonds. General obligation bonds are secured by
the
issuer's pledge of its full faith and credit and taxing power for the
payment of
principal and interest. Interest on and principal of revenue bonds,
however, are
payable only from the revenue generated by the facility financed by the
bond or
other specified sources of revenue. Revenue bonds do not represent a
pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are
typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Virginia municipal securities depend on a variety of factors,
including: the general conditions of the short-term municipal note
market and of
the municipal bond market; the size of the particular offering; the
maturity of
the obligations; and the rating of the issue. The ability of the Fund to
achieve
its investment objective also depends on the continuing ability of the
issuers
of Virginia municipal securities and participation interests, or the
credit
enhancers of either, to meet their obligations for the payment of
interest and
principal when due. In addition, from time to time, the supply of
Virginia
municipal securities acceptable for purchase by the Fund could become
limited.
The Fund may invest in Virginia municipal securities which are repayable
out of
revenue streams generated from economically related projects or
facilities
and/or whose issuers are located in the same state. Sizable investments
in these
Virginia municipal securities could involve an increased risk to the
Fund should
any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Virginia municipal securities are subject to
the
provisions of bankruptcy, insolvency, and other laws affecting the
rights and
remedies of creditors. In addition, the obligations of such issuers may
become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest,
or
imposing other constraints upon enforcement of such obligations or upon
the
ability of states or municipalities to levy taxes. There is also the
possibility
that, as a result of litigation or other conditions, the power or
ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater
fluctuation
in the total market value of the Fund's portfolio. Any economic,
political, or
regulatory developments affecting the value of the securities in the
Fund's
portfolio will have a greater impact on the total value of the portfolio
than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable
year, with regard to at least 50% of the Fund's total assets, no more
than 5% of
its total assets are invested in the securities of a single issuer and
that with
respect to the remainder of the Fund's total assets, no more than 25% of
its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase
agreements
(arrangements in which the Fund sells a money market instrument for a
percentage
of its cash value with an agreement to but it back on a set date) or
pledge
securities except, under certain circumstances, the Fund may borrow up
to
one-third of the value of its total assets and pledge up to 15% of the
value of
total assets to secure such borrowings. This investment limitation
cannot be
changed without shareholder approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Combined Statement of Additional Information, in
order to
comply with applicable laws and regulations, including the provisions of
and
regulations under the Investment Company Act of 1940, as amended. In
particular,
the Fund will comply with the various requirements of Rule 2a-7, which
regulates
money market mutual funds. The Fund will determine the effective
maturity of its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
TRUST INFORMATION
- ------------------------------------------------------------------------
- --------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The
Trustees are
responsible for managing the Trust's business affairs and for exercising
all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities
between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated
Management, the Fund's investment adviser, subject to direction by the
Trustees.
The adviser continually conducts investment research and supervision for
the
Fund and is responsible for the purchase and sale of portfolio
instruments.
ADVISORY FEES. The adviser receives an annual investment advisory
fee equal
to .40 of 1% of the Fund's average daily net assets. The adviser
has
undertaken to reimburse the Fund up to the amount of the advisory
fee for
operating expenses in excess of limitations established by certain
states.
The adviser also may voluntarily choose to waive a portion of its
fee or
reimburse other expenses of the Fund, but reserves the right to
terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business
trust,
organized on April 11, 1989, is a registered investment adviser
under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors.
All of the Class A (voting) shares of Federated Investors are owned
by a
trust, the trustees of which are John F. Donahue, Chairman and
Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors
serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative
services
to a number of investment companies. Total assets under management
or
administration by these and other subsidiaries of Federated
Investors are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for
Institutional
Service Shares of the Fund. It is a Pennsylvania corporation organized
on
November 14, 1969, and is the principal distributor for a number of
investment
companies. Federated Securities Corp. is a subsidiary of Federated
Investors.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services
Plan (the
"Services Plan") under which it will pay Federated Shareholder Services,
an
affiliate of Federated Investors, an amount not exceeding .25 of 1% of
the
average daily net asset value of the Institutional Service Shares
to provide personal services and/or maintenance of shareholder accounts
to the
Fund and its shareholders. From time to time and for such periods as
deemed
appropriate, the amount stated above may be reduced voluntarily.
Federated Shareholder Services may elect to pay financial institutions
fees
based upon shares owned by their clients or customers for services
provided to
those clients or customers. The schedules of such fees and the basis
upon which
such fees will be paid will be determined from time to time by Federated
Shareholder Services.
SHAREHOLDER SERVICING ARRANGEMENTS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds,
investment
advisers, and broker/dealers to provide certain services to
shareholders. These
services may include, but are not limited to, distributing prospectuses
and
other information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of shares. Any fees paid for
these
services by the distributor will be reimbursed by the adviser and not
the Fund.
GLASS-STEAGALL ACT. The Glass-Steagall Act prohibits a depository
institution
(such as a commercial bank or a savings and loan association) from being
an
underwriter or distributor of most securities. In the event the Glass-
Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax
current
restrictions on depository institutions, the Trustees will consider
appropriate
changes in the administrative services.
State securities laws governing the ability of depository institutions
to act as
underwriters or distributors of securities may differ from
interpretations given
to the Glass-Steagall Act and, therefore, banks and financial
institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary
of
Federated Investors, provides administrative personnel and services
(including
certain legal and accounting services) necessary to operate the Fund.
Federated
Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
------------------------------------ --------------------------------
- ----
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750
million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may
choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is
custodian for
the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services
Company,
Pittsburgh, PA, is transfer agent for the shares of, and dividend
disbursing
agent for, the Fund.
INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for
the Fund
are Arthur Andersen LLP, Pittsburgh, PA.
NET ASSET VALUE
- ------------------------------------------------------------------------
- --------
The Fund attempts to stabilize the net asset value of Institutional
Service
Shares at $1.00 by valuing the portfolio securities using the amortized
cost
method. The net asset value per share is determined by subtracting
liabilities
attributable to Institutional Service Shares from the value of Fund
assets
attributable to Institutional Service Shares, and dividing the remainder
by the
number of Institutional Service Shares outstanding. The Fund cannot
guarantee
that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m., and 4:00
p.m.
(Eastern time) Monday through Friday except on: (i) days on which there
are not
sufficient changes in the value of the Fund's portfolio securities that
its net
asset value might be materially affected; (ii) days during which no
shares are
tendered for redemption and no orders to purchase shares are received;
or (iii)
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
INVESTING IN THE FUND
- ------------------------------------------------------------------------
- --------
SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York
Stock
Exchange and the Federal Reserve Wire System are open for business.
Shares may
be purchased either by wire or mail. The Fund reserves the right to
reject any
purchase request.
To make a purchase, open an account by calling Federated Securities
Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase by Federal Reserve wire, call the Fund before 1:00
p.m.
(Eastern time) to place an order. The order is considered received
immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern
time) that
day. Federal funds should be wired as follows: Federated Services
Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE;
For Credit
to: Virginia Municipal Cash Trust--Institutional Service Shares; Fund
Number
(this number can be found on the account statement or by contacting the
Fund);
Group Number or Order Number; Nominee or Institution Name; and ABA
Number
011000028.
BY MAIL. To purchase by mail, send a check made payable to Virginia
Municipal
Cash Trust--Institutional Service Shares to: Federated Services Company,
c/o
State Street Bank and Trust Company, P.O. Box 8602, Boston, MA 02266-
8602.
Orders by mail are considered received when payment by check is
converted into
federal funds. This is normally the next business day after the check is
received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be
opened
with a smaller amount as long as the minimum is reached within 90 days.
Minimum
investments will be calculated by combining all accounts maintained with
the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts.
However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping
requirements. The
transfer agent charges a fee based on the level of subaccounting
services
rendered. Financial institutions 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 provided which may be related to the
ownership of
Fund shares. This prospectus should, therefore, be read together with
any
agreement between the customer and the financial institution with regard
to the
services provided, the fees charged for those services and any
restrictions and
limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share
account for each shareholder. Share certificates are not issued unless
requested
by contacting the Fund or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all
purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are
automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund. Shares purchased by wire
before
1:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by
check begin earning dividends the day after the check is converted into
federal
funds.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If
capital
gains or losses were to occur, they could result in an increase or
decrease in
dividends. The Fund will distribute in cash or additional shares any
realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
- ------------------------------------------------------------------------
- --------
Shares are redeemed at their net asset value next determined after
Federated
Services Company receives the redemption request. Redemptions will be
made on
days on which the Fund computes its net asset value. Redemption requests
must be
received in proper form and can be made as described below.
