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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 primarily in short-term
Connecticut municipal securities, including securities of states, territories,
and possessions of the United States which are not issued by or on behalf of
Connecticut, or its political subdivisions and financing authorities, but which
provide income exempt from federal regular income tax and the Connecticut
Dividend and Interest Income Tax consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Connecticut Municipal Securities 5
Investment Risks 6
Non-Diversification 6
Investment Limitations 6
FUND INFORMATION 7
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Management of the Fund 7
Distribution of Institutional Service Shares 8
Administration of the Fund 8
NET ASSET VALUE 9
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HOW TO PURCHASE SHARES 9
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Special Purchase Features 10
HOW TO REDEEM SHARES 10
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Special Redemption Features 11
ACCOUNT AND SHARE INFORMATION 11
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TAX INFORMATION 12
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Federal Income Tax 12
State and Local Taxes 12
PERFORMANCE INFORMATION 13
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FINANCIAL STATEMENTS 14
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REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 25
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ADDRESSES 26
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SUMMARY OF FUND EXPENSES
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<TABLE>
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)................................................. None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)............................... None
Redemption Fee (as a percentage of amount redeemed, if applicable).................... None
Exchange Fee.......................................................................... None
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)..................................................... 0.31%
12b-1 Fee............................................................................. None
Total Other Expenses.................................................................. 0.29%
Shareholder Services Fee (after waiver) (2).................................. 0.14%
Total Operating Expenses (3)..................................................... 0.60%
</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 operating expenses would have been 0.90% absent the voluntary
waivers of a portion of the management fee and a portion of the shareholder
services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Trust will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Fund 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
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<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 $ 75
</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
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 25.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
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1995 1994 1993** 1992 1991 1990(A)
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00 $ 1.00
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INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.03 0.02 0.02 0.03 0.04 0.05
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LESS DISTRIBUTIONS
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Distributions from net
investment income (0.03) (0.02) (0.02 ) (0.03) (0.04) (0.05 )
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NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00 $ 1.00
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TOTAL RETURN (B) 3.31% 2.12% 1.96 % 2.68% 4.04% 5.54 %
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RATIOS TO AVERAGE NET ASSETS
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Expenses 0.60% 0.59% 0.57 % 0.56% 0.56% 0.48 %*
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Net investment income 3.26% 2.11% 1.95 % 2.66% 3.94% 5.32 %*
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Expense waiver/reimbursement (c) 0.30% 0.18% 0.25 % 0.30% 0.21% 0.28 %*
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SUPPLEMENTAL DATA
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Net assets, end of period (000
omitted) $184,718 $190,423 $140,446 $140,118 $140,113 $138,738
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</TABLE>
* Computed on an annualized basis.
** Prior to November 6, 1992, the Fund provided two classes of shares.
(a) Reflects operations for the period from November 1, 1989 (date of initial
public investment) to October 31, 1990.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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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 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 that state. A minimum initial investment of
$25,000 within 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
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INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and 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 complying with the various
requirements of Rule 2a-7 under the Investment Company Act of 1940 which
regulates money market funds and 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 Dividend and Interest
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 Dividend and Interest Income Tax ("Connecticut Municipal
Securities"). Examples of Connecticut Municipal Securities include, but are not
limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Connecticut
Municipal Securities from financial institutions such as commercial and
investment banks, savings 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. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; obligations issued or guaranteed by
the U.S. government, its agencies, or instrumentalities; instruments issued by a
U.S. branch of a domestic bank or other deposit institution having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment; and repurchase agreements (arrangements in which the organization
selling the Fund a temporary investment agrees at the time of sale to repurchase
it at a mutually agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain Connecticut
Municipal Securities is subject to the federal alternative minimum tax.
CONNECTICUT MUNICIPAL SECURITIES
Connecticut Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
Connecticut Municipal Securities include industrial development bonds issued by
or on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Connecticut Municipal Securities are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed by
the bond or other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or
charge against the general revenues of a municipality or public authority.
Industrial development bonds are typically classified as revenue bonds.
INVESTMENT RISKS
Yields on Connecticut Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of Connecticut Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of Connecticut
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Connecticut Municipal Securities which are repayable out
of revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Connecticut Municipal Securities could involve an increased risk to the Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Connecticut Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge up to 15% of the value of total assets to secure such
borrowings. This investment limitation cannot be changed without shareholder
approval.
FUND INFORMATION
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MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989 is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES AGREEMENT. The Fund has entered into a Shareholder
Services Agreement with Federated Shareholder Services, a subsidiary of
Federated Investors, under which the Fund may make payments up to .25 of 1% of
the average daily net asset value of the Institutional Service Shares, computed
at an annual rate, to provide personal services for shareholders and to provide
the maintenance of shareholder accounts (shareholder services). From time to
time, and for such periods as deemed appropriate, the amount stated above may be
reduced voluntarily. Under the Shareholder Services Agreement, Federated
Shareholder Services will either perform shareholder services directly or will
select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. With respect to Institutional
Service Shares, in addition to payments made pursuant to the Shareholder
Services Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions supplemental
fees for the performance of substantial sales services, distribution-related
support services, or shareholder services. The support may include sponsoring
sales, educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's investment
adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- --------------------- ----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
on assets in excess of $750
.075 of 1% million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of Institutional Service
Shares at $1.00 by valuing the portfolio securities using the amortized cost
method. The net asset value per share is determined by subtracting 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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
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Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days which the New York Stock Exchange
is 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 within a
90-day period. 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 of State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: Connecticut Municipal Cash
Trust, Institutional Service Shares; Fund Number (This number can be found on
the account statement or by contacting the Fund.); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to Connecticut Municipal Cash Trust--Institutional
Service Shares. Orders by mail are considered received when payment by check is
converted into federal funds (normally the business day after the check is
received), and shares begin earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM. A minimum of $100 can be automatically withdrawn
periodically from the shareholder's checking account at an Automated Clearing
House ("ACH") member and invested in Fund shares. Shareholders should contact
their financial institution or the Fund to participate in this program.
HOW TO REDEEM SHARES
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Shares are redeemed at their net asset value next determined after 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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. 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 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If shares certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar
amount requested. All owners of the account must sign the request exactly as the
shares are registered. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. The check writing service allows
shareholders to receive the daily dividend declared on the shares to be redeemed
until the check is presented to UMB Bank, N.A., the bank responsible for
administering the check writing program, for payment. However, checks should
never be made payable or sent to UMB Bank, N.A. or the Fund to redeem shares,
and a check may not be written to close an account.
DEBIT CARD. Upon request, a debit account will be established. This account
allows shareholders to redeem shares by using a debit card. A fee will be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of at
least $25,000, a systematic withdrawal program may be established whereby
automatic redemptions are made from the account and transferred electronically
to any commercial bank, savings bank, or credit union that is an ACH member.
Shareholders may apply for participation in this program through their financial
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$25,000 due to shareholder redemptions. Before shares are
redeemed to close an account, the shareholder is notified in writing and allowed
30 days to purchase additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has 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. 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 election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Fund may purchase all types of municipal bonds, including private activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than
Connecticut. Shareholders are urged to consult their own tax advisers regarding
the status of their accounts under state and local tax laws.
CONNECTICUT TAXES. Under existing Connecticut laws, distributions made by the
Fund will not be subject to Connecticut individual income taxes to the extent
that such distributions qualify as exempt interest dividends under the Internal
Revenue Code, and represent (i) interest on obligations issued by
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 the distributions made by the Fund are derived from other types of
obligations, such dividends 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 tax payer 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 total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the shares' tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
CONNECTICUT MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.1%
- ------------------------------------------------------------------------
CONNECTICUT--94.5%
------------------------------------------------------
$ 2,310,000 Berlin, CT, 4.00% BANs, 6/27/1996 NR(3) $ 2,316,552
------------------------------------------------------
3,750,000 Capitol Region Education Council, CT, 5.35% BANs
(First National Bank of Boston, MA LOC), 11/15/1995 P-1 3,750,479
------------------------------------------------------
4,100,000 Cheshire, CT, 4.25% BANs, 8/9/1996 NR(2) 4,118,277
------------------------------------------------------
9,933,170 (a) Clipper Connecticut Tax Exempt Trust, (Series 1994-1)
Weekly VRDNs (State Street Bank and Trust Co. LIQ) VMIG1 9,933,170
------------------------------------------------------
2,640,000 Connecticut Development Authority Weekly VRDNs (Banta
Associates)/(Marine Midland Bank N.A., Buffalo, NY
LOC) P-1 2,640,000
------------------------------------------------------
4,200,000 Connecticut Development Authority Weekly VRDNs
(Capital District Energy Center)/(Canadian Imperial
Bank of Commerce, Toronto LOC) P-1 4,200,000
------------------------------------------------------
700,000 Connecticut Development Authority Weekly VRDNs
(Capital District Energy Center)/(Canadian Imperial
Bank of Commerce, Toronto LOC) P-1 700,000
------------------------------------------------------
4,500,000 Connecticut Development Authority Weekly VRDNs (Jewish
Community Center (New Haven, CT))/(Fleet National
Bank, Providence, R.I. LOC) P-1 4,500,000
------------------------------------------------------
1,466,000 Connecticut Development Authority Weekly VRDNs (RSA
Corp.)/(Barclays Bank PLC, London LOC) P-1 1,466,000
------------------------------------------------------
1,030,000 Connecticut Development Authority, (Series 1985)
Weekly VRDNs (Martin-Brower Company Project)/(ABN AMRO
Bank N.V., Amsterdam LOC) P-1 1,030,000
------------------------------------------------------
5,000,000 Connecticut Development Authority, (Series 1993)
Weekly VRDNs (Rand-Whitney Containerboard Limited
Partnership)/(Chase Manhattan Bank N.A., New York LOC) A-1 5,000,000
------------------------------------------------------
11,000,000 Connecticut Development Authority, (Series A) Weekly
VRDNs (Exeter Energy)/(Sanwa Bank Ltd, Osaka LOC) A-1 11,000,000
------------------------------------------------------
</TABLE>
CONNECTICUT MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
----------
----
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
CONNECTICUT--CONTINUED
------------------------------------------------------
$ 1,000,000 Connecticut Development Authority, (Series B) Weekly
VRDNs (Exeter Energy)/(Sanwa Bank Ltd, Osaka LOC) A-1 $ 1,000,000
------------------------------------------------------
7,499,000 Connecticut Development Authority, (Series C) Weekly
VRDNs (Exeter Energy)/(Sanwa Bank Ltd, Osaka LOC) A-1 7,499,000
------------------------------------------------------
2,000,000 Connecticut Development Authority, PCR (Series 1993A)
Weekly VRDNs (Connecticut Light & Power Co.)/
(Deutsche Bank, AG LOC) A-1 2,000,000
------------------------------------------------------
2,000,000 Connecticut Development Authority, PCR (Series 1993A)
Weekly VRDNs (Western Mass Electric Co.)/(Union Bank
of Switzerland, Zurich LOC) A-1 2,000,000
------------------------------------------------------
1,500,000 Connecticut Development Authority, PCR Refunding Bonds
(Series 1993B) Weekly VRDNs (Connecticut Light & Power
Co.)/(Union Bank of Switzerland, Zurich LOC) A-1 1,500,000
------------------------------------------------------
6,700,000 Connecticut Municipal Electric Energy Cooperative,
