FEDERATED MUNICIPAL TRUST, 497, 1995-02-21

FEDERATED MUNICIPAL TRUST
497, 1995-02-21

Previous: FEDERATED MUNICIPAL TRUST, 497, 1995-02-21

Next: MONEY MARKET OBLIGATIONS TRUST /NEW/, DEF 14A, 1995-02-21

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)

<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
- --------------------------------------------------------------------------------

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

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.

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.

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
- --------------------------------------------------------------------------------

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)

<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.

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."

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

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.

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.

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.

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

<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>

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
- --------------------------------------------------------------------------------

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.)

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.

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

HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------

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.

SPECIAL REDEMPTION FEATURES

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.

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

CERTIFICATES AND CONFIRMATIONS

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

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

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL INCOME 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.

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
- ----------------------------------------------------------------------------------------------

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

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-.

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.