BY MAIL
Shares may be redeemed by sending a written request to: Federated
Services
Company, c/o State Street Bank and Trust Company, P.O. Box 8602, Boston,
MA
02266-8602. The written request should state: Virginia Municipal Cash
Trust--Institutional Service Shares; shareholder's name; the account
number; and
the share or dollar amount requested. Sign the request exactly as the
shares are
registered. Shareholders should call the Fund for assistance in
redeeming by
mail.
If share certificates have been issued, they must be properly endorsed
and
should be sent by registered or certified mail with the written request.
Shareholders requesting a redemption of $50,000 or more, a redemption of
any
amount to be sent to an address other than that on record with the Fund,
or a
redemption payable other than to the shareholder of record must have
their
signatures guaranteed by:
- a trust company or commercial bank whose deposits are insured by
the Bank
Insurance Fund which is administered by the Federal Deposit
Insurance
Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific
Stock
Exchanges;
- a savings bank or savings and loan association whose deposits are
insured
by the Savings Association Insurance Fund, which is administered
by the
FDIC; or
- any other "eligible guarantor institution," as defined in the
Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the transfer agent have adopted standards for accepting
signature
guarantees from the above institutions. The Fund may elect in the future
to
limit eligible signature guarantors to institutions that are members of
the
signature guarantee program. The Fund and its transfer agent reserve the
right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day,
but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a
redemption
request is processed.
BY WRITING A CHECK. At the shareholder's request, State Street Bank and
Trust
Company will establish a checking account for redeeming shares. For
further
information, contact the Fund.
With this checking account, shares may be redeemed by writing a check
for
$100.00 or more. The redemption will be made at the net asset value on
the date
that the check is presented to the Fund. A check may not be written to
close an
account. A shareholder may obtain cash by negotiating the check through
the
shareholder's local bank. Checks should never be made payable or sent to
State
Street Bank and Trust Company to redeem shares. Canceled checks are sent
to the
shareholder each month.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions
may be
recorded. If reasonable procedures are not followed by the Fund, it may
be
liable for losses due to unauthorized or fraudulent telephone
instructions. An
authorization form permitting the Fund to accept telephone requests must
first
be completed. Authorization forms and information on this service are
available
from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time),
the
proceeds will be wired the same day to the shareholder's account at a
domestic
commercial bank which is a member of the Federal Reserve System, and
those
shares redeemed will not be entitled to that day's dividend. A daily
dividend
will be paid on shares redeemed if the redemption request is received
after
12:00 noon (Eastern time). However, the proceeds are not wired until the
following business day.
In the event of drastic economic or market changes, a shareholder may
experience
difficulty in redeeming by telephone. If such a case should occur,
another
method of redemption, such as "By Mail," should be considered. If at any
time
the Fund shall determine it necessary to terminate or modify this method
of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund
may
redeem shares in any account and pay the proceeds to the shareholder if
the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is
notified in
writing and allowed 30 days to purchase additional shares to meet the
minimum
requirement.
SHAREHOLDER INFORMATION
- ------------------------------------------------------------------------
- --------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee
elections and
other matters submitted to shareholders for vote. All shares of all
classes of
each portfolio in the Trust have equal voting rights, except that in
matters
affecting only a particular portfolio or class, only shares of that
portfolio or
class are entitled to vote. As a Massachusetts business trust, the Trust
is not
required to hold annual shareholder meetings. Shareholder approval will
be
sought only for certain changes in the Trust's or the Fund's operation
and for
the election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting.
A special meeting of the shareholders for this purpose shall be called
by the
Trustees upon the written request of shareholders owning at least 10% of
the
outstanding shares of the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable
as
partners under Massachusetts law for obligations of the Trust. To
protect its
shareholders, the Trust has filed legal documents with Massachusetts
that
expressly disclaim the liability of its shareholders for acts or
obligations of
the Trust. These documents require notice of this disclaimer to be given
in each
agreement, obligation, or instrument the Trust or its Trustees enter
into or
sign.
In the unlikely event a shareholder is held personally liable for the
Trust's
obligations, the Trust is required by the Declaration of Trust to use
its
property to protect or compensate the shareholder. On request, the Trust
will
defend any claim made and pay any judgment against a shareholder for any
act or
obligation of the Trust. Therefore, financial loss resulting from
liability as a
shareholder will occur only if the Trust itself cannot meet its
obligations to
indemnify shareholders and pay judgments against them.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements
of the Internal Revenue Code applicable to regulated investment
companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income
tax
purposes so that income (including capital gains) and losses realized by
the
Trust's other portfolios will not be combined for tax purposes with
those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any
dividends received from the Fund that represent net interest on tax-
exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds
issued
after August 7, 1986, may be included in calculating the federal
individual
alternative minimum tax or the federal alternative minimum tax for
corporations.
The Fund may purchase all types of municipal bonds, including private
activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for
the
taxable year. Alternative minimum taxable income is equal to the regular
taxable
income of the taxpayer increased by certain "tax preference" items not
included
in regular taxable income and reduced by only a portion of the
deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary
investments and any realized net short-term gains are taxed as ordinary
income.
These tax consequences apply whether dividends are received in cash or
as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than
Virginia. Shareholders are urged to consult their own tax advisers
regarding the
status of their accounts under state and local tax laws.
VIRGINIA TAXES. Under existing Virginia laws, distributions made by the
Fund
will not be subject to Virginia income taxes to the extent that such
distributions qualify as exempt-interest dividends under the Internal
Revenue
Code, and represent (i) interest from obligations issued by or on behalf
of the
Commonwealth of Virginia or any political subdivision thereof; or (ii)
interest
from obligations issued by a territory or possession of the United
States or any
political subdivision thereof which federal law exempts from state
income taxes.
Conversely, to the extent that distributions made by the Fund are
attributable
to other types of obligations, such distributions will be subject to
Virginia
income taxes.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------
- --------
From time to time the Fund advertises its yield, effective yield, and
tax-equivalent yield for Institutional Service Shares.
Yield represents the annualized rate of income earned on an investment
over a
seven-day period. It is the annualized dividends earned during the
period on an
investment shown as a percentage of the investment. The effective yield
is
calculated similarly to the yield, but when annualized, the income
earned by an
investment is assumed to be reinvested daily. The effective yield will
be
slightly higher than the yield because of the compounding effect of this
assumed
reinvestment. The tax-equivalent yield is calculated similarly to the
yield, but
is adjusted to reflect the taxable yield that would have to be earned to
equal
Institutional Service Shares' tax exempt yield, assuming a specific tax
rate.
Advertisements and sales literature may also refer to total return.
Total return
represents the change, over a specified period of time, in the value of
an
investment in Institutional Service Shares after reinvesting all income
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The performance figures will be calculated separately for each class of
shares.
Because each class of shares is subject to different expenses, the
yield,
effective yield and tax-equivalent yield of Institutional Shares will
exceed the
yield, effective yield and tax-equivalent yield of Institutional Service
Shares
for the same period.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
its
performance to certain indices.
OTHER CLASSES OF SHARES
- ------------------------------------------------------------------------
- --------
The Fund also offers the following class.
Institutional Shares are sold at net asset value primarily to financial
institutions acting in a fiduciary capacity. Investments in
Institutional Shares
are subject to a minimum initial investment of $25,000. Institutional
Shares are
sold with no 12b-1 fees.
Financial institutions providing distribution or administrative services
may
receive additional compensation depending upon which class of shares of
the Fund
is sold. The distributor pays this compensation and is reimbursed from
sources
other than the assets of the Fund.
The amount of dividends payable to shareholders of any particular class
may be
more or less than that payable to the shareholders of any other class
depending
upon the existence of and differences in class expenses, 12b-1 Plan
expenses,
and Shareholder Services Plan expenses. The stated advisory fee is the
same for
all classes of shares.
VIRGINIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report, dated December 14, 1994,
on the
Fund's financial statements for the year ended October 31, 1994, and on
the
following table for each of the periods presented, is included in the
Annual
Report, which is incorporated by reference. This table should be read in
conjunction with the Fund's financial statements and notes thereto,
which may be
obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER
31,
---
- ------------------
1994 1993*
---
- -- ------
<S> <C>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD
$1.00 $1.00
- ----------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------
Net investment income
0.03 0.003
- ----------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------
Dividends to shareholders from net investment income
(0.03) (0.003)
- ---------------------------------------------------------------- ---
- -- -----
NET ASSET VALUE, END OF PERIOD
$1.00 $1.00
- ---------------------------------------------------------------- ---
- -- -----
TOTAL RETURN**
2.57% 0.35%
- ----------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------
Expenses
0.33% 0.09%(b)
- ----------------------------------------------------------------
Net investment income
2.56% 2.68%(b)
- ----------------------------------------------------------------
Expense waiver/reimbursement (a)
0.37% 1.04%(b)
- ----------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------
Net assets, end of period (000 omitted)
$20,360 $7,210
- ----------------------------------------------------------------
</TABLE>
* Reflects operations for the period from September 16, 1993 (date of
initial
public investment) to October 31, 1993.
** Based on net asset value, which does not reflect the sales load or
contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
(b) Computed on an annualized basis.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C> <C>
Virginia Municipal Cash Trust
Institutional Service Shares
Federated
Investors Tower
Pittsburgh,
PA 15222-3779
- ------------------------------------------------------------------------
- ------------------------
Distributor
Federated Securities Corp. Federated
Investors Tower
Pittsburgh,
PA 15222-3779
- ------------------------------------------------------------------------
- ------------------------
Investment Adviser
Federated Management Federated
Investors Tower
Pittsburgh,
PA 15222-3779
- ------------------------------------------------------------------------
- ------------------------
Custodian
State Street Bank and P.O. Box
8602
Trust Company Boston, MA
02266-8602
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- ------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated
Investors Tower
Pittsburgh,
PA 15222-3779
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- ------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One
PPG Place
Pittsburgh,
PA 15222
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- ------------------------
</TABLE>
VIRGINIA MUNICIPAL
CASH TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated February 28, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314229824
3080501A-ISS (2/95)
Virginia Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Institutional Shares
Institutional Service Shares
Combined Statement of Additional Information
This Combined Statement of Additional Information should be read
with
the prospectus(es) of Virginia Municipal Cash Trust (the "Fund")
dated February 28, 1995. This Statement is not a prospectus. To
receive a copy of a prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated February 28, 1995.
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
Reverse Repurchase Agreements 2
Virginia Investment Risks 2
Investment Limitations 2
Brokerage Transactions 4
Federated Municipal Trust
Management 5
The Funds 8
Share Ownership 9
Trustees Compensation 10
Trustee Liability 10
Investment Adviser 11
Advisory Fees 11
Fund Administration 11
Shareholder Services Plan 12
Determining Net Asset Value 12
Redemption in Kind 12
The Fund's Tax Status 12
Performance Information 13
Yield 13
Effective Yield 13
Tax-Equivalent Yield 13
Tax-Equivalency Table 13
Total Return 14
Performance Comparisons 15
Investment Policies
Unless indicated otherwise, the policies described below may be changed
by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the
security, the issuer of any demand feature applicable to the security,
or
any guarantor of either the security or any demand feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution
irrevocable letters of credit or guarantees and give the Fund the right
to
demand payment of the principal amounts of the participation interests
plus
accrued interest on short notice (usually within seven days). The
municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation
interests
include the right to demand payment from the issuers of those interests.
By
purchasing participation interests having a seven day demand feature,
the
Fund is buying a security meeting the maturity and quality requirements
of
the Fund and also is receiving the tax-free benefits of the underlying
securities.
Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the
nature of the appropriation for the lease. Furthermore, a lease may
provide
that the participants cannot accelerate lease obligations upon default.
The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the
investment
adviser, under the authority delegated by the Board of Trustees, will
base
its determination on the following factors: whether the lease can be
terminated by the lessee; the potential recovery, if any, from a sale of
the leased property upon termination of the lease; the lessee's general
credit strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit
enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other
than normal transaction costs, are incurred. However, liquid assets of
the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are
marked
to market daily and are maintained until the transaction has been
settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than
20%
of the total value of its assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant
to
repurchase agreements. Repurchase agreements are arrangements in which
banks, brokers/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at
a mutually agreed upon time and price. To the extent that the seller
does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. The Fund or
its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund
will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by
the
Trustees.
Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument in
return for a percentage of the instrument's market value in cash and
agrees
that on a stipulated date in the future the Fund will repurchase the
portfolio instrument by remitting the original consideration plus
interest
at an agreed upon rate. The use of reverse repurchase agreements may
enable
the Fund to avoid selling portfolio instruments at a time when a sale
may
be deemed to be disadvantageous, but does not ensure this result. When
effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be
purchased, are: segregated on the Fund's records at the trade date;
marked
to market daily; and maintained until the transaction is settled.
Virginia Investment Risks
The Commonwealth of Virginia's credit strength is derived from a
diversified economy, relatively low unemployment rates, strong financial
management, and a low debt burden. The Commonwealth's economy benefits
significantly from its proximity to Washington, D.C. Government is the
Commonwealth's third-largest employment sector, comprising 21% of total
employment. Other important sectors of the economy include shipbuilding,
tourism, construction, and agriculture. The effects of the most recent
base-
closing legislation were muted because of consolidation from out-of-
state
bases to Virginia installations. While military operations at the
Pentagon
are unlikely to be threatened, another round of base closings scheduled
for
1995 may jeopardize a number of Virginia installations.
Virginia is a very conservative debt issuer and has maintained debt
levels
that are low in relation to its substantial resources. Conservative
policies also dominate the Commonwealth's financial operations; and the
Commonwealth administration continually demonstrates its ability and
willingness to adjust financial planning and budgeting to preserve
financial balance. For example, economic weakness in the Commonwealth
and
the region caused personal income and sale and corporate tax collections
to
fall below projected forecasts and placed the Commonwealth under
budgetary
strain. The Commonwealth reacted by reducing its revenue expectations
for
the 1990-92 biennium and preserved financial balance through a series of
transfers, appropriation reductions, and other budgetary revisions.
Management's actions resulted in modest budget surpluses for fiscal 1992
and 1993 and another modest surplus was reported for fiscal year 1994,
which ended June 30.
The Fund's concentration in securities issued by the Commonwealth and
its
political subdivisions provides a greater level of risk than a fund
which
is diversified across numerous states and municipal entities. The
ability
of the Commonwealth or its municipalities to meet their obligations will
depend on the availability of tax and other revenues; economic,
political,
and demographic conditions within the Commonwealth; and the underlying
fiscal condition of the Commonwealth, its counties, and its
municipalities.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as may
be
necessary for the clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements in
amounts up to one-third of the value of its net assets, including
the
amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of
the portfolio by enabling the Fund to meet redemption requests
when
the liquidation of portfolio securities is deemed to be
inconvenient
or disadvantageous. The Fund will not purchase any securities
while
borrowings in excess of 5% of its total assets are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except
to secure permitted borrowings. In those cases, it may pledge
assets
having a market value not exceeding the lesser of the dollar
amounts
borrowed or 15% of the value of its total assets at the time of
the
pledge.
Lending Cash or Securities
The Fund will not lend any of its assets, except that it may
acquire
publicly or nonpublicly issued Virginia municipal securities or
temporary investments or enter into repurchase agreements, in
accordance with its investment objective, policies, limitations or
its Declaration of Trust.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts,
or commodity futures contracts.
Investing in Real Estate
The Fund will not purchase or sell real estate or real estate
limited
partnerships, although it may invest in securities of issuers
whose
business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real
estate.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
Concentration of Investments
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would be
invested in any one industry or in industrial development bonds or
other securities, the interest upon which is paid from revenues of
similar types of projects. However, the Fund may invest as
temporary
investments more than 25% of the value of its assets in cash or
cash
items, securities issued or guaranteed by the U.S. government, its
agencies, or instrumentalities, or instruments secured by these
money
market instruments, such as repurchase agreements.