Power Supply System Revenue Bonds (1995 Series A),
3.70% CP (Fleet National Bank, Providence, R.I. LOC),
Mandatory Tender 2/13/1996 P-1 6,700,000
------------------------------------------------------
1,600,000 Connecticut State HEFA Weekly VRDNs (Charlotte
Hungerfield Hospital)/(Mitsubishi Bank Ltd, Tokyo LOC) VMIG1 1,600,000
------------------------------------------------------
3,800,000 Connecticut State HEFA, (Series A) Weekly VRDNs
(Forman School Issue)/(National Westminster Bank, PLC,
London LOC) A-1+ 3,800,000
------------------------------------------------------
3,875,000 Connecticut State HEFA, (Series L), 3.70% CP (Yale
University), Mandatory Tender 11/7/1995 A-1+ 3,875,000
------------------------------------------------------
4,300,000 Connecticut State HEFA, (Series N), 3.50% CP (Yale
University), Mandatory Tender 11/13/1995 A-1+ 4,300,000
------------------------------------------------------
5,000,000 Connecticut State HEFA, 3.60% CP (Windham Community
Memorial Hospital)/(Banque Paribas, Paris LOC),
Mandatory Tender 11/21/1995 A-1 5,000,000
------------------------------------------------------
8,900,000 Connecticut State HEFA, Revenue Bonds (Series B)
Weekly VRDNs (Bridgeport Hospital Issue)/(Fuji Bank,
Ltd., Tokyo LOC) A-1 8,900,000
------------------------------------------------------
</TABLE>
CONNECTICUT MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
----------
----
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
CONNECTICUT--CONTINUED
------------------------------------------------------
$ 1,000,000 Connecticut State HEFA, Variable Rate Demand Revenue
Bonds (Series A) Weekly VRDNs (Pomfret School Issue)/
(Credit Local de France LOC) VMIG1 $ 1,000,000
------------------------------------------------------
5,250,000 Connecticut State HFA, (Series 1990C), 3.90% CP,
Mandatory Tender 1/22/1996 A-1+ 5,250,000
------------------------------------------------------
1,500,000 Connecticut State HFA, (Series 1990C), 3.95% CP,
Mandatory Tender 11/16/1995 A-1+ 1,500,000
------------------------------------------------------
3,200,000 Connecticut State HFA, (Series 1990D), 3.80% CP,
Mandatory Tender 12/8/1995 A-1+ 3,200,000
------------------------------------------------------
3,245,000 Connecticut State HFA, (Series 1990D), 3.90% CP,
Mandatory Tender 1/22/1996 A-1+ 3,245,000
------------------------------------------------------
4,100,000 Connecticut State Resource Recovery Authority, 4.00%
RANs (Fleet National Bank, Providence, R.I. LOC),
6/21/1996 P-1 4,107,538
------------------------------------------------------
1,910,000 Connecticut State Weekly VRDNs (Merrill Lynch Capital
Services, Inc. LIQ) VMIG1 1,910,000
------------------------------------------------------
2,100,000 Connecticut State, Economic Recovery Notes Weekly
VRDNs A-1+ 2,100,000
------------------------------------------------------
12,000,000 Connecticut State, Special Assessment Unemployment
Compensation Advance Fund, Revenue Bonds (Series
1993C), 3.90% TOBs (FGIC INS)/(FGIC Securities
Purchase, Inc. LIQ), Mandatory Tender 7/1/1996 A-1+ 12,000,000
------------------------------------------------------
4,325,000 Groton City, CT, 4.50% BANs, 11/15/1995 NR(3) 4,325,754
------------------------------------------------------
8,000,000 Hartford, CT Redevelopment Authority Weekly VRDNs
(Underwood Towers)/(FSA INS)/(Barclays Bank PLC,
London LIQ) A-1+ 8,000,000
------------------------------------------------------
9,475,000 Meriden, CT, (Lot B), 4.25% BANs, 8/14/1996 NR(3) 9,496,990
------------------------------------------------------
1,480,000 Middlebury, CT, (Lot B), 5.00% BANs, 2/8/1996 NR(1) 1,480,765
------------------------------------------------------
3,200,000 Milford, CT, 4.56% BANs, 11/15/1995 NR(2) 3,200,305
------------------------------------------------------
1,700,000 New Haven, CT Weekly VRDNs (Starter Sportswear)/
(National Westminster Bank USA, NY LOC) P-1 1,700,000
------------------------------------------------------
3,415,000 Rocky Hill, CT, 4.25% BANs, 12/15/1995 NR(3) 3,416,166
------------------------------------------------------
</TABLE>
CONNECTICUT MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
----------
----
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
CONNECTICUT--CONTINUED
------------------------------------------------------
$ 7,500,000 Stamford, CT Housing Authority, Multi-Modal
Interchangeable Rate Revenue Bonds (Series 1994)
Weekly VRDNs (Morgan Street Project)/(Deutsche Bank,
AG LOC) VMIG1 $ 7,500,000
------------------------------------------------------
2,200,000 Waterbury, CT, 4.75% BANs, 4/25/1996 NR 2,203,615
------------------------------------------------------ ------------
Total 174,464,611
------------------------------------------------------ ------------
PUERTO RICO--4.6%
------------------------------------------------------
3,500,000 Puerto Rico Industrial, Medical & Environmental PCA,
(Series 1988), 3.65% CP (Inter American University of
Puerto Rico)/(Bank of Tokyo Ltd., Tokyo LOC),
Mandatory Tender 12/14/1995 A-1 3,500,000
------------------------------------------------------
5,000,000 Puerto Rico Public Building Authority, (PA-106) Weekly
VRDNs (AMBAC INS)/(Merrill Lynch Capital Services,
Inc. LIQ) Aaa 5,000,000
------------------------------------------------------ ------------
Total 8,500,000
------------------------------------------------------ ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $182,964,611
------------------------------------------------------ ------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 25.4% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Denotes a restricted security which is subject to restrictions or resale
under Federal Securities laws. This security has been determined to be
liquid under criteria established by the Board of Trustees. At the end of
the period, this security amounts to $9,933,170 which represents 5% of net
assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($184,718,216) at October 31, 1995.
CONNECTICUT MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
BANs -- Bond Anticipation Notes
CP -- Commercial Paper
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Security Assurance
HEFA -- Health and Education Facilities Authority
HFA -- Housing Finance Authority
INS -- Insured
LIQ -- Liquidity Agreement
LOC -- Letter of Credit
PCA -- Pollution Control Authority
PCR -- Pollution Control Revenue
PLC -- Public Limited Company
RANs -- Revenue Anticipation Notes
TOBs -- Tender Option Bonds
VRDNs -- Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CONNECTICUT MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $182,964,611
- -------------------------------------------------------------------------------
Cash 705,547
- -------------------------------------------------------------------------------
Income receivable 1,432,431
- ------------------------------------------------------------------------------- ------------
Total assets 185,102,589
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Payable for shares redeemed $ 64,801
- --------------------------------------------------------------------
Income distribution payable 275,299
- --------------------------------------------------------------------
Accrued expenses 44,273
- -------------------------------------------------------------------- --------
Total liabilities 384,373
- ------------------------------------------------------------------------------- ------------
NET ASSETS for 184,718,216 shares outstanding $184,718,216
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$184,718,216 / 184,718,216 shares outstanding $ 1.00
- ------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CONNECTICUT MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest $8,198,696
- ----------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------
Investment advisory fee $1,064,090
- -------------------------------------------------------------------
Administrative personnel and services fee 161,103
- -------------------------------------------------------------------
Custodian fees 41,840
- -------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 24,663
- -------------------------------------------------------------------
Directors'/Trustees' fees 2,749
- -------------------------------------------------------------------
Auditing fees 13,322
- -------------------------------------------------------------------
Legal fees 1,627
- -------------------------------------------------------------------
Portfolio accounting fees 42,127
- -------------------------------------------------------------------
Shareholder services fee 532,055
- -------------------------------------------------------------------
Share registration costs 6,442
- -------------------------------------------------------------------
Printing and postage 11,181
- -------------------------------------------------------------------
Insurance premiums 5,343
- -------------------------------------------------------------------
Taxes 2,619
- -------------------------------------------------------------------
Miscellaneous 1,373
- ------------------------------------------------------------------- ----------
Total expenses 1,910,534
- -------------------------------------------------------------------
Waivers--
- -------------------------------------------------------------------
Waiver of investment advisory fee $(400,553)
- -------------------------------------------------------
Waiver of shareholder services fee (242,434)
- ------------------------------------------------------- ---------
Total waivers (642,987)
- ------------------------------------------------------------------- ----------
Net expenses 1,267,547
- ---------------------------------------------------------------------------------- ----------
Net investment income $6,931,149
- ---------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CONNECTICUT MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------
Net investment income $ 6,931,149 $ 4,066,496
- ------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------
Distributions from net investment income (6,931,149) (4,066,496)
- ----------------------------------------------------------------------------- -------------
SHARE TRANSACTIONS--
- -------------------------------------------------------------
Proceeds from sale of shares 522,140,169 486,727,225
- -------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of distributions declared 1,971,315 1,166,410
- -------------------------------------------------------------
Cost of shares redeemed (529,816,470) (437,916,644)
- ------------------------------------------------------------- ------------- -------------
Change in net assets resulting from share transactions (5,704,986) 49,976,991
- ------------------------------------------------------------- ------------- -------------
Change in net assets (5,704,986) 49,976,991
- -------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------
Beginning of period 190,423,202 140,446,211
- ------------------------------------------------------------- ------------- -------------
End of period $ 184,718,216 $ 190,423,202
- ------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CONNECTICUT MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Connecticut Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers in state than would be a comparable
tax-exempt mutual fund that invests nationally. In order to reduce the
credit risk associated with such factors, at October 31, 1995, 64% of the
securities in the portfolio of investments are backed by letters of credit
or bond insurance of various financial institutions and financial guaranty
assurance agencies. The value of investments insured by or supported
(backed) by a letter of credit for any one institution or agency do not
exceed 11% of total investments
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. Many restricted securities may
be resold in the secondary market in transactions exempt from registration.
In some cases, the restricted securities may be resold without registration
upon exercise of a demand
CONNECTICUT MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
feature. Such restricted securities may be determined to be liquid under
criteria established by the Board of Trustees. The Fund will not incur any
registration costs upon such resales. Restricted securities are valued at
amortized cost in accordance with Rule 2a-7 under the Investment Company
Act of 1940.
Additional information on each restricted security held at October 31, 1995
is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
------------------------------------------------------------ ------------- -------------
<S> <C> <C>
Clipper Connecticut Tax Exempt Trust (Series 1994-1) May 6, 1994 $9,933,170
Weekly VRDN's (State Street Bank and Trust Co. LIQ)
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
October 31, 1995, capital paid-in aggregated $184,718,216. Transactions in
shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
INSTITUTIONAL SERVICE SHARES 1995 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 522,140,169 486,727,225
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 1,971,315 1,166,410
- ---------------------------------------------------------------
Shares redeemed (529,816,470) (437,916,644)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from share transactions (5,704,986) 49,976,991
- --------------------------------------------------------------- ------------ ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive a portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
CONNECTICUT MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company,("FServ") serves as transfer and dividend disbursing agent for
the Fund. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common Officers. These
transactions were made at current market value pursuant to rule 17a-7 under the
Act amounting to $259,440,000 and $290,790,000 respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Connecticut Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of
Connecticut Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust, a Massachusetts business trust), including the schedule of portfolio
investments, as of October 31, 1995, the related statement of operations for the
year then ended and the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights (see page 2 of the
prospectus) for the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Connecticut Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations for the year then
ended, and the changes in its net assets for each of the two years in the period
then ended and the financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
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 P.O. Box 8600
Trust Company Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------------------
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 December 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229105
9101004 A-SS (12/95)
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"), a portfolio of Federated
Municipal Trust ( the "Trust") dated December 31, 1995. This Statement is
not a prospectus. You may request a copy of a prospectus or a paper copy
of this Statement, if you have received it electronically, free of charge
by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated December 31, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated Investors
INVESTMENT POLICIES 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
Ratings 1
When-Issued And Delayed Delivery Transactions 1
Repurchase Agreements 2
Credit Enhancement 2
CONNECTICUT INVESTMENT RISKS 2
INVESTMENT LIMITATIONS 3
FEDERATED MUNICIPAL TRUST MANAGEMENT 5
The Funds 9
Share Ownership 9
Trustees Compensation 10
Trustee Liability 10
INVESTMENT ADVISORY SERVICES 11
Investment Adviser 11
Advisory Fees 11
BROKERAGE TRANSACTIONS 11
OTHER SERVICES 12
Fund Administration 12
Custodian and Portfolio Recordkeeper 12
Transfer Agent 12
Independent Public Accountants 12
SHAREHOLDER SERVICES AGREEMENT 12
DETERMINING NET ASSET VALUE 12
REDEMPTION IN KIND 13
MASSACHUSETTS PARTNERSHIP LAW 13
THE FUND'S TAX STATUS 13
PERFORMANCE INFORMATION 13
Yield 13
Effective Yield 13
Tax-Equivalent Yield 14
Tax-Equivalency Table 14
Total Return 14
Performance Comparisons 15
ABOUT FEDERATED INVESTORS 15
Mutual Fund Market 15
Institutional Clients 15
Trust Organizations 16
Broker/Dealers and Bank Broker/Dealer Subsidiaries 16
APPENDIX 17
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by the
Trustees without shareholder approval. Shareholders will be notified before
any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or any
guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation interests
include the right to demand payment from the issuers of those interests. By
purchasing participation interests having a seven day demand feature, the Fund
is buying a security meeting the maturity and quality requirements of the Fund
and also is receiving the tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments
by a governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the
appropriation for the lease. Furthermore, a lease may provide that the
participants cannot accelerate lease obligations upon default. The
participants would only be able to enforce lease payments as they became due.
In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be terminated by
the lessee; the potential recovery, if any, from a sale of the leased property
upon termination of the lease; the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and prospects);
the likelihood that the lessee will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to its
operations (e.g., the potential for an "event of non-appropriation"); and any
credit enhancement or legal recourse provided upon an event of non-
appropriation or other termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations ("NRSROs") or be of comparable quality to
securities having such ratings. An NRSRO's two highest rating categories are
determined without regard for sub-categories and gradations. For example,
securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Ratings Group
("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or
FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all
considered rated in one of the two highest short-term rating categories. The
Fund will follow applicable regulations in determining whether a security
rated by more than one NRSRO can be treated as being in one of the two highest
short-term rating categories; currently, such securities must be rated by two
NRSROs in one of their two highest rating categories. See "Regulatory
Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the
Fund`s records at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
brokers/dealers, and other recognized financial institutions sell securities
to the Fund and agree at the time of sale to repurchase them at a mutually
agreed upon time and price. To the extent that the seller does not repurchase
the securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. The Fund or its custodian will take
possession of the securities subject to repurchase agreements, and these
securities will be marked to market daily. In the event that a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of
the Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.
CREDIT ENHANCEMENT
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.
CONNECTICUT INVESTMENT RISKS
The Fund invests in obligations of Connecticut issuers which results in the
Fund's performance being subject to risks associated with the overall
conditions present within Connecticut (the "State"). The following information
is a brief summary of the recent prevailing economic conditions and a general
summary of the State's financial status. This information is based on official
statements relating to securities that have been offered by Connecticut
issuers and from other sources believed to be reliable but should not be
relied upon as a complete description of all relevant information.
The State has maintained relative fiscal balance for the last few fiscal years
after several years of deficits in the late 1980's when the State and national
economy entered a recession. The State enacted an individual income tax while
decreasing the sales tax in 1991 in an attempt to provide better stability to
the State's revenue sources. The State also benefits from a level of per
capital income that is among the highest in the country and a highly educated
and skilled work force.
The Connecticut economy is largely composed of manufacturing (concentrated in
defense and aircraft) and service industries (such as insurance and finance)
that were robust and growing for much of the past two decades. Beginning in
the late 1980's, the national economy slowed down and entered a recession that
has affected several areas of the State's economy. Specifically, the cutbacks
in the defense and insurance industries and general corporate restructuring
have resulted in the loss of over 9% of the labor force. More recently, the
Connecticut economy has experienced a slight recovery, however at a slower
pace than the nation and there are signs that this recovery may be slowing.
Additionally, public policy in taxes as well as expenditure control will
affect the state going forward.
The overall financial condition of the State can also be illustrated by
changes of its debt ratings. During the period in which the State has
experienced financial difficulties in the late 1980's, its general obligation
long-term debt ratings as determined by Moody's and S&P decreased from Aa1 and
AA+, respectively, to Aa and AA-.
The Fund's concentration in securities issued by the State and its political
subdivisions provides a greater level of risk than a fund which is diversified
across numerous states and municipal entities. The ability of the State or its
municipalities to meet their obligations will depend on the availability of
tax and other revenues; economic, political, and demographic conditions within
the State; and the underlying fiscal condition of the State and its
municipalities.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for the
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money in amounts up to one-third of the value of its total assets, including
the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate management of
the portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while borrowings in
excess of 5% of the value of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except 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 government body creating it and the security is backed only
by its own assets and revenues.
Industrial development bonds backed only by the assets and revenues of a non-
governmental user are considered to be issued solely by that user. 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, and limitations.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, although it may invest in
securities of issuers whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or interests in real
estate.
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.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940. In particular, the Fund
will comply with the various requirements of Rule 2a-7, 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 ability to participate in volume
transactions will be to the benefit of the Fund.
FEDERATED MUNICIPAL TRUST MANAGEMENT
OFFICERS AND TRUSTEES ARE LISTED WITH THEIR ADDRESSES, BIRTHDATES, PRESENT
POSITIONS WITH FEDERATED MUNICIPAL TRUST, AND PRINCIPAL OCCUPATIONS.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative
Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; founding Chairman, National Advisory
Council for Environmental Policy and Technology and Federal Emergency
Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global 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 of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Services Company; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice President,
Federated Shareholder Services; Vice President, Federated Administrative
Services; Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; President and
Trustee, Federated Shareholder Services; Director, Federated Securities Corp.;
Executive Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
THE FUNDS
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 3-5 Years; Federated U.S. Government Securities Fund: 5-10 Years; First
Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S.
Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility
Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc. - 1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; RIMCO Monument Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Targeted
Duration Trust; Tax-Free Instruments Trust; Trust for Financial Institutions;
Trust For Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; The Virtus Funds; World
Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees own less than 1% of the Trust`s outstanding shares.
As of December 4, 1995, the following shareholders of record owned 5% or more
of the outstanding shares of the Connecticut Municipal Cash Trust: State
Street Bank and Trust Company, North Quincy, MA, owned approximately
11,130,506 shares (5.23%); Anderson & Co., Philadelphia, PA, owned
approximately 39,624,841 shares (18.63%); and Fleet Securities Corp.,
Rochester, NY, owned approximately 49,196,329 shares (23.14%).
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION*# FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Fund and
Chairman and Director 68 other investment companies in the Fund
Complex
Thomas G. Bigley,$2,458 $20,688 for the Fund and
Director 49 other investment companies in the Fund Complex
John T. Conroy, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
William J. Copeland, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
James E. Dowd, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D., $3,266 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Edward L. Flaherty, Jr., $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Peter E. Madden, $2,757 $90,563 for the Fund and
Director 64 other investment companies in the Fund Complex
Gregor F. Meyer, $3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
John E. Murray, Jr., $1,762 $0 for the Fund and
Director 64 other investment companies in the Fund Complex
Wesley W. Posvar,$3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Marjorie P. Smuts, $3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of 15
portfolios.
+The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
INVESTMENT ADVISER
The Fund's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife and his
son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder of the
Fund for any losses that may be sustained in the purchase, holding, or sale of
any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus.
For the fiscal years ended October 31, 1995, 1994, and 1993, the adviser
earned $1,064,090, $961,837, and $666,093, respectively, of which $400,553,
$337,400, and $388,530, respectively, was voluntarily waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1-1/2% per
year of the remaining average net assets, the adviser will reimburse the
Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future. shareholders.
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, 1995 , 1994, and 1993, 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.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated Administrative
Services, Inc., also a subsidiary of Federated Investors, served as the Fund's
Administrator. (For purposes of this Statement of Additional Information,
Federated Administrative Services and Federated Administrative Services, Inc.
may hereinafter collectively be referred to as the "Administrators".) For the
fiscal years ended October 31, 1995, 1994 and 1993, the Administrators earned
$161,103, $198,789, and $268,954, respectively. Dr. Henry J. Gailliot, an
officer of Federated Management, the adviser to the Fund, holds approximately
20% of the outstanding common stock and serves as a director of Commercial
Data Services, Inc., a company which provides computer processing services to
Federated Administrative Services.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
TRANSFER AGENT
As transfer agent, Federated Services Company maintains all necessary
shareholder records. For its services, the transfer agent receives a fee based
on size, type, and number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
SHAREHOLDER SERVICES AGREEMENT
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 Agreement, the Trustees expect that the Fund will benefit by:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts. For the fiscal
period ending October 31,1995, the Fund paid Shareholder Services fees in the
amount of $532,055, of which $242,434 was waived.
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.
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.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during
the year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers charge
fees in connection with services provided in conjunction with an investment in
shares of the Fund, the performance will be reduced for those shareholders
paying those fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding
capital changes but including the value of any additional shares purchased
with dividends earned from the original one share and all dividends declared
on the original and any purchased shares; dividing the net change in the
account's value by the value of the account at the beginning of the base
period to determine the base period return; and multiplying the base period
return by 365/7.
The Fund's yield for the seven-day period ended October 31, 1995, was 3.30%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended October 31, 1995,
was 3.36%.
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,
1995, was 6.01%.
TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature. The
interest earned by the municipal securities in the Fund's portfolio generally
remains free from federal regular income tax,* and is often free from state
and local taxes as well. As the table below indicates, a "tax-free" investment
can be an attractive choice for investors, particularly in times of narrow
spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF CONNECTICUT
TAX BRACKET:
FEDERAL 15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED
FEDERAL
AND STATE 19.50% 32.50% 35.50% 40.50% 44.10%
JOINT $1- $39,001- $94,251- $143,601- OVER
RETURN: 39,000 94,250 143,600 256,500 $256,500
SINGLE $1- $23,351- $56,551- $117,951- OVER
RETURN: 23,350 56,550 117,950 256,500 $256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
1.50% 1.86% 2.22% 2.33% 2.52% 2.68%
2.00 2.48 2.96 3.10 3.36 3.58
2.50 3.11 3.70 3.88 4.20 4.47
3.00 3.73 4.44 4.65 5.04 5.37
3.50 4.35 5.19 5.43 5.88 6.26
4.00 4.97 5.93 6.20 6.72 7.16
4.50 5.59 6.67 6.98 7.56 8.05
5.00 6.21 7.41 7.75 8.40 8.94
5.50 6.83 8.15 8.53 9.24 9.84
6.00 7.45 8.89 9.30 10.08 10.73
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL STATE
AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENTS WERE NOT USED TO
INCREASE FEDERAL DEDUCTIONS.
The chart above is for illustrative purposes only. It is not an indicator
of past or future performance of Fund shares.
* Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is computed
by multiplying the number of shares owned at the end of the period by the net
asset value per share at the end of the period. The number of shares owned at
the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends and
distributions.
The Fund's average annual total returns for the one-year period ended October
31, 1995 and for the period from November 1, 1989 (date of initial public
investment) through ended October 31, 1995 were 3.31% and 3.27%, respectively.
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
O LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports monthly
and 12-month-to-date investment results for the same money funds.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected
in its investment decision making-structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands
of clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market funds,
a principal means used by money managers today to value money market fund
shares. Other innovations include the first institutional tax-free money
market fund. As of December 31, 1994, Federated Investors managed more than
$31 billion in assets across approximately 43 money market funds, including 17
government, 8 prime and 18 municipal with assets approximating $17 billion,
$7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors's
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors's domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors's international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional
clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated Investors funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Investors mutual funds are available to consumers through major
brokerage firms nationwide--including 200 New York Stock Exchange firms--
supported by more wholesalers than any other mutual fund distributor. The
marketing effort to these firms is headed by James F. Getz, President,
Broker/Dealer Division.