The above limitations cannot be changed without shareholder approval.
The
following investment limitations, however, may be changed by the
Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Investing in Restricted Securities
The Fund will not invest more than 10% of its total assets in
securities subject to restrictions on resale under federal
securities
law.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its net
assets
in illiquid securities.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment
companies,
except as part of a merger, consolidation, or other acquisition.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers (including companies responsible
for
paying principal and interest on industrial development bonds)
which
have records of less than three years of continuous operations,
including the operation of any predecessor.
Investing for Control
The Fund will not invest in securities of a company for the
purpose
of exercising control or management.
Investing in Issuers Whose Securities Are Owned by Officers and
Trustees
of the Trust
The Fund will not purchase or retain the securities of any issuer
if
the Officers and Trustees of the Trust or its investment adviser,
owning individually more than .50 of 1% of the issuer's
securities,
together own more than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or
any
combination of them.
Investing in Minerals
The Fund will not purchase or sell interests in oil, gas, or other
mineral exploration or development programs or leases, although it
may purchase the securities of issuers which invest in or sponsor
such programs.
For purposes of the above limitations, the Fund considers instruments
issued by a U.S. branch of a domestic bank or savings and loan having
capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items." Except with respect to borrowing
money, if a percentage limitation is adhered to at the time of
investment,
a later increase or decrease in percentage resulting from any change in
value or net assets will not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of
the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order
at a favorable price. In working with dealers, the adviser will
generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Board
of Trustees. The adviser may select brokers and dealers who offer
brokerage
and research services. These services may be furnished directly to the
Fund
or to the adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic
studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may
be
used by the adviser or its affiliates in advising the Trust and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid,
it would tend to reduce their expenses. The adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. During the period from September 16, 1993 (date of
initial public investment) to October 31, 1993 and for the fiscal year
ended October 31, 1994 , the Fund paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type
the Fund may make may also be made by those other accounts. When the
Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
Federated Municipal Trust Management
Officers and Trustees are listed with their addresses, present positions
with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Vice President of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Center
Pittsburgh, PA 15219
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee or Managing General Partner
of the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate
ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of
the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of
the
Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation
and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center - Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman,
Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds;
Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue
is
the son of John F. Donahue, Chairman and Trustee of the Trust.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.;
Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer
of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in
the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
As referred to in the list of Trustees and Officers, "Funds" includes
the
following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Arrow
Funds;
Automated Cash Management Trust; Automated Government Money Trust;
Cash
Trust Series II; Cash Trust Series, Inc.; DG Investor Series; Edward
D.
Jones & Co. Daily Passport Cash Trust; Federated ARMs Fund;
Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government
Trust;
Federated Growth Trust; Federated High Yield Trust; Federated
Income
Securities Trust; Federated Income Trust; Federated Index Trust;
Federated
Institutional Trust; Federated Intermediate Government Trust;
Federated
Master Trust; Federated Short-Intermediate Government Trust;
Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-
Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds;
Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund,
Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund,
Inc.;
Fund for U.S. Government Securities, Inc.; Government Income
Securities,
Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.;
Insurance
Management Series; Intermediate Municipal Trust; International
Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust;
Liberty
Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty
Municipal Securities Fund, Inc.; Liberty U.S. Government Money
Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.;
Liquid
Cash Trust; Managed Series Trust; The Medalist Funds; Money
Market
Management, Inc.; Money Market Obligations Trust; Money Market
Trust;
Municipal Securities Income Trust; 111 Corcoran Funds; Peachtree Funds;
The
Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut
Funds;
Short-Term Municipal Trust; Star Funds; The Starburst Funds; The
Starburst
Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration
Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial
Institutions; Trust For Government Cash Reserves; Trust for Short-Term
U.S.
Government Securities; Trust for U.S. Treasury Obligations;
World
Investment Series, Inc.
Share Ownership
Officers and Trustees own less than 1% of the Trust's outstanding
shares.
As of January 10, 1995, the following shareholder(s) of record owned 5%
or
more of the outstanding Institutional Shares of the Fund: Firstblue &
Company, Bluefield, West Virginia, owned approximately 1,284,917 shares
(5.73%), VATCO, Richland, Virginia, owned approximately 1,337,086 shares
(5.96%), Warrtrust & Company, Warrenton, Virginia, owned approximately
1,944,917 shares (8.67%), Nabaf & Company, Fredericksburg, Virginia,
owned
approximately 2,374,832 shares (10.59%), Planta & Co., Staunton,
Virginia,
owned approximately 1,837,846 shares (8.19%), Hamac & Co., Richmond,
Virginia, owned approximately 6,202,568 shares (27.66%), Comfort & Co.,
Hampton, Virginia, owned approximately 3,472,358 shares (15.48%) and
Chesnat, Kilmarnock, Virginia, owned approximately 1,321,463
shares(5.89%).
As of January 10, 1995, the following shareholder(s) of record owned 5%
or
more of the outstanding Institutional Service Shares of the Fund: PM
Beef
Group, LP, Ashland, Virginia, owned approximately 5,336,552 shares
(5.42%),
Datatel, Inc., Fairfax, Virginia, owned approximately 5,742,000 shares
(5.83%) and Hilb Rogal & Hamilton Company, Glen Allen, Virginia, owned
approximately 10,051,375 shares (10.21%).
Trustees Compensation
AGGREGATE TOTAL COMPENSATION PAID
NAME , COMPENSATION TO TRUSTEES FROM
POSITION WITH FROM TRUST
TRUST TRUST# AND FUND COMPLEX
John F. Donahue, $ -0- $ -0- for the Trust and
Chairman and Trustee 69 other investment companies in the
Fund Complex
Thomas G. Bigley, $ 719.00 $ 24,991 for the Trust and
Trustee 50 other investment companies in the
Fund Complex
John T. Conroy, Jr., $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
William J. Copeland, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
James E. Dowd, $ 4,757.00 $ 136,100 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $ 4,308.00 $ 123,600 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $ 4,757.00 $ 136,100 for the Trust
and
Trustee 65 other investment companies in the
Fund Complex
Glen R. Johnson, $ -0- $ -0- for the Trust and
President and Trustee 9 other investment companies in the
Fund Complex
Peter E. Madden, $ 4,308.00 $ 104,880 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Gregor F. Meyer, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Wesley W. Posvar, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
Marjorie P. Smuts, $ 4,308.00 $ 123,600 for the Trust and
Trustee 65 other investment companies in the
Fund Complex
#The aggregate compensation is provided for the Trust which is comprised
of
13 portfolios.
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable
for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject
by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated Management. It is a
subsidiary
of Federated Investors. All the voting securities of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue, his
wife
and his son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder
of
the Fund for any losses that may be sustained in the purchase, holding,
or
sale of any security or for anything done or omitted by it, except acts
or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with
the
Trust.
Advisory Fees
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the fiscal years ended October 31, 1994 and 1993, the adviser earned
$470,783 and $20,894, respectively, of which $435,418 and $20,894,
respectively, was voluntarily waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and
extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of
average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets,
the
adviser will reimburse the Fund for its expenses over the
limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the
amount of the excess, subject to an annual adjustment. If the
expense
limitation is exceeded, the amount to be reimbursed by the adviser
will be limited, in any single fiscal year, by the amount of the
investment advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred
to
as the "Administrators".) For the fiscal year ended October 31, 1994,
the
Administrators collectively earned $145,109. For the fiscal year ended
October 31, 1993, Federated Administrative Services, Inc. earned
$24,647.
Dr. Henry J. Gailliot, an officer of Federated Management, the adviser
to
the Fund, holds approximately 20% of the outstanding common stock and
serves as a director of Commercial Data Services, Inc., a company which
provides computer processing services to Federated Administrative
Services.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust
Company,
Boston, MA is custodian for the securities and cash of the Fund. It also
provides certain accounting and recordkeeping services with respect to
the
Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains
all necessary shareholder records. For its services, the transfer agent
receives a fee based on size, type and number of accounts and
transactions
made by shareholders.