*Source: Investment Company Institute
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a variable rate demand feature. The first rating (long-term
rating) addresses the likelihood of repayment of principal and interest when
due, and the second rating (short-term rating) describes the demand
characteristics. Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The
definitions for the long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
LONG-TERM DEBT RATINGS
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the
relative investment qualities of short-term obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the
use of the VMIG symbol to reflect such characteristics as payment upon
periodic demand rather than fixed maturity dates and payment relying on
external liquidity. In this case, two ratings are usually assigned, (for
example, AAA/VMIG-1); the first representing an evaluation of the degree of
risk associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1 Issuers rated PRIME-1 (or related supporting institutions) have
a superior capacity for repayment of short-term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries,
high rates of return on funds employed, conservative capitalization
structure with moderate reliance on debt and ample asset protection,
broad margins in earning coverage of fixed financial charges and high
internal cash generation, well-established access to a range of financial
markets and assured sources of alternate liquidity
P-2 Issuers rated PRIME-2 (or related supporting institutions) have
a strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited
above, but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
LONG-TERM DEBT RATINGS
AAA Bonds which are rated AAA are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes is can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
AA Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in AAA securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term
indebtedness. However, management considers them to be of comparable
quality to securities rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "AAA" by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "AA" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.
314229105
9101004 B-SS (12/95)
PENNSYLVANIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
CASH SERIES SHARES
PROSPECTUS
The Cash Series Shares of Pennsylvania Municipal Cash Trust (the "Fund") offered
by this prospectus represent interests in a non-diversified portfolio of
Federated Municipal Trust (the "Trust"), an open-end management investment
company (a mutual fund). The Fund invests primarily in short-term Pennsylvania
municipal securities, including securities of states, territories, and
possessions of the United States which are not issued by or on behalf of
Pennsylvania, or its political subdivisions and financing authorities, but which
provide income exempt from federal regular income tax and the personal income
taxes imposed by the Commonwealth of Pennsylvania consistent with stability of
principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Pennsylvania Municipal Securities 6
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Cash Series Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 10
- ------------------------------------------------------
Special Purchase Features 10
HOW TO REDEEM SHARES 11
- ------------------------------------------------------
Special Redemption Features 12
ACCOUNT AND SHARE INFORMATION 12
- ------------------------------------------------------
TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
State and Local Taxes 14
OTHER CLASSES OF SHARES 14
- ------------------------------------------------------
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 16
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES 17
- ------------------------------------------------------
FINANCIAL STATEMENTS 18
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 35
- ------------------------------------------------------
ADDRESSES 36
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CASH SERIES SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)..................................................... 0.28%
12b-1 Fee (after waiver) (2).......................................................... 0.35%
Total Other Expenses.................................................................. 0.42%
Shareholder Services Fee..................................................... 0.25%
Total Operating Expenses (3)..................................................... 1.05%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.50%.
(2) The maximum 12b-1 fee is 0.40%.
(3) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending October 31, 1996. The total operating
expenses were 1.05% for the fiscal year ended October 31, 1995 and would have
been 1.33% absent the voluntary waivers of portions of the management fee and
the 12b-1 fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Cash Series Shares of the Fund
will bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Fund Information." Wire-transferred redemptions
of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period........... $ 11 $ 33 $ 58 $ 128
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
PENNSYLVANIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 35.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------
1995 1994 1993 1992 1991(A)
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.03
- --------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------
Distributions from net
investment income (0.03) (0.02) (0.02) (0.03) (0.03)
- -------------------------------------------- ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------- ------ ------ ------ ------ ------
TOTAL RETURN (B) 3.02% 1.84% 1.83% 2.67% 3.55%
- --------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------
Expenses 1.05% 1.04% 0.97% 0.96% 0.78%*
- --------------------------------------------
Net investment income 2.98% 1.73% 1.88% 2.64% 3.92%*
- --------------------------------------------
Expense waiver/reimbursement (c) 0.28% 0.18% 0.12% 0.12% 0.28%*
- --------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------
Net assets, end of period (000 omitted) $28,255 $18,352 $18,561 $24,694 $19,846
- --------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from January 25, 1991 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established three classes of shares known as Cash Series Shares, Institutional
Shares and Institutional Service Shares. This prospectus relates only to Cash
Series Shares of the Fund, which are designed primarily for the retail customers
of financial institutions as a convenient means of accumulating an interest in a
professionally managed, non-diversified portfolio investing primarily in
short-term Pennsylvania municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Pennsylvania taxpayers because it
invests in municipal securities of that state. A minimum initial investment of
$10,000 within a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the personal income taxes imposed by the Commonwealth of
Pennsylvania consistent with stability of principal. This investment objective
cannot be changed without shareholder approval. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
complying with the various requirements of Rule 2a-7 under the Investment
Company Act of 1940 which regulates money market mutual funds and by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Pennsylvania municipal securities (as defined below) maturing in 13 months or
less. As a matter of investment policy, which cannot be changed without
shareholder approval, at least 80% of the Fund's annual interest income will be
exempt from federal regular income tax and Pennsylvania dividend and interest
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 Pennsylvania and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and Pennsylvania state income tax imposed
upon non-corporate taxpayers ("Pennsylvania Municipal Securities"). Examples of
Pennsylvania Municipal Securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Pennsylvania
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Pennsylvania Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality to other
securities in which the Fund invests, such as: obligations issued by or on
behalf of municipal or corporate issuers; obligations issued or guaranteed by
the U.S. government, its agencies, or instrumentalities; instruments issued by a
U.S. branch of a domestic bank or other deposit institution having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment; and repurchase agreements (arrangements in which the organization
selling the Fund a temporary investment agrees at the time of sale to repurchase
it at a mutually agreed upon time and price), all having the same quality
characteristics as described above.
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain Pennsylvania
Municipal Securities is subject to the federal alternative minimum tax.
PENNSYLVANIA MUNICIPAL SECURITIES
Pennsylvania Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
Pennsylvania Municipal Securities include industrial development bonds issued by
or on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Pennsylvania Municipal Securities are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed by
the bond or other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or charge against the general revenues of
a municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Pennsylvania Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of Pennsylvania Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of Pennsylvania
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Pennsylvania Municipal Securities which are repayable out
of revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Pennsylvania Municipal Securities could involve an increased risk to the Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Pennsylvania Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result
in greater fluctuation in the total market value of the Fund's portfolio. Any
economic, political, or regulatory developments affecting the value of the
securities in the Fund's portfolio will have a greater impact on the total value
of the portfolio than would be the case if the portfolio were diversified among
more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge up to 15% of the value of total assets to secure such
borrowings. These investment limitations cannot be changed without shareholder
approval.
The Fund will invest in securities for income earnings rather than trading for
profit. The Fund will not vary its investments, except subject to certain
conditions.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .50 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated
Investors, Mr. Donahue's wife, and Mr. Donahue's son, J. Christopher
Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF CASH SERIES SHARES
Federated Securities Corp. is the principal distributor for Cash Series Shares
of the Fund. It is a Pennsylvania corporation organized on November 14, 1969,
and is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan adopted in
accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"), the
distributor may be paid a fee in an amount computed at an annual rate of .50 of
1% of the average daily net assets of Cash Series Shares to finance any activity
which is principally intended to result in the sale of Cash Series Shares
subject to the Distribution Plan. The distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide sales services or distribution-related
support services as agents for their clients or customers.
The Distribution Plan is a compensation-type Plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by Cash
Series Shares under the Distribution Plan.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to .25 of
1% of the average daily net asset value of Cash Series Shares to obtain certain
personal services for shareholders and the maintenance of shareholder accounts.
Under the Shareholder Services Agreement, Federated Shareholders Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon Cash Series Shares owned by their clients or customers.
The schedules of such fees and the basis upon which such fees will be paid will
be determined from time to time by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to payments made
pursuant to the Distribution Plan and Shareholder Services Agreement, Federated
Securities Corp. and Federated Shareholder Services, from their own assets, may
pay financial institutions supplemental fees for the performance of substantial
sales services, distribution-related support services, or shareholder services.
The support may include sponsoring sales, educational and training seminars for
their employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support furnished by
the financial institution. Any payments made by the distributor may be
reimbursed by the Fund's investment adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- --------------------- ----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
on assets in excess of $750
.075 of 1% million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Cash Series Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
net asset value per share is determined by subtracting liabilities attributable
to shares from the value of Fund assets attributable to shares, 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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next is
determined after an order is received, on days on which the New York Stock
Exchange is 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 or more within a 90-day period. Financial institutions may impose
different minimum investment requirements on their customers.
In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before shares can be purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may purchase shares
through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives payment by
wire or converts payment by check from the financial institution into federal
funds. It is the financial institution's responsibility to transmit orders
promptly. Financial institutions may charge additional fees for their services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling the Fund
before 1:00 p.m. (Eastern time). The order is considered received immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern time) in
order to begin earning dividends that same day. Federal funds should be wired as
follows: Federated Services Company, c/o State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: Pennsylvania Municipal Cash
Trust, Cash Series Shares; Fund Number (this number can be found on the account
statement or by contacting the Fund.); Group Number or Order Number; Nominee or
Institution Name; and ABA Number 011000028. Shares cannot be purchased by wire
on holidays when wire transfers are restricted. Questions on wire purchases
should be directed to your shareholder services representative at the telephone
number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to Pennsylvania Municipal Cash Trust--Cash Series Shares.
Please include an account number on the check. 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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar
amount requested. All owners of the account must sign the request exactly as the
shares are registered. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. Shareholder accounts will continue to
receive the daily dividend declared on the shares to be redeemed until the check
is presented to UMB Bank, N.A., the bank responsible for administering the
checkwriting program, for payment. However, checks should never be made payable
or sent to UMB Bank, N.A. or the Fund to redeem shares, and a check may not be
written to close an account.
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
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$10,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has 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. 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 election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting 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 December 4, 1995, BHC Securities Inc., Philadelphia, PA, owned 35.87% of
the voting securities of the Fund's Cash Series Shares and BB Securities Co.,
Blue Ball, PA, owned 33.30% of the voting securities of the Fund's Institutional
Shares, 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.
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
In the opinion of Houston, Houston & Donnelly, counsel to the Trust, Fund shares
may be subject to personal property taxes imposed by counties, municipalities,
and school districts in Pennsylvania to the extent that the portfolio securities
in the Fund would be subject to such taxes if owned directly by residents of
those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PENNSYLVANIA TAXES. The Fund received a ruling from the Commonwealth of
Pennsylvania Department of Revenue that interest or gain derived by the Fund
from obligations free from state taxation in Pennsylvania is not taxable on
pass-through to Fund shareholders for purposes of Pennsylvania personal income
taxes. This was based on the existence of the Pennsylvania Investment
Restrictions (see "Investment Limitations"). However, legislation enacted in
December 1993, eliminates the necessity of the Pennsylvania Investment
Restrictions. This legislation also generally repeals the Pennsylvania personal
income tax exemption for gains from the sale of tax-exempt obligations,
including the exemption for distributions from the Fund to the extent that they
are derived from gains from tax-exempt obligations.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers other classes. Institutional Shares are sold at net asset
value primarily to financial institutions acting in a fiduciary or agency
capacity and are subject to a minimum initial investment of $25,000 over a
90-day period. Institutional Service Shares are sold at net asset value
primarily to financial institutions acting in an agency capacity and are subject
to a minimum initial investment of $25,000 over a 90-day period.
All classes are subject to certain of the same expenses.
Institutional Shares are distributed with no 12b-1 fees but are subject to
shareholder services fees.
Institutional Service Shares are distributed with no 12b-1 fees but are subject
to shareholder services fees.
Expense differences between classes may affect the performance of each class.
To obtain more information and a prospectus for any other class, investors may
call 1-800-235-4669.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the Fund's tax exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
PENNSYLVANIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 35.
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1995(A)
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- ------------------------------------------------------------------------------
Net investment income 0.01
- ------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------
Distributions from net investment income (0.01)
- ------------------------------------------------------------------------------ ---------
NET ASSET VALUE, END OF PERIOD $1.00
- ------------------------------------------------------------------------------ ---------
TOTAL RETURN (B) 1.03%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 0.45%*
- ------------------------------------------------------------------------------
Net investment income 3.81%*
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.46%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $2,529
- ------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 23, 1995 (date of initial
public investment) to October 31, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 35.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991 1990(A)
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.05 0.05
- -----------------------------------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (0.03) (0.02) (0.02) (0.03) (0.05) (0.05 )
- ----------------------------------- ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------- ------ ------ ------ ------ ------ ------
TOTAL RETURN (B) 3.44% 2.25% 2.24% 3.08% 4.64% 5.78 %
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 0.65% 0.64% 0.57% 0.56% 0.55% 0.50 %*
- -----------------------------------
Net investment income 3.38% 2.19% 2.21% 3.04% 4.53% 5.56 %*
- -----------------------------------
Expense waiver/reimbursement (c) 0.27% 0.02% 0.12% 0.12% 0.11% 0.18 %*
- -----------------------------------
SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period (000
omitted) $276,407 $229,160 $318,518 $308,200 $317,165 $275,882
- -----------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from November 21, 1989 (date of initial
public investment) to October 31, 1990.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.4%
- ------------------------------------------------------------------------
PENNSYLVANIA--99.2%
------------------------------------------------------
$ 2,350,000 Allegheny County, PA HDA, (Series 1988A) Weekly VRDNs
(Allegheny Hospital)/(PNC Bank, N.A. LOC) VMIG1 $ 2,350,000
------------------------------------------------------
1,000,000 Allegheny County, PA IDA, (Series 1991) Weekly VRDNs
(Mine Safety Appliances Co.)/(Sanwa Bank Ltd, Osaka
LOC) P-1 1,000,000
------------------------------------------------------
1,500,000 Allegheny County, PA, IDA, (Series 1991B) Weekly VRDNs
(Shandon, Inc.)/(PNC Bank, N.A. LOC) P-1 1,500,000
------------------------------------------------------
6,500,000 Allegheny County, PA IDA, 4.75% CP (Duquesne Light
Power Co.)/(Barclays Bank PLC, London LOC), Mandatory
Tender 12/7/1995 A-1+ 6,500,000
------------------------------------------------------
4,975,000 Allegheny County, PA IDA, Adjustable Rate Commercial
Development Revenue Bonds (Series 1992) Weekly VRDNs
(Eleven Parkway Center Associates)/(Integra Bank,
Pittsburgh LOC) A-1 4,975,000
------------------------------------------------------
5,000,000 Allegheny County, PA IDA, PCR (Series 1992A), 3.75%
TOBs (Duquesne Light Power Co.)/(Canadian Imperial
Bank of Commerce, Toronto LOC), Optional Tender
11/30/1995 P-1 5,000,000
------------------------------------------------------
3,000,000 Beaver County, PA IDA, PCR Refunding Bonds (1992
Series-E), 3.85% CP (Toledo Edison Co.)/(Toronto-
Dominion Bank LOC), Mandatory Tender 3/6/1996 A1 3,000,000
------------------------------------------------------
1,260,000 Berks County, PA IDA Weekly VRDNs (ADC Quaker Maid
Meats)/(Meridian Bank, Reading, PA LOC) VMIG1 1,260,000
------------------------------------------------------
1,580,000 Berks County, PA IDA Weekly VRDNs (Beacon Container)/
(Corestates Bank N.A., Philadelphia, PA LOC) P-1 1,580,000
------------------------------------------------------
2,000,000 Berks County, PA IDA, (Series 1988) Weekly VRDNs
(Arrow Electronics, Inc.)/(Corestates Bank N.A.,
Philadelphia, PA LOC) P-1 2,000,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
----------
----
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 2,000,000 Berks County, PA IDA, Variable Rate Demand/Fixed Rate
Mfg Facilities Revenue Bonds (Series 1995) Weekly
VRDNs (Grafika Commercial Printing, Inc.)/(Meridian
Bank, Reading, PA LOC) P-1 $ 2,000,000
------------------------------------------------------
2,000,000 Berks County, PA, (Series 1995), 5.20% TRANs,
12/31/1995 NR(3) 2,000,000
------------------------------------------------------
2,445,000 Bucks County, PA IDA Weekly VRDNs (Double H Plastics,
Inc.)/(Meridian Bank, Reading, PA LOC) VMIG1 2,445,000
------------------------------------------------------
2,960,000 Bucks County, PA IDA Weekly VRDNs (Pennsylvania
Associates)/(Meridian Bank, Reading, PA LOC) P-1 2,960,000
------------------------------------------------------
5,090,000 Bucks County, PA IDA, (Series 1991) Weekly VRDNs
(Cabot Medical Corp.)/(Meridian Bank, Reading, PA LOC) VMIG1 5,090,000
------------------------------------------------------
4,000,000 Butler County, PA IDA Weekly VRDNs (Mine Safety
Appliances Co.)/(Sanwa Bank Ltd, Osaka LOC) P-1 4,000,000
------------------------------------------------------
1,000,000 Butler County, PA IDA, (Series 1992B) Weekly VRDNs
(Mine Safety Appliances Co.)/(Sanwa Bank Ltd, Osaka
LOC) P-1 1,000,000
------------------------------------------------------
2,435,000 Butler County, PA IDA, Variable Rate IDRB (Series
1994) Weekly VRDNs (Lue-Rich Holding Company, Inc.
Project)/(ABN AMRO Bank N.V., Amsterdam LOC) A-1+ 2,435,000
------------------------------------------------------
700,000 Cambria County, PA IDA Weekly VRDNs (Cambria
Cogeneration)/(Fuji Bank, Ltd., Tokyo LOC) A-1 700,000
------------------------------------------------------
1,900,000 Carbon County, PA IDA Weekly VRDNs (Summit Management
& Utilities, Inc.)/(PNC Bank, N.A. LOC) A-1 1,900,000
------------------------------------------------------
5,000,000 Carbon County, PA IDA, 3.90% CP (Panther Creek)/
(National Westminster Bank, PLC, London LOC),
Mandatory Tender 1/18/1996 A-1+ 5,000,000
------------------------------------------------------
2,620,000 Carbon County, PA IDA, Resource Recovery Bonds, 3.80%
CP (Panther Creek)/(National Westminster Bank, PLC,
London LOC), Mandatory Tender 11/17/1995 A-1+ 2,620,000
------------------------------------------------------
6,825,000 Carbon County, PA IDA, Resource Recovery Bonds, 3.85%
CP (Panther Creek)/(National Westminster Bank, PLC,
London LOC), Mandatory Tender 1/25/1996 A-1+ 6,825,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
----------
----
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 1,545,000 Carbon County, PA IDA, Resource Recovery Bonds, 3.90%
CP (Panther Creek)/(National Westminster Bank, PLC,
London LOC), Mandatory Tender 1/16/1996 A-1+ $ 1,545,000
------------------------------------------------------
5,000,000 Carbon County, PA IDA, Solid Waste Disposal Revenue
Notes (Series 1995A), 4.00% RANs (Horsehead Resource
Development, Inc.)/(Chemical Bank, New York LOC),
12/1/1995 P-1 5,000,000
------------------------------------------------------
7,300,000 Clearfield County, PA IDA Weekly VRDNs (Penn Traffic
Co.)/(ABN AMRO Bank N.V., Amsterdam LOC) P-1 7,300,000
------------------------------------------------------
3,305,000 Clinton County, PA Municipal Authority, (Series A)
Weekly VRDNs (Lock Haven Hospital)/(Mellon Bank NA,
Pittsburgh LOC) P-1 3,305,000
------------------------------------------------------
3,000,000 Clinton County, PA, IDA Weekly VRDNs (Armstrong World
Industries, Inc.)/(Mellon Bank NA, Pittsburgh LOC) P-1 3,000,000
------------------------------------------------------
17,000,000 Commonwealth of Pennsylvania, (First Series of
1995-1996), 4.50% TANs, 6/28/1996 SP-1+ 17,079,453
------------------------------------------------------
1,600,000 Cumberland County, PA IDA, Variable Rate Demand/ Fixed
Industrial Development Bonds (Series 1994) Weekly
VRDNs (Lane Enterprises, Inc. Project)/(Meridian Bank,
Reading, PA LOC) P-1 1,600,000
------------------------------------------------------
3,900,000 East Hempfield Township, PA IDA, (Series 1985) Weekly
VRDNs (Yellow Freight System)/(Wachovia Bank of NC,
NA, Winston-Salem LOC) A-1 3,900,000
------------------------------------------------------
7,300,000 Erie County, PA Hospital Authority Weekly VRDNs (St.
Vincent Health System)/(Fuji Bank, Ltd., Tokyo LOC) A-1 7,300,000
------------------------------------------------------
500,000 Erie County, PA IDA Weekly VRDNs (P.H.B. Project)/
(PNC Bank, N.A. LOC) P-1 500,000
------------------------------------------------------
425,000 Erie County, PA IDA, (Series 1985) Weekly VRDNs (R.
P-C Value, Inc.)/(PNC Bank, N.A. LOC) P-1 425,000
------------------------------------------------------
600,000 Erie County, PA IDA, (Series B) Weekly VRDNs (P.H.B.
Project)/(PNC Bank, N.A. LOC) P-1 600,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 1,665,000 Erie County, PA IDA, Multi Mode Revenue Refunding
Bonds Weekly VRDNs (Corry Manor, Inc.)/(PNC Bank, N.A.