Shareholder Services Plan
This arrangement permits the payment of fees to Federated Shareholder
Services and financial institutions to cause services to be provided
which
are necessary for the maintenance of shareholder accounts and to
encourage
personal services to shareholders by a representative who has knowledge
of
the shareholder's particular circumstances and goals. These activities
and
services may include, but are not limited to: providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish
and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balance; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses. By
adopting
the Shareholder Services Plan, the Board of Trustees expects that the
Fund
will benefit by: (1) providing personal services to shareholders;
(2) investing shareholder assets with a minimum of delay and
administrative
detail; (3) enhancing shareholder recordkeeping systems; and (4)
responding
promptly to shareholders' requests and inquiries concerning their
accounts.
For the fiscal period ending October 31, 1994, payments in the amount of
$0
and $102,290, respectively, were made pursuant to the Shareholder
Services
Plan on behalf of Institutional Shares and Institutional Service Shares,
respectively.
Determining Net Asset Value
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.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or
1%
of the Fund's net asset value, whichever is less, for any one
shareholder
within a 90-day period. Any redemption beyond this amount will also be
in
cash unless the Trustees determine that further payments should be in
kind.
In such cases, the Fund will pay all or a portion of the remainder of
the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected
in a
manner that the Trustees deem fair and equitable. Redemption in kind is
not
as liquid as a cash redemption. If redemption is made in kind,
shareholders
who sell these securities could receive less than the redemption value
and
could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated
investment
companies, the Fund must, among other requirements: derive at least 90%
of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested;
changes in interest rates; changes in expenses; and the relative amount
of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for
those
shareholders paying those fees.
Yield
The Fund calculates its yield based upon the seven days ending on the
day
of the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional
shares purchased with dividends earned from the original one share and
all
dividends declared on the original and any purchased shares; dividing
the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
For the seven-day period ended October 31, 1994, the yields for
Institutional Shares and Institutional Service Shares were 2.97% and
2.87%,
respectively.
Effective Yield
The Fund calculates its effective yield by compounding the unannualized
base period return by: adding 1 to the base period return; raising the
sum
to the 365/7th power; and subtracting 1 from the result.
For the seven-day period ended October 31, 1994, the effective yields
for
Institutional Shares and Institutional Service Shares were 3.01% and
2.91%,
respectively.
Tax-Equivalent Yield
The tax-equivalent yield of the Fund is calculated similarly to the
yield
but is adjusted to reflect the taxable yield that the Fund would have
had
to earn to equal its actual yield, assuming a 39.6% tax rate (the
maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
For the seven-day period ended October 31, 1994, the tax-equivalent
yields
for Institutional Shares and Institutional Service Shares were 5.43% and
5.25%, respectively.
Tax-Equivalency Table
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free
from state and local taxes as well. As the table below indicates, a "tax-
free" investment can be an attractive choice for investors, particularly
in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF VIRGINIA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
20.75% 33.75% 36.75% 41.75% 45.35%
JOINT $1- $39,001- $94,251- $143,601- OVER
RETURN 39,000 94,250 143,600 256,000
$256,500
SINGLE $1- $23,351- $56,551- $117,951- OVER
RETURN 23,350 56,550 117,950 256,500
$256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
3.50% 4.42% 5.28% 5.53% 6.01% 6.40%
4.00% 5.05% 6.04% 6.32% 6.87% 7.32%
4.50% 5.68% 6.79% 7.11% 7.73% 8.23%
5.00% 6.31% 7.55% 7.91% 8.58% 9.15%
5.50% 6.94% 8.30% 8.70% 9.44% 10.06%
6.00% 7.57% 9.06% 9.49% 10.30% 10.98%
6.50% 8.20% 9.81% 10.28% 11.16% 11.89%
7.00% 8.83% 10.57% 11.07% 12.02% 12.81%
7.50% 9.46% 11.32% 11.86% 12.88% 13.72%
8.00% 10.09% 12.08% 12.65% 13.73% 14.64%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL
STATE AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENTS WERE
NOT
USED TO INCREASE FEDERAL DEDUCTIONS. IF YOU ITEMIZE DEDUCTIONS,
YOUR
TAXABLE YIELD EQUIVALENT WILL BE LOWER.
The chart above is for illustrative purposes only. It is not an
indicator
of past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
Total Return
Average annual total return is the average compounded rate of return for
a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the
period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, adjusted over the
period by any additional shares, assuming the monthly reinvestment of
all
dividends and distributions.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition
of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
- Lipper Analytical Services, Inc. ranks funds in various fund
categories based on total return, which assumes the reinvestment
of
all income dividends and capital gains distributions, if any.
- Donoghue's Money Fund Report publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the
same
money funds.
- Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day
effective
yield.
314229824
314229816
3080501B (2/95)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements: Incorporated by reference to the
Annual Reports to Shareholders of
the Funds dated December 31, 1994
(File No. 811-5911).
(b) Exhibits:
(1) Copy of Declaration of Trust of the Registrant
(1);
(i) Conformed copy of Amendment No. 4, dated
September 1, 1989, to the Declaration of
Trust (7);
(ii) Copy of Amendment No. 10, dated November
18,
1992, to the Declaration of Trust (12);
(iii) Conformed copy of Amendment No. 12, dated
Nov. 22, 1993, to the Declaration of Trust
(17);
(iv) Conformed copy of Amendment No. 13, dated
February 24, 1994, to the Declaration of
Trust (17);
(v) Conformed copy of Amendment No. 14, dated
August 25, 1994 (20);
(2) Copy of By-Laws of the Registrant (7);
(3) Not applicable;
(4) (i) Copy of Specimen Certificates for Shares
of Beneficial Interest of Alabama
Municipal Cash Trust, Minnesota Municipal
Cash Trust (Cash Series Shares and
Institutional Shares), Pennsylvania
Municipal Cash Trust (Cash Series Shares
and Institutional Service Shares),
Virginia Municipal Cash Trust
(Institutional Service Shares and
Institutional Shares), North Carolina
Municipal Cash Trust, Ohio Municipal Cash
Trust (Cash II Shares and Institutional
Shares), Massachusetts Municipal Cash
Trust (Institutional Service Shares and
BayFunds Shares), and New Jersey Municipal
Cash Trust (Institutional Shares and
Institutional Service Shares) (16);
______________________
1. Response is incorporated by reference to Registrant's
Initial Registration Statement on Form N-1A filed on September 29,
1989 (File Nos. 33-31259 and 811-5911).
7. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 6 on Form N-1A filed on November 6, 1990
(File Nos. 33-31259 and 811-5911).
12. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 14 on Form N-1A filed on December 23, 1992
(File Nos. 33-31251 and 811-5911).
16. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 21 on Form N-1A filed on December 29, 1993
(File Nos. 33-31251 and 811-5911).
17. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 22 on Form N-1A filed on March 2, 1994 (File
Nos. 33-31251 and 811-5911).
20. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 30 on Form N-1A
filed on September 19, 1994 (File Nos. 33-
31251 and 811-5911).
(ii) Copy of
Specimen Certificate for Maryland
Municipal Cash Trust (17);
(iii) Copy of Specimen Certificate for Florida
Municipal Cash Trust (20)
(5) Copy of Investment Advisory Contract of the
Registrant (7);
(i) Conformed copy of Exhibit G to Investment
Advisory Contract for Virginia Municipal
Cash Trust (18);
(ii) Conformed copy of Exhibit H
to Investment Advisory Contract for
Alabama Municipal Cash Trust (19);
(iii) Conformed copy of Exhibit I
to Investment Advisory Contract for North
Carolina Municipal Cash Trust (19);
(iv) Conformed copy of Exhibit J
to Investment Advisory Contract for
Maryland Municipal Cash Trust (19);
(v) Conformed copy of Exhibit K
to Investment Advisory Contract for New
York Municipal Cash Trust; (22)
(vi) Conformed copy of Exhibit L
to
Investment Advisory Contract for
California
Municipal Cash Trust; (22)
(vii) Conformed copy of Exhibit M
to the Investment Advisory Contract for
Florida Municipal Cash Trust; (22)
(6) Copy of Distributor's Contract of the Registrant
(7);
(i) Conformed copy of Exhibit M
to Distributor's Contract; (22)
(ii) Conformed copy of Exhibit N
to the Distributor's Contract for Virginia
Municipal Cash Trust (19);
(iii) Conformed copy of Exhibit O
to the Distributor's Contract for Alabama
Municipal Cash Trust (19);
+ All exhibits have been filed electronically.
7. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 6 on Form N-1A filed on November 6, 1990 (File Nos.
33-31259
and 811-5911).
17. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 22 on Form N-1A filed on March 2, 1994 (File Nos. 33-
31259
and 811-5911).
18. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 26 on Form N-1A filed on June 1, 1994 (File Nos. 33-
31259
and 811-5911).
19. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 28 on Form N-1A filed on June 28, 1994 (File Nos. 33-
31259
and 811-5911).
20. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 30 on Form N-1A filed on September 19, 1994 (File
Nos. 33-
31259 and 811-5911).
22. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 32 on Form N-1A filed on December 28, 1994 (File
Nos. 33-
31259 and 811-5911).
(iv) Conformed copy of Exhibit P
to the Distributor's Contract for North
Carolina Municipal Cash Trust (19);
(v) Conformed copy of Exhibit Q
to the Distributor's Contract for Maryland
Municipal Cash Trust (19);
(vi) Conformed copy of Exhibit R
to the Distributor's Contract for New York
Municipal Cash Trust, Cash II Shares (21);
(vii) Conformed copy of Exhibit S
to the Distributor's Contract for New York
Municipal Cash Trust, Institutional
Service Shares (21);
(viii) Conformed copy of Exhibit T
to
the Distributor's Contract for California
Municipal Cash Trust (21);
(ix) Conformed copy of Exhibit U
to the Distributor's Contract for Florida
Municipal Cash Trust; (22)
(7) Not applicable;
(8) (i) Conformed copy of Custodian Agreement of
the Registrant; (22)
(9) (i) Conformed copy of Transfer Agency
Agreement of the Registrant; (22)
(ii) Conformed copy of Sub-Transfer Agency
Agreement of the Registrant (Massachusetts
Municipal Cash Trust--BayFunds Shares
only)(15);
(iii) Conformed copy of Shareholder Services
Agreement of the Registrant (Massachusetts
Municipal Cash Trust--BayFunds Shares
only) (15);
(iv) Conformed copy of
Shareholder Services Agreement of the
Registrant; (22)
(v) Conformed copy of Shareholder Services Plan
of the Registrant; (22)
+ All exhibits have been filed electronically.
15. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 18 on Form N-1A filed on October 1, 1993 (File Nos.
33-31259
and 811-5911).
19. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 28 on Form N-1A filed on June 28, 1994 (File Nos. 33-
31259
and 811-5911).
21. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 31 on Form N-1A filed on October 24, 1994 (File Nos.
33-
31259 and 811-5911).
22. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 32 on Form N-1A filed on December 28, 1994 (File
Nos. 33-
31259 and 811-5911).
(vi) Conformed copy of Exhibit A to
Shareholder Services Plan for Virginia
Municipal Cash Trust-Institutional Service
Shares; (19)
(vii) Conformed copy of Exhibit B to
Shareholder Services Plan for Maryland
Municipal Cash Trust; (18)
(viii)Form of Exhibit C to Shareholder Services
Plan for Florida Municipal Cash Trust; +
(ix) Conformed copy of Administrative Services
Agreement of the Registrant; (22)
(10) (i) Copy of Opinion and Consent of Counsel as
to the legality of shares for Minnesota
Municipal Cash Trust (5);
(ii) Copy of Opinion and Consent of Counsel as
to the legality of shares for New Jersey
Municipal Cash Trust (7);
(11) (i) Conformed copy of Consent of Independent
Public Accountants, Arthur Andersen & Co.;
+
(ii) Conformed copy of Consent of Independent
Auditors, Deloitte & Touche; +
(12) Not applicable;
(13) Copy of Initial Capital Understanding (2);
(14) Not applicable.
(15) (i) Copy of Rule 12b-1 Plan of the Registrant
(7); Additional Exhibits to the Rule 12b-1
Plan and Agreement have been executed to
reflect the coverage of subsequently
created
portfolios and/or classes under these
documents. Because these exhibits are
substantially identical but differ only as
to
the Fund name, dates, and any other Fund -
specific information, pursuant to Rule 8b-
31
of the Investment Company Act they need
not
be filed.
(1) Conformed copy of Exhibit H to 12b-1
Plan for New York Municipal Cash Trust,
Cash II Shares (21);
(2) Conformed copy of Exhibit I to 12b-1
Plan for New York Municipal Cash Trust,
Institutional Service Shares (21);
(3) Conformed copy of Exhibit J to 12b-1
Plan for Florida Municipal Cash Trust;
(22)
_________________________
+ All exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on Form N-1A filed on October 31, 1989
(File Nos. 33-31259 and 811-5911).
5. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 3 on Form N-1A filed August 3, 1990 (File
Nos. 33-31259 and 811-5911).
7. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 6 on Form N-1A filed on November 6, 1990
(File Nos. 33-31259 and 811-5911).
18. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 26 on Form N-1A filed on June 1, 1994 (File Nos. 33-
31259
and 811-5911).
19. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 28 on Form N-1A filed on June 28, 1994 (File Nos. 33-
31259
and 811-5911).
21. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 31 on Form N-1A filed on October 24, 1994 (File Nos.
33-
31259 and 811-5911).
22. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 32 on Form N-1A filed on December 28, 1994 (File
Nos. 33-
31259 and 811-5911).
(16) Schedules for Computation of Performance Data;
(i) New Jersey Municipal Cash Trust
(Institutional Shares and Institutional
Service Shares); +
(ii) Ohio Municipal Cash Trust; +
(iii) Virginia Municipal Cash Trust
(Institutional Share and Institutional
Service Shares) (16);
(iv) Alabama Municipal Cash Trust (18);
(v) North Carolina Municipal Cash Trust (18);
(vi) Maryland Municipal Cash Trust (21);
(vii) Florida Municipal Cash Trust; +
(17) Financial Data Schedules; +
(18) Not Applicable.
(19) Conformed copy of Power of Attorney (22);
Item 25. Persons Controlled by or Under Common Control with
Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of January 10, 1995
Shares of beneficial
interest (no par value)
Alabama Municipal Cash Trust 181
California Municipal Cash Trust 449
Connecticut Municipal Cash Trust
Institutional Service Shares 962
Florida Municipal Cash Trust 115
Maryland Municipal Cash Trust 213
Massachusetts Municipal Cash Trust
Institutional Service Shares 242
BayFunds Shares 3
____________________________
+All exhibits have been filed electronically.
16. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 21 on Form N-1A filed on December 29, 1993
(File Nos. 33-31259 and 811-5911).
18. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 26 on Form N-1A filed on June 1, 1994 (File Nos. 33-
31259
and 811-5911).
21. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 31 on Form N-1A filed on October 24, 1994 (File Nos.
33-
31259 and 811-5911).
22. Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 32 on Form N-1A filed on December 28, 1994 (File
Nos. 33-
31259 and 811-5911).
Number of Record Holders
Title of Class as of December 2, 1994
Minnesota Municipal Cash Trust
Cash Series Shares 2266
Institutional Shares 45
New Jersey Municipal Cash Trust
Institutional Service Shares 130
Institutional Shares 36
New York Municipal Cash Trust
Cash II Shares 97
Institutional Service Shares 176
North Carolina Municipal Cash Trust 246
Ohio Municipal Cash Trust
Cash II Shares 130
Institutional Shares 55
Pennsylvania Municipal Cash Trust
Cash Series Shares 588
Institutional Service Shares 284
Virginia Municipal Cash Trust
Institutional Shares 20
Institutional Service Shares 447
Item 27. Indemnification: (3.)
Item 28. Business and Other Connections of Investment Adviser:
For a description of the other business of the investment
adviser, see the section entitled "Federated Municipal Trust
Information - Management of the Trust" 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 "Federated
Municipal Trust Management - Officers and Trustees." 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:
William D. Dawson, J. Thomas Madden, Mark L. Mallon,
Executive Vice Presidents; Henry J. Gailliot, Senior Vice
President-Economist; Peter R. Anderson, Gary J. Madich, and
J. Alan Minteer, Senior Vice Presidents; J. Scott Albrecht,
Randall A. Bauer, Jonathan C. Conley, Deborah A. Cunningham,
Michael P. Donnelly, Mark E. Durbiano, Kathleen M. Foody-
Malus, Thomas M. Franks, Edward C. Gonzales, Jeff A.