LOC) A-1 $ 1,665,000
------------------------------------------------------
500,000 Forest County, PA IDA Weekly VRDNs (Industrial Timber
& Land Co.)/(National City Bank, Cleveland, OH LOC) P-1 500,000
------------------------------------------------------
1,280,000 Forest County, PA IDA Weekly VRDNs (Marienville Health
Care Facility)/(PNC Bank, N.A. LOC) P-1 1,280,000
------------------------------------------------------
1,800,000 Franklin County, PA IDA Weekly VRDNs (The Guarriello
Limited Partnership)/(PNC Bank, N.A. LOC) P-1 1,800,000
------------------------------------------------------
2,800,000 Lackawanna County, PA IDA, (Series 1992) Weekly VRDNs
(Hem Project)/(Corestates Bank N.A., Philadelphia, PA
LOC) P-1 2,800,000
------------------------------------------------------
2,350,000 Lancaster, PA Higher Education Authority, College
Revenue Bonds (Series 1995) Weekly VRDNs (Franklin and
Marshall College Project) VMIG1 2,350,000
------------------------------------------------------
2,356,092 Lawrence County, PA IDA, (Series 1989A) Weekly VRDNs
(Ellwood Uddeholm Steel Co.)/(Society National Bank,
Cleveland, OH LOC) P-1 2,356,092
------------------------------------------------------
3,100,000 Lehigh County, PA IDA, (Series 1989A) Weekly VRDNs
(Hershey Pizza Co., Inc.)/(PNC Bank, N.A. LOC) A-1 3,100,000
------------------------------------------------------
1,000,000 Lehigh County, PA, General Purpose Authority Revenue
Bonds (Series 1990) Weekly VRDNs (Phoebe Terrace,
Inc.)/(Meridian Bank, Reading, PA LOC) P-1 1,000,000
------------------------------------------------------
3,300,000 Lehigh County, PA, IDA Weekly VRDNs (Cedar Crest
College)/(PNC Bank, N.A. LOC) A-1 3,300,000
------------------------------------------------------
1,005,000 McKean County, PA IDA, Multi-Mode Revenue Refunding
Bonds Weekly VRDNs (Bradford Manor, Inc.)/(PNC Bank,
N.A. LOC) A-1 1,005,000
------------------------------------------------------
3,300,000 Monroe County, PA IDA, PCR Weekly VRDNs (Cooper
Industries, Inc.)/(Sanwa Bank Ltd, Osaka LOC) A-1 3,300,000
------------------------------------------------------
2,600,000 Montgomery County, PA IDA, (Series 1984) Weekly VRDNs
(General Signal Corp.)/(Morgan Guaranty Trust Co., New
York LOC) P-1 2,600,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 3,500,000 Montgomery County, PA IDA, (Series 1984) Weekly VRDNs
(Seton Co.)/(Banque Paribas, Paris LOC) A-1 $ 3,500,000
------------------------------------------------------
1,300,000 Montgomery County, PA IDA, (Series 1992) Weekly VRDNs
(RJI Limited Partnership)/(Meridian Bank, Reading, PA
LOC) VMIG1 1,300,000
------------------------------------------------------
2,800,000 Montgomery County, PA IDA, (Series 84) Weekly VRDNs
(Thomas & Betts Corp.)/(Wachovia Bank of NC, NA,
Winston-Salem LOC) P-1 2,800,000
------------------------------------------------------
6,980,000 Montgomery County, PA IDA, Commercial Development
Revenue Bonds (Series 1992) Weekly VRDNs (Hickory
Pointe Project)/(First Fidelity Bank, NA, New Jersey
LOC) P-1 6,980,000
------------------------------------------------------
5,075,000 Moon Township, PA IDA Weekly VRDNs (Airport Hotel
Associates)/(ABN AMRO Bank N.V., Amsterdam LOC) A-1+ 5,075,000
------------------------------------------------------
5,000,000 North Lebanon Township, PA, Municipal Authority
Mortgage Weekly VRDNs (Grace Community, Inc.)/
(Meridian Bank, Reading, PA LOC) VMIG1 5,000,000
------------------------------------------------------
9,000,000 Northampton County, PA IDA, 3.85% CP (Citizens
Utilities Co.), Mandatory Tender 11/9/1995 A-1+ 9,000,000
------------------------------------------------------
2,000,000 Northampton County, PA IDA, 3.90% CP (Citizens
Utilities Co.), Mandatory Tender 12/14/1995 A-1+ 2,000,000
------------------------------------------------------
1,590,000 Northumberland County PA IDA, Variable Rate Demand/
Fixed Rate Revenue Bonds (Series A of 1995) Weekly
VRDNs (Furman Farms, Inc. Project)/(Meridian Bank,
Reading, PA LOC) P-1 1,590,000
------------------------------------------------------
1,875,000 Pennsylvania Education Development Authority Weekly
VRDNs (Cyrogenics, Inc.)/(PNC Bank, N.A. LOC) A-1 1,875,000
------------------------------------------------------
3,300,000 Pennsylvania Education Development Authority Weekly
VRDNs (Industrial Scientific Corp.)/(Mellon Bank NA,
Pittsburgh LOC) P-1 3,300,000
------------------------------------------------------
750,000 Pennsylvania Education Development Authority Weekly
VRDNs (Pioneer Fluid)/(PNC Bank, N.A. LOC) A-1 750,000
------------------------------------------------------
675,000 Pennsylvania Education Development Authority Weekly
VRDNs (RMF Associates)/(PNC Bank, N.A. LOC) P-1 675,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 900,000 Pennsylvania Education Development Authority Weekly
VRDNs (Reace Associates)/(PNC Bank, N.A. LOC) A-1 $ 900,000
------------------------------------------------------
4,400,000 Pennsylvania Education Development Authority Weekly
VRDNs (Walnut And Craig)/(PNC Bank, N.A. LOC) P-1 4,400,000
------------------------------------------------------
500,000 Pennsylvania Education Development Authority, (Series
B) Weekly VRDNs (Payne Printing Co.)/ (PNC Bank, N.A.
LOC) A-1 500,000
------------------------------------------------------
1,300,000 Pennsylvania Education Development Authority, Revenue
Bonds (Series G4) Weekly VRDNs (Metamora Products)/
(PNC Bank, N.A. LOC) A-1 1,300,000
------------------------------------------------------
325,000 Pennsylvania Education Development Authority, Revenue
Bonds Weekly VRDNs (DDI Pharmaceuticals, Inc.)/ (PNC
Bank, N.A. LOC) A-1 325,000
------------------------------------------------------
625,000 Pennsylvania Education Development Authority, Revenue
Bonds Weekly VRDNs (RAM Forest Products)/ (PNC Bank,
N.A. LOC) A-1 625,000
------------------------------------------------------
6,915,000 Pennsylvania Housing Finance Authority, 3.90% TOBs
(First National Bank of Chicago LIQ), Optional Tender
4/1/1996 NR(2) 6,915,000
------------------------------------------------------
980,000 Pennsylvania Housing Finance Authority, Section 8
Assisted Residential Development Refunding Bonds
(Series 1992A) Weekly VRDNs (CGIC INS)/(Citibank NA,
New York LIQ) NR(1) 980,000
------------------------------------------------------
2,420,000 Pennsylvania Housing Finance Authority, Tender Option
Bonds/Single Family Housing (Series O), 4.875% TOBs
(Meridian Bank, Reading, PA LIQ), Optional Tender
4/1/1996 NR(2) 2,420,000
------------------------------------------------------
3,190,000 Pennsylvania State Higher Education Assistance Agency,
4.50% TOBs (Carnegie-Mellon University), Optional
Tender 5/1/1996 A-1 3,190,000
------------------------------------------------------
9,405,000 Pennsylvania State Higher Education Facilities
Authority, 4.20% TOBs (Carnegie-Mellon University),
Optional Tender 11/1/1995 A-1 9,405,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 1,945,000 Pennsylvania State Higher Education Facilities
Authority, College & University Revenues/Drexel
University, 7.70% Bonds (United States Treasury PRF),
11/1/1995 (@102) Aaa $ 1,983,900
------------------------------------------------------
3,100,000 Pennsylvania State University, Series 1995 Notes,
5.25% BANs, 4/5/1996 MIG1 3,110,758
------------------------------------------------------
9,000,000 Philadelphia Redevelopment Authority, Multi-Family
Revenue Bonds (Series 1985) Weekly VRDNs (Franklin
Town Towers)/(Marine Midland Bank N.A., Buffalo, NY
LOC) P-2 9,000,000
------------------------------------------------------
7,440,000 Philadelphia, PA IDA, (Series 93) Weekly VRDNs
(Sackett Development)/(Mellon Bank NA, Pittsburgh LOC) A1 7,440,000
------------------------------------------------------
7,000,000 Philadelphia, PA IDA, 4.25% TOBs (Suite Hotel)/(First
National Bank of Boston, MA LOC), Optional Tender
6/1/1996 P-1 7,000,000
------------------------------------------------------
3,700,000 Philadelphia, PA IDA, Commercial Development Revenue
Bonds (Series A), 4.00% TOBs (Economy Inn)/ (First
National Bank of Boston, MA LOC), Optional Tender
7/1/1996 P-1 3,700,000
------------------------------------------------------
1,700,000 Philadelphia, PA IDA, Commercial Development Revenue
Bonds (Series B), 4.00% TOBs (Economy Inn)/(First
National Bank of Boston, MA LOC), Optional Tender
7/1/1996 A-2 1,700,000
------------------------------------------------------
5,500,000 Philadelphia, PA, (Series A), 4.50% TRANs, 6/27/1996 SP-1 5,517,306
------------------------------------------------------
4,000,000 Philadelphia, PA, GO (Series 1990), 3.85% CP (Fuji
Bank, Ltd., Tokyo LOC), Mandatory Tender 11/16/1995 VMIG1 4,000,000
------------------------------------------------------
4,010,000 Philadelphia, PA, GO (Series 1990), 4.00% CP (Fuji
Bank, Ltd., Tokyo LOC), Mandatory Tender 11/6/1995 Aa3 4,010,000
------------------------------------------------------
5,000,000 Port Authority of Allegheny County, PA, (Series
1995A), 3.875% GANs (PNC Bank, N.A. LOC), 6/28/1996 NR(3) 5,000,000
------------------------------------------------------
2,320,000 Sayre, PA, Health Care Facilities Authority Weekly
VRDNs (VHA of Pennsylvania)/(AMBAC INS)/(First
National Bank of Chicago LIQ) A-1 2,320,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 4,000,000 Temple University, Commonwealth System of Higher
Education University Funding Obligations (Series
1995), 5.00% BANs, 5/22/1996 SP-1+ $ 4,014,883
------------------------------------------------------
3,824,000 Upper Darby School District, PA, 4.13% TRANs,
6/28/1996 NR(3) 3,825,432
------------------------------------------------------
1,550,000 Venango, PA IDA, (Series A), 3.95% CP (Scrubgrass
Power Corp.)/(National Westminster Bank, PLC, London
LOC), Mandatory Tender 1/10/1996 A-1+ 1,550,000
------------------------------------------------------
4,000,000 Venango, PA IDA, Resource Recovery Bonds
(Series 1993), 3.80% CP (Scrubgrass Power Corp.)/
(National Westminster Bank, PLC, London LOC),
Mandatory Tender 11/13/1995 A-1+ 4,000,000
------------------------------------------------------
2,100,000 Venango, PA IDA, Resource Recovery Bonds
(Series 1993), 3.95% CP (Scrubgrass Power Corp.)/
(National Westminster Bank, PLC, London LOC),
Mandatory Tender 1/26/1996 A-1+ 2,100,000
------------------------------------------------------
870,000 Washington County, PA Hospital Authority, (Series
1990) Weekly VRDNs (Mac Plastics, Inc.)/(National City
Bank, Cleveland, OH LOC) AA 870,000
------------------------------------------------------
5,700,000 Washington County, PA Municipal Authority Facilities,
(Series 1985A) Weekly VRDNs (1985-A Pooled Equipment
Lease Program)/(Sanwa Bank Ltd, Osaka LOC) VMIG1 5,700,000
------------------------------------------------------
1,350,000 Washington County, PA, IDA (Series 1988) Weekly VRDNs
(Coca-Cola Co.)/(Mellon Bank NA, Pittsburgh LOC) P-1 1,350,000
------------------------------------------------------
1,100,000 West Cornwall Township, PA Municipal Authority,
Revenue Bonds (Series 1995) Weekly VRDNs (Lebanon
Valley Brethern Home Project (PA))/(Meridian Bank,
Reading, PA LOC) P-1 1,100,000
------------------------------------------------------
1,418,000 West York Area School District, PA, Tax & Revenue
Anticipation Notes (Series 1995), 4.26% TRANs,
6/28/1996 NR(3) 1,418,711
------------------------------------------------------
2,588,850 Woodland Hills School District, PA, 4.21% TRANs,
6/28/1996 NR 2,589,819
------------------------------------------------------ ------------
Total 304,856,354
------------------------------------------------------ ------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PUERTO RICO--0.2%
------------------------------------------------------
$ 600,000 Puerto Rico Government Development Bank Weekly VRDNs
(Credit Suisse, Zurich LOC) A-1+ $ 600,000
------------------------------------------------------ ------------
TOTAL INVESTMENTS, AT AMORTIZED COST(A) $305,456,354
------------------------------------------------------ ------------
</TABLE>
Securities that are subject to the Alternative Minimum Tax represent 56.5% of
the portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($307,191,765) at October 31, 1995.
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronym(s) are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
BANs -- Bond Anticipation Notes
CGIC -- Capital Guaranty Insurance Corporation
CP -- Commercial Paper
GANs -- Grant Anticipation Notes
GO -- General Obligation
HDA -- Hospital Development Authority
IDA -- Industrial Development Authority
IDRB -- Industrial Development Revenue Bond
INS -- Insured
LIQ -- Liquidity Agreement
LOC -- Letter of Credit
PCR -- Pollution Control Revenue
PLC -- Public Limited Company
PRF -- Prerefunded
RANs -- Revenue Anticipation Notes
TANs -- Tax Anticipation Notes
TOBs -- Tender Option Bonds
TRANs -- Tax and Revenue Anticipation Notes
VHA -- Veterans Housing Administration
VRDNs -- Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Investments in securities, at amortized cost and value $305,456,354
- -------------------------------------------------------------------------------
Cash 302,320
- -------------------------------------------------------------------------------
Income receivable 2,170,862
- -------------------------------------------------------------------------------
Receivable for shares sold 2,272
- ------------------------------------------------------------------------------- ------------
Total assets 307,931,808
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Payable for shares redeemed 1,505
- --------------------------------------------------------------------
Income distribution payable 634,420
- --------------------------------------------------------------------
Accrued expenses 104,118
- -------------------------------------------------------------------- --------
Total liabilities 740,043
- ------------------------------------------------------------------------------- ------------
NET ASSETS for 307,191,765 shares outstanding $307,191,765
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES:
- -------------------------------------------------------------------------------
$276,407,484 / 276,407,484 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
CASH SERIES SHARES:
- -------------------------------------------------------------------------------
$28,255,264 / 28,255,264 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
INSTITUTIONAL SHARES:
- -------------------------------------------------------------------------------
$2,529,017 / 2,529,017 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------
Interest $11,660,838
- ---------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------
Investment advisory fee $1,445,400
- -----------------------------------------------------------------------
Administrative personnel and services fee 218,834
- -----------------------------------------------------------------------
Custodian fees 54,452
- -----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 51,317
- -----------------------------------------------------------------------
Directors'/Trustees' fees 1,626
- -----------------------------------------------------------------------
Auditing fees 14,983
- -----------------------------------------------------------------------
Legal fees 3,910
- -----------------------------------------------------------------------
Portfolio accounting fees 67,074
- -----------------------------------------------------------------------
Distribution services fee--Cash Series Shares 96,501
- -----------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 661,792
- -----------------------------------------------------------------------
Shareholder services fee--Cash Series Shares 60,313
- -----------------------------------------------------------------------
Shareholder services fee--Institutional Shares 596
- -----------------------------------------------------------------------
Share registration costs 42,662
- -----------------------------------------------------------------------
Printing and postage 15,292
- -----------------------------------------------------------------------
Insurance premiums 6,469
- -----------------------------------------------------------------------
Miscellaneous 5,970
- ----------------------------------------------------------------------- ----------
Total expenses 2,747,191
- -----------------------------------------------------------------------
Waivers--
- -----------------------------------------------------------------------
Waiver of investment advisory fee $(222,841)
- -----------------------------------------------------------
Waiver of distribution services fee--Cash Series Shares (44,624)
- -----------------------------------------------------------
Waiver of shareholder services fee--Institutional Service
Shares (496,060)
- -----------------------------------------------------------
Waiver of shareholder services fee--Cash Series Shares (1,766)
- -----------------------------------------------------------
Waiver of shareholder services fee--Institutional Shares (596)
- ----------------------------------------------------------- ---------
Total waivers (765,887)
- ----------------------------------------------------------------------- ----------
Net expenses 1,981,304
- --------------------------------------------------------------------------------------- -----------
Net investment income $ 9,679,534
- --------------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------
Net investment income $ 9,679,534 $ 6,997,846
- ------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------
Distributions from net investment income
- -------------------------------------------------------------
Institutional Service Shares (8,951,830) (6,625,711)
- -------------------------------------------------------------
Cash Series Shares (718,640) (372,135)
- -------------------------------------------------------------
Institutional Shares (9,064) 0
- ------------------------------------------------------------- ------------- -------------
Change in net assets resulting from distributions to
shareholders (9,679,534) (6,997,846)
- ------------------------------------------------------------- ------------- -------------
SHARE TRANSACTIONS--
- -------------------------------------------------------------
Proceeds from sale of shares 1,028,950,579 800,515,592
- -------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of distributions declared 2,339,163 1,321,124
- -------------------------------------------------------------
Cost of shares redeemed (971,610,388) (891,403,705)
- ------------------------------------------------------------- ------------- -------------
Change in net assets resulting from share transactions 59,679,354 (89,566,989)
- ------------------------------------------------------------- ------------- -------------
Change in net assets 59,679,354 (89,566,989)
- -------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------
Beginning of period 247,512,411 337,079,400
- ------------------------------------------------------------- ------------- -------------
End of period $ 307,191,765 $ 247,512,411
- ------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Pennsylvania
Municipal Cash Trust (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The Fund offers three classes of shares: Institutional Service Shares,
Cash Series Shares and Institutional Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
75.5% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
supported (backed) by a letter of credit for any one institution or agency
does not exceed 11.7% of total investments.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $307,191,765.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
INSTITUTIONAL SERVICE SHARES 1995 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 940,400,092 749,671,233
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 1,631,397 937,173
- ---------------------------------------------------------------
Shares redeemed (894,784,261) (839,966,777)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Institutional Service share
transactions 47,247,228 (89,358,371)
- --------------------------------------------------------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
CASH SERIES SHARES 1995 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 85,377,025 50,844,359
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 705,513 383,951
- ---------------------------------------------------------------
Shares redeemed (76,179,429) (51,436,928)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Cash Series share transactions 9,903,109 (208,618)
- --------------------------------------------------------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
INSTITUTIONAL SHARES 1995(A) 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 3,173,462 0
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 2,253 0
- ---------------------------------------------------------------
Shares redeemed (646,698) 0
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Institutional share transactions 2,529,017 0
- --------------------------------------------------------------- ------------ ------------
Net change resulting from share transactions 59,679,354 (89,566,989)
- --------------------------------------------------------------- ------------ ------------
</TABLE>
(a) For the period from August 23, 1995 (date of initial public investment) to
October 31, 1995.
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's Cash Series shares. The Plan provides that the Fund may incur
distribution expenses up to .40 of 1% of the average daily net assets of the
Cash Series Shares, annually to compensate FSC.
The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS,") the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive a portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion. For the fiscal year
ended October 31, 1995, the Institutional Shares fully waived its shareholder
services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the Fund.
This fee is based on the size, type, and number of accounts and transactions
made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common Officers. These
transactions were made at current market value pursuant to Rule 17a-7 under the
Act amounting to $488,240,000 and $437,690,000 respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Pennsylvania Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of
Pennsylvania Municipal Cash Trust (an investment portfolio of Federated
Municipal Trust, a Massachusetts business trust), including the schedule of
portfolio investments, as of October 31, 1995, the related statement of
operations for the year then ended, and the statement of changes in net assets
for each of the two years in the period then ended and the financial highlights
(see pages 2, 16 and 17 of the prospectus) for the periods presented. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pennsylvania Municipal Cash Trust (an investment portfolio of Federated
Municipal Trust) as of October 31, 1995, the results of its operations for the
year then ended and the changes in its net assets for each of the two years in
the period then ended and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Pennsylvania Municipal Cash Trust
Cash Series Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- -------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL
CASH TRUST
CASH SERIES SHARES
PROSPECTUS
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated December 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229881
9101005A-CSS (12/95)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares of Pennsylvania Municipal Cash Trust (the
"Fund") offered by this prospectus represent interests in a non-diversified
portfolio of Federated Municipal Trust (the "Trust"), an open-end management
investment company (a mutual fund). The Fund invests primarily in short-term
Pennsylvania municipal securities, including securities of states, territories,
and possessions of the United States which are not issued by or on behalf of
Pennsylvania, or its political subdivisions and financing authorities, but which
provide income exempt from federal regular income tax and the personal income
taxes imposed by the Commonwealth of Pennsylvania consistent with stability of
principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SERVICE SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Pennsylvania Municipal Securities 6
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Institutional Service Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 9
- ------------------------------------------------------
Special Purchase Features 10
HOW TO REDEEM SHARES 10
- ------------------------------------------------------
Special Redemption Features 12
ACCOUNT AND SHARE INFORMATION 12
- ------------------------------------------------------
TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
State and Local Taxes 13
OTHER CLASSES OF SHARES 14
- ------------------------------------------------------
PERFORMANCE INFORMATION 15
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES 16
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES 17
- ------------------------------------------------------
FINANCIAL STATEMENTS 18
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 35
- ------------------------------------------------------
ADDRESSES 36
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)...................................................... 0.28%
12b-1 Fee............................................................................. None
Total Other Expenses.................................................................. 0.37%
Shareholder Services Fee (after waiver)(2)................................... 0.20%
Total Operating Expenses(3)...................................................... 0.65%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.50%.
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending October 31, 1996. The total operating
expenses were 0.65% for the fiscal year ended October 31, 1995 and would have
been 0.92% absent the voluntary waivers of a portion of the management fee and
the shareholder services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Institutional Service Shares of
the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Fund Information." Wire-
transferred redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period........... $ 7 $ 21 $ 36 $ 81
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
PENNSYLVANIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 35.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991 1990(A)
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.05 0.05
- -----------------------------------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (0.03) (0.02) (0.02) (0.03) (0.05) (0.05 )
- ----------------------------------- ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------- ------ ------ ------ ------ ------ ------
TOTAL RETURN (B) 3.44% 2.25% 2.24% 3.08% 4.64% 5.78 %
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 0.65% 0.64% 0.57% 0.56% 0.55% 0.50 %*
- -----------------------------------
Net investment income 3.38% 2.19% 2.21% 3.04% 4.53% 5.56 %*
- -----------------------------------
Expense waiver/reimbursement (c) 0.27% 0.02% 0.12% 0.12% 0.11% 0.18 %*
- -----------------------------------
SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period (000
omitted) $276,407 $229,160 $318,518 $308,200 $317,165 $275,882
- -----------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from November 21, 1989 (date of initial
public investment) to October 31, 1990.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established three classes of shares known as Institutional Service Shares,
Institutional Shares, and Cash Series Shares. This prospectus relates only to
Institutional Service Shares of the Fund, which are designed primarily for
financial institutions acting in an agency capacity as a convenient means of
accumulating an interest in a professionally managed, non-diversified portfolio
investing primarily in short-term Pennsylvania municipal securities. The Fund
may not be a suitable investment for retirement plans or for non-Pennsylvania
taxpayers because it invests in municipal securities of that state. A minimum
initial investment of $25,000 within a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are sold
and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the personal income taxes imposed by the Commonwealth of
Pennsylvania consistent with stability of principal. This investment objective
cannot be changed without shareholder approval. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
complying with the various requirements of Rule 2a-7 under the Investment
Company Act of 1940 which regulates money market funds and by following the
investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Pennsylvania municipal securities (as defined below) maturing in 13 months or
less. As a matter of investment policy, which cannot be changed without
shareholder approval, at least 80% of the Fund's annual interest income will be
exempt from federal regular income tax and the personal income taxes imposed by
the Commonwealth of Pennsylvania. (Federal regular income tax does not include
the federal individual alternative minimum tax or the federal alternative
minimum tax for corporations.) The average maturity of the securities in the
Fund's portfolio, computed on a dollar-weighted basis, will be 90 days or less.
Unless indicated otherwise, the investment policies may be changed by the
Trustees without shareholder approval. Shareholders will be notified before any
material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of Pennsylvania and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and the personal income taxes imposed by the
Commonwealth of Pennsylvania imposed upon non-corporate taxpayers ("Pennsylvania
Municipal Securities"). Examples of Pennsylvania Municipal Securities include,
but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Pennsylvania
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Pennsylvania Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Leases obligations maybe subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; obligations issued or guaranteed by
the U.S. government, its agencies, or instrumentalities; instruments issued by a
U.S. branch of a domestic bank or other deposit institution having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment; and repurchase agreements (arrangements in which the organization
selling the Fund a temporary investment agrees at the time of sale to repurchase
it at a mutually agreed upon time and price), all having the same quality
characteristics as described above.
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain Pennsylvania
Municipal Securities is subject to the federal alternative minimum tax.
PENNSYLVANIA MUNICIPAL SECURITIES
Pennsylvania Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
Pennsylvania Municipal Securities include industrial development bonds issued by
or on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Pennsylvania Municipal Securities are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed by
the bond or other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or charge against the general revenues of
a municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Pennsylvania Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of Pennsylvania Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of Pennsylvania
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Pennsylvania Municipal Securities which are repayable out
of revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Pennsylvania Municipal Securities could involve an increased risk to the Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Pennsylvania Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result
in greater fluctuation in the total market value of the Fund's portfolio. Any
economic, political, or regulatory developments affecting the value of the
securities in the Fund's portfolio will have a greater impact on the total value
of the portfolio than would be the case if the portfolio were diversified among
more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge up to 15% of the value of total assets to secure such
borrowings.