Kozemchak, Marian R. Marinack, John W. McGonigle, Gregory M.
Melvin, Susan M. Nason, Mary Jo Ochson, Robert J. Ostrowski,
Frederick L. Plautz, Jr., Charles A. Ritter, James D.
Roberge, and Christopher H. Wiles, Vice Presidents; Edward
C. Gonzales, Treasurer; and John W. McGonigle, Secretary.
The business address of each of the Officers of the
investment adviser is Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. These individuals are also
officers of a majority of the investment advisers to the
Funds listed in Part B of this Registration Statement under
"The Funds."
3. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 1 on Form N-1A filed on March 22, 1990
(File Nos. 33-31259 and 811-5911).
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of
the
Registrant, also acts as principal underwriter for the
following open-end investment companies: Alexander
Hamilton
Funds; American Leaders Fund, Inc.; Annuity Management
Series;
Arrow Funds; Automated Cash Management Trust; Automated
Government Money Trust; BayFunds; The Biltmore Funds;
The
Biltmore Municipal Funds; California Municipal Cash
Trust; Cash
Trust Series, Inc.; Cash Trust Series II; DG Investor
Series;
Edward D. Jones & Co. Daily Passport Cash Trust;
Federated ARMs
Fund; Federated Exchange Fund, Ltd.; Federated GNMA
Trust;
Federated Government Trust; Federated Growth Trust;
Federated
High Yield Trust; Federated Income Securities Trust;
Federated
Income Trust; Federated Index Trust; Federated
Institutional
Trust; Federated Intermediate Government Trust;
Federated
Master Trust; Federated Municipal Trust; Federated Short-
Intermediate Government Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-
Free
Trust; Federated U.S. Government Bond Fund; First
Priority
Funds; First Union Funds; Fixed Income Securities, Inc.;
Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress
Municipal Income Fund, Inc.; Fortress Utility Fund,
Inc.;
Fountain Square Funds; Fund for U.S. Government
Securities,
Inc.; Government Income Securities, Inc.; High Yield
Cash
Trust; Independence One Mutual Funds; Insight
Institutional
Series, Inc.; Insurance Management Series; Intermediate
Municipal Trust; International Series Inc.; Investment
Series
Funds, Inc.; Investment Series Trust; Liberty Equity
Income
Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty
Municipal Securities Fund, Inc.; Liberty U.S. Government
Money
Market Trust; Liberty Utility Fund, Inc.; Liquid Cash
Trust;
Managed Series Trust; Marshall Funds, Inc.; Money Market
Management, Inc.; The Medalist Funds; Money Market
Obligations
Trust; Money Market Trust; The Monitor Funds; Municipal
Securities Income Trust; Newpoint Funds; New York
Municipal
Cash Trust; 111 Corcoran Funds; Peachtree Funds; The
Planters
Funds; RIMCO Monument Funds; The Shawmut Funds; Short-
Term
Municipal Trust; SouthTrust Vulcan Funds; Star Funds;
The
Starburst Funds; The Starburst Funds II; Stock and Bond
Fund,
Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Tower Mutual Funds; Trademark Funds;
Trust
for Financial Institutions; Trust for Government Cash
Reserves;
Trust for Short-Term U.S. Government Securities; Trust
for U.S.
Treasury Obligations; Vision Fiduciary Funds, Inc.;
Vision
Group of Funds, Inc.; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal
underwriter
for the following closed-end investment company:
Liberty Term
Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant
Richard B. Fisher Director, Chairman, Chief Vice
President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Vice
President
Federated Investors Tower President, and Treasurer, and
Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice
President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
Federated Municipal Trust Federated Investors
Tower
Registrant Pittsburgh, PA 15222-
3779
Federated Services Company
Transfer Agent, Dividend
Disbursing Agent and Federated Investors
Tower
Portfolio Recordkeeper Pittsburgh, PA 15222-
3779
Federative Administrative
Services Federated Investors
Tower
Administrator Pittsburgh, PA 15222-
3779
Federated Management Federated Investors
Tower
Adviser Pittsburgh, PA 15222-
3779
State Street Bank
Trust Company P.O. Box 8604
Custodian Boston, MA 02266-8604
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions
of Section 16(c) of the 1940 Act with respect to the removal
of Trustees and the calling of special shareholder meetings
by shareholders.
Registrant hereby undertakes to furnish each person to whom
a prospectus is delivered a copy of the Registrant's latest
annual report to shareholders, upon request and without
charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED MUNICIPAL
TRUST,
certifies that it meets all of the requirements for effectiveness of
this
Amendment to its Registration Statement pursuant to Rule 485(b) under
the
Securities Act of 1933 and 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 9th day of February, 1995.
FEDERATED MUNICIPAL TRUST
BY: /s/G. Andrew Bonnewell
G. Andrew Bonnewell, Assistant Secretary
Attorney in Fact for John F. Donahue
February 9, 1995
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/G. Andrew Bonnewell
G. Andrew Bonnewell Attorney In Fact February 9,
1995
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Glen R. Johnson* President and Trustee
Edward C. Gonzales* Vice President and Treasurer
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Trustee
John T. Conroy* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in Post-
Effective Amendment No. 33 to Form N1-A Registration Statement of
Federated
Municipal Trust of our report dated December 14, 1994, on the financial
statements of Federated Municipal Trust, included in or made a part of
this
registration statement.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Pittsburgh, Pennsylvania
February 8, 1995
Exhibit 9(viii) under Form N-
1A
Exhibit 10 under Item 601/Reg. S-
K
EXHIBIT C
to the
Plan
FEDERATED MUNICIPAL TRUST
Florida Municipal Cash Trust
This Plan is adopted by FEDERATED MUNICIPAL TRUST with respect to
the Shares of the Portfolio of the Trust set forth above.
In compensation for the services provided pursuant to this Plan,
Providers will be paid a monthly fee computed at the annual rate of .25
of 1% of the average aggregate net asset value of the Shares of Florida
Municipal Cash Trust held during the month.
Witness the due execution hereof this 1st day of September, 1994.
FEDERATED MUNICIPAL TRUST
By:
President
Schedule for computation of Yield Calculation
Florida Municipal Cash Trust
This example illustrates the yield quotation for the
seven-day period ended:
31-Dec-94
Value of a hypothetical pre-existing account with exactly
$1.000000000
one share at the beginning of the base period
Value of same account (excluding capital changes) at end
$1.000916967
of the seven-day base period*
$0.000916967
Net change in account value
Base Period Return:
Net change in account value divided by the beginning account value
$0.000916967
($ .000916967 / $1.000000000)
4.78%
Annualized Current Net Yield ( .000916967 x 365/7)
4.90%
Effective Yield ** (.000916967 + 1 ) ^ (365/7) - 1
* This value includes the value of additional shares purchased with
dividends from the original share, and dividends declared on both the
original share and any such additional shares.
** This value may change to include shares purchased with dividends
reinvested on a less frequent basis.
Tax Equivalent Yield (Assumes individual does not itemize on Federal
Return
100% minus the Federal and Florida taxable %'s (100% - 28% - 0% = 72%)
7 Day Net Yield / by the tax equivalent % (4.78% / 72%) = 6.64%
<TABLE>
<CAPTION>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Florida Municipal Cash Trust Price/
Share= $1.00
Return Since Inception
ending 12/31/94 NAV= $1.00
FYE: October 31
<S> <C> <C>
<C> <C> <C> <C> <C> <C>
Begin
Capital Reinvest Ending Total
DECLARED: DAILY Reinvest Period
Dividend Gain Price Period Ending
Invest
PAID: MONTHLY Dates Shares
/Share /Share /Share Shares Price
Value
9/21/94 1000.000
0.000000000 0.00000 $1.00 1000.000 $1.00
$1,000.00
9/30/94 1000.000
0.000942996 0.00000 $1.00 1000.943 $1.00
$1,000.94
10/31/94 1000.943
0.002588470 0.00000 $1.00 1003.534 $1.00
$1,003.53
11/30/94 1003.534
0.002714822 0.00000 $1.00 1006.258 $1.00
$1,006.26
12/31/94 1006.258
0.003270056 0.00000 $1.00 1009.549 $1.00
$1,009.55
$1,000 (1+T) = End Value
</TABLE>
Schedule for computation of Yield Calculation
New Jersey Municipal Cash Trust Institutional Shares
31-Dec-94
This example illustrates the yield quotation for the seven-day period
ended
Value of a hypothetical pre-existing account with exactly
$1.000000000
one share at the beginning of the base period
Value of same account (excluding capital changes) at end
$1.000908744
of the seven-day base period*
$0.000908744 Net
change in account value
Base Period Return:
Net change in account value divided by the beginning account value
$0.000908744
($ .000916967 / $1.000000000)
.74% Annualized Current Net Yield ( .000908744 x 365/7)
.85% Effective Yield ** (.000908744 + 1 ) ^ (365/7) - 1
* This value includes the value of additional shares purchased with
dividends from the original share, and dividends declared on both
the
original share and any such additional shares.
** This value may change to include shares purchased with dividends
reinvested on a less frequent basis.
Tax Equivalent Yield (Assumes individual does not itemize on Federal
Return
100% minus the Federal and Florida taxable %'s (100% - 28% - 6.5% =
65.5%)
7 Day Net Yield / by the tax equivalent % (4.74% / 65.5%) = 7.24%
Schedule for computation of Yield Calculation
New Jersey Municipal Cash Trust Institutional Service Shares
31-Dec-94
This example illustrates the yield quotation for the seven-day period
ended
Value of a hypothetical pre-existing account with exactly
$1.000000000
one share at the beginning of the base period
Value of same account (excluding capital changes) at end
$1.000892030
of the seven-day base period*
$0.000892030 Net
change in account value
Base Period Return:
Net change in account value divided by the beginning account value
$0.000892030
($ .000916967 / $1.000000000)
4.65% Annualized Current Net Yield ( .00089203 x 365/7)
4.76% Effective Yield ** (.00089203 + 1 ) ^ (365/7) - 1
* This value includes the value of additional shares purchased with
dividends from the original share, and dividends declared on both
the
original share and any such additional shares.
** This value may change to include shares purchased with dividends
reinvested on a less frequent basis.
Tax Equivalent Yield (Assumes individual does not itemize on Federal
Return
100% minus the Federal and Florida taxable %'s (100% - 28% - 6.5% =
65.5%)
7 Day Net Yield / by the tax equivalent % (4.65% / 65.5%) = 7.10%
Schedule for computation of Yield Calculation
Ohio Municipal Cash Trust
30-Apr-91
This example illustrates the yield quotation for the seven-day period
ended
Value of a hypothetical pre-existing account with exactly
$1.000000000
one share at the beginning of the base period
Value of same account (excluding capital changes) at end
$1.001037534
of the seven-day base period*
$0.001037534 Net
change in account value
Base Period Return:
Net change in account value divided by the beginning account value
$0.001037534
($ .000916967 / $1.000000000)
.41% Annualized Current Net Yield ( .001037534 x 365/7)
.56% Effective Yield ** (.001037534 + 1 ) ^ (365/7) - 1
* This value includes the value of additional shares purchased with
dividends from the original share, and dividends declared on both
the
original share and any such additional shares.
** This value may change to include shares purchased with dividends
reinvested on a less frequent basis.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective
Amendment No. 33 to Registration Statement No. 33-31259 of Federated
Municipal Trust of our report dated November 12, 1993 appearing in the
Prospectus dated November 30, 1993 of California Municipal Cash Trust,
or
report dated December 17, 1993, appearing in the Prospectus dated
December
31, 1993 of New York Municipal Cash Trust, and to the references to us
under the heading "Financial Highlights" in such Prospectuses.
/s/Deloitte & Touche
Deloitte & Touche
Boston, Massachusetts
February 8, 1995
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> ALABAMA MUNICIPAL CASH TRUST
<PERIOD-TYPE> 11-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 142,272,477
<INVESTMENTS-AT-VALUE> 142,272,477
<RECEIVABLES> 689,982
<ASSETS-OTHER> 144,234
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 143,106,693
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 302,832
<TOTAL-LIABILITIES> 302,832
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 142,803,861
<SHARES-COMMON-STOCK> 142,803,861
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 142,803,861
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,475,274
<OTHER-INCOME> 0
<EXPENSES-NET> 173,808
<NET-INVESTMENT-INCOME> 1,301,466
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,301,466
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,301,466
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 478,251,901
<NUMBER-OF-SHARES-REDEEMED> 336,054,760
<SHARES-REINVESTED> 606,720
<NET-CHANGE-IN-ASSETS> 142,803,861
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 243,579
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 478,262
<AVERAGE-NET-ASSETS> 53,882,670
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .020
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .020
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> CALIFORNIA MUNICIPAL CASH TRUST
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 80,956,758
<INVESTMENTS-AT-VALUE> 80,956,758
<RECEIVABLES> 469,969
<ASSETS-OTHER> 355,888
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 81,782,615
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 219,942
<TOTAL-LIABILITIES> 219,942
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 81,562,673
<SHARES-COMMON-STOCK> 81,562,673
<SHARES-COMMON-PRIOR> 74,707,347
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 81,562,673
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 230,743
<OTHER-INCOME> 0
<EXPENSES-NET> 41,193
<NET-INVESTMENT-INCOME> 189,550
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 189,550
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 189,550
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 30,010,373
<NUMBER-OF-SHARES-REDEEMED> 23,185,135
<SHARES-REINVESTED> 30,088
<NET-CHANGE-IN-ASSETS> 6,855,326
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 34,909
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 72,053
<AVERAGE-NET-ASSETS> 82,205,189
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .002
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .002
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 59
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> CONNECTICUT MUNICIPAL CASH TRUST
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-END> OCT-31-1994
<INVESTMENTS-AT-COST> 196,224,981
<INVESTMENTS-AT-VALUE> 196,224,981
<RECEIVABLES> 1,103,064
<ASSETS-OTHER> 253,894
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 197,581,939
<PAYABLE-FOR-SECURITIES> 6,750,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 408,737
<TOTAL-LIABILITIES> 7,158,737
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 190,423,202
<SHARES-COMMON-STOCK> 190,423,202
<SHARES-COMMON-PRIOR> 140,446,211
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 190,423,202
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,206,206
<OTHER-INCOME> 0
<EXPENSES-NET> 1,139,710
<NET-INVESTMENT-INCOME> 4,066,496
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,066,496
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,066,496
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 486,727,225
<NUMBER-OF-SHARES-REDEEMED> 437,916,644
<SHARES-REINVESTED> 1,166,410
<NET-CHANGE-IN-ASSETS> 49,976,991
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 961,837
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,474,548
<AVERAGE-NET-ASSETS> 192,367,471
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> .020
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<NAME> FLORIDA MUNICIPAL CASH TRUST
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<NAME> MARYLAND MUNICIPAL CASH TRUST
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<S> <C>
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<SERIES>
<NUMBER> 6
<NAME> MASS. MUNI CASH TRUST-INST. SERVICE SHARES
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<TABLE> <S> <C>
<S> <C>
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<NUMBER> 7
<NAME> MASS. MUNI CASH TRUST-BAYFUNDS SHARES
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<TABLE> <S> <C>
<S> <C>
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<NUMBER> 8
<NAME> MINNESOTA MUNI CASH TRUST-INST SHARES
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<TABLE> <S> <C>
<S> <C>
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<SERIES>
<NUMBER> 9
<NAME> MINNESOTA MUNI CASH TRUST-CASH SERIES SHARES
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<TABLE> <S> <C>
<S> <C>
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<NUMBER> 10
<NAME> NEW JERSEY MUNI CASH TRUST-INST SHARES
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<TABLE> <S> <C>
<S> <C>
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<NUMBER> 11
<NAME> NEW JERSEY MUNI CASH TRUST-INST SERV SHARES
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<TABLE> <S> <C>
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<NUMBER> 12
<NAME> NORTH CAROLINA MUNICIPAL CASH TRUST
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