The Fund will invest in securities for income earnings rather than trading for
profit. The Fund will not vary its investments, except subject to certain
conditions.
The above investment limitations cannot be changed without shareholder approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .50 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated
Investors, Mr. Donahue's wife, and Mr. Donahue's son, J. Christopher
Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services Agreement
with Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to .25 of 1% of the average daily net asset
value of the Institutional Service Shares, computed at an annual rate, to
provide personal services for shareholders and to provide the maintenance of
shareholder accounts (shareholder services). From time to time, and for such
periods as deemed appropriate, the amount stated above may be reduced
voluntarily. Under the Shareholder Services Agreement, Federated Shareholder
Services will either perform shareholder services directly or will select
financial institutions to perform shareholder services. Financial institutions
will receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. With respect to Institutional
Service Shares, in addition to payments made pursuant to the Shareholder
Services Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions supplemental
fees for the performance of substantial sales services, distribution-related
support
services, or shareholder services. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's investment
adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- --------------------- ----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
on assets in excess of $750
.075 of 1% million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Institutional Service
Shares at $1.00 by valuing the portfolio securities using the amortized cost
method. The net asset value per share is determined by subtracting liabilities
attributable to shares from the value of Fund assets attributable to shares, 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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days which the New York Stock Exchange
is 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 within a
90-day
period. 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 of State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: Pennsylvania Municipal Cash
Trust, Institutional Service Shares; Fund Number (This number can be found on
the account statement or by contacting the Fund.); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to Pennsylvania Municipal Cash Trust--Institutional
Service Shares. 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 instruc-
tions, 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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests on
holidays when wire transfers are restricted will be wired the following business
day. Questions about telephone redemptions on days when wire transfers are
restricted should be directed to your shareholder services representative at the
telephone number listed on your account statement. 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 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If shares certificates have been issued, they should be sent
unendorsed with the written request by registered or certificate mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. The check writing service allows
shareholders to receive the daily dividend declared on the shares to be redeemed
until the check is presented to UMB Bank, N.A., the bank responsible for
administering the check writing program, for payment. However, checks should
never be made payable or sent to UMB Bank, N.A. or the Fund to redeem shares,
and a check may not be written to close an account.
DEBIT CARD. Upon request, a debit account will be established. This account
allows shareholders to redeem shares by using a debit card. A fee will be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of at
least $25,000, a systematic withdrawal program may be established whereby
automatic redemptions are made from the account and transferred electronically
to any commercial bank, savings bank, or credit union that is an ACH member.
Shareholders may apply for participation in this program through their financial
institutions or the Fund.
ACCOUNT AND SHARE 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. Shares purchased by
wire before 1:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by check begin earning dividends the day after the check is converted
into federal funds.
CAPITAL GAINS. The Fund does not expect to realize any capital gains or losses.
If capital gains or losses were to occur, they could result in an increase or
decrease in dividends. The Fund will distribute in cash or additional shares any
realized net long-term capital gains at least once every 12 months.
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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$25,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has one vote in Trustee elections and other
matters submitted to shareholders for vote. All shares of all classes of each
portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 election of Trustees under certain
circumstances.
As of December 4, 1995, BHC Securities Inc., Philadelphia, PA, owned 35.87% of
the voting securities of the Fund's Cash Series Shares and BB Securities Co.,
Blue Ball, PA, owned 33.30% of the voting securities of the Fund's Institutional
Shares, 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.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
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
In the opinion of Houston, Houston & Donnelly, counsel to the Trust, Fund shares
may be subject to personal property taxes imposed by counties, municipalities,
and school districts in Pennsylvania to the extent that the portfolio securities
in the Fund would be subject to such taxes if owned directly by residents of
those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PENNSYLVANIA TAXES. The Fund received a ruling from the Commonwealth of
Pennsylvania Department of Revenue that interest or gain derived by the Fund
from obligations free from state taxation in Pennsylvania is not taxable on
pass-through to Fund shareholders for purposes of Pennsylvania personal income
taxes. This was based on the existence of the Pennsylvania Investment
Restrictions (see "Investment Limitations"). However, legislation enacted in
December, 1993, eliminates the necessity of the Pennsylvania Investment
Restrictions. This legislation also generally repeals the Pennsylvania personal
income tax exemption for gains from the sale of tax-exempt obligations,
including the exemption for distributions from the Fund to the extent that they
are derived from gains from tax-exempt obligations.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers other classes of shares called Institutional Shares and
Cash Series Shares.
Cash Series Shares that are sold primarily to retail customers of financial
institutions. Cash Series Shares are sold at net asset value and are subject to
a Rule 12b-1 Plan and a Shareholder Services Agreement. Investments in Cash
Series Shares are subject to a minimum initial investment of $10,000 within a
90-day period.
Institutional Shares are sold primarily to financial institutions acting in a
fiduciary or agency capacity. Institutional Shares are sold at net asset value
and are subject to a Shareholder Services Agreement. Institutional Shares are
subject to a minimum initial investment of $25,000 within a 90-day period.
Institutional Service Shares, Institutional Shares, and Cash Series Shares are
subject to certain of the same expenses. Expense differences, however, between
Institutional Service Shares, Institutional Shares, and Cash Series Shares may
affect the performance of each class.
To obtain more information and a prospectus for Institutional Shares or Cash
Series Shares, investors may call 1-800-235-4669.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the shares' tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
PENNSYLVANIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 35.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------
1995 1994 1993 1992 1991(A)
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.03
- --------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------
Distributions from net
investment income (0.03) (0.02) (0.02) (0.03) (0.03 )
- -------------------------------------------- ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------- ------ ------ ------ ------ ------
TOTAL RETURN (B) 3.02% 1.84% 1.83% 2.67% 3.55%
- --------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------
Expenses 1.05% 1.04% 0.97% 0.96% 0.78%*
- --------------------------------------------
Net investment income 2.98% 1.73% 1.88% 2.64% 3.92%*
- --------------------------------------------
Expense waiver/reimbursement (c) 0.28% 0.18% 0.12% 0.12% 0.28%*
- --------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------
Net assets, end of period (000 omitted) $28,255 $18,352 $18,561 $24,694 $19,846
- --------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from January 25, 1991 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 35.
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1995(A)
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- ------------------------------------------------------------------------------
Net investment income 0.01
- ------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------
Distributions from net investment income (0.01)
- ------------------------------------------------------------------------------ ---------
NET ASSET VALUE, END OF PERIOD $1.00
- ------------------------------------------------------------------------------ ---------
TOTAL RETURN (B) 1.03%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 0.45%*
- ------------------------------------------------------------------------------
Net investment income 3.81%*
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.46%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $2,529
- ------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 23, 1995 (date of initial
public investment) to October 31, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.4%
- ------------------------------------------------------------------------
PENNSYLVANIA--99.2%
------------------------------------------------------
$ 2,350,000 Allegheny County, PA HDA, (Series 1988A) Weekly VRDNs
(Allegheny Hospital)/(PNC Bank, N.A. LOC) VMIG1 $ 2,350,000
------------------------------------------------------
1,000,000 Allegheny County, PA IDA, (Series 1991) Weekly VRDNs
(Mine Safety Appliances Co.)/(Sanwa Bank Ltd, Osaka
LOC) P-1 1,000,000
------------------------------------------------------
1,500,000 Allegheny County, PA, IDA, (Series 1991B) Weekly VRDNs
(Shandon, Inc.)/(PNC Bank, N.A. LOC) P-1 1,500,000
------------------------------------------------------
6,500,000 Allegheny County, PA IDA, 4.75% CP (Duquesne Light
Power Co.)/(Barclays Bank PLC, London LOC), Mandatory
Tender 12/7/1995 A-1+ 6,500,000
------------------------------------------------------
4,975,000 Allegheny County, PA IDA, Adjustable Rate Commercial
Development Revenue Bonds (Series 1992) Weekly VRDNs
(Eleven Parkway Center Associates)/(Integra Bank,
Pittsburgh LOC) A-1 4,975,000
------------------------------------------------------
5,000,000 Allegheny County, PA IDA, PCR (Series 1992A), 3.75%
TOBs (Duquesne Light Power Co.)/(Canadian Imperial
Bank of Commerce, Toronto LOC), Optional Tender
11/30/1995 P-1 5,000,000
------------------------------------------------------
3,000,000 Beaver County, PA IDA, PCR Refunding Bonds (1992
Series-E), 3.85% CP (Toledo Edison Co.)/(Toronto-
Dominion Bank LOC), Mandatory Tender 3/6/1996 A1 3,000,000
------------------------------------------------------
1,260,000 Berks County, PA IDA Weekly VRDNs (ADC Quaker Maid
Meats)/(Meridian Bank, Reading, PA LOC) VMIG1 1,260,000
------------------------------------------------------
1,580,000 Berks County, PA IDA Weekly VRDNs (Beacon Container)/
(Corestates Bank N.A., Philadelphia, PA LOC) P-1 1,580,000
------------------------------------------------------
2,000,000 Berks County, PA IDA, (Series 1988) Weekly VRDNs
(Arrow Electronics, Inc.)/(Corestates Bank N.A.,
Philadelphia, PA LOC) P-1 2,000,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 2,000,000 Berks County, PA IDA, Variable Rate Demand/Fixed Rate
Mfg Facilities Revenue Bonds (Series 1995) Weekly
VRDNs (Grafika Commercial Printing, Inc.)/(Meridian
Bank, Reading, PA LOC) P-1 $ 2,000,000
------------------------------------------------------
2,000,000 Berks County, PA, (Series 1995), 5.20% TRANs,
12/31/1995 NR(3) 2,000,000
------------------------------------------------------
2,445,000 Bucks County, PA IDA Weekly VRDNs (Double H Plastics,
Inc.)/(Meridian Bank, Reading, PA LOC) VMIG1 2,445,000
------------------------------------------------------
2,960,000 Bucks County, PA IDA Weekly VRDNs (Pennsylvania
Associates)/(Meridian Bank, Reading, PA LOC) P-1 2,960,000
------------------------------------------------------
5,090,000 Bucks County, PA IDA, (Series 1991) Weekly VRDNs
(Cabot Medical Corp.)/(Meridian Bank, Reading, PA LOC) VMIG1 5,090,000
------------------------------------------------------
4,000,000 Butler County, PA IDA Weekly VRDNs (Mine Safety
Appliances Co.)/(Sanwa Bank Ltd, Osaka LOC) P-1 4,000,000
------------------------------------------------------
1,000,000 Butler County, PA IDA, (Series 1992B) Weekly VRDNs
(Mine Safety Appliances Co.)/(Sanwa Bank Ltd, Osaka
LOC) P-1 1,000,000
------------------------------------------------------
2,435,000 Butler County, PA IDA, Variable Rate IDRB (Series
1994) Weekly VRDNs (Lue-Rich Holding Company, Inc.
Project)/(ABN AMRO Bank N.V., Amsterdam LOC) A-1+ 2,435,000
------------------------------------------------------
700,000 Cambria County, PA IDA Weekly VRDNs (Cambria
Cogeneration)/(Fuji Bank, Ltd., Tokyo LOC) A-1 700,000
------------------------------------------------------
1,900,000 Carbon County, PA IDA Weekly VRDNs (Summit Management
& Utilities, Inc.)/(PNC Bank, N.A. LOC) A-1 1,900,000
------------------------------------------------------
5,000,000 Carbon County, PA IDA, 3.90% CP (Panther Creek)/
(National Westminster Bank, PLC, London LOC),
Mandatory Tender 1/18/1996 A-1+ 5,000,000
------------------------------------------------------
2,620,000 Carbon County, PA IDA, Resource Recovery Bonds, 3.80%
CP (Panther Creek)/(National Westminster Bank, PLC,
London LOC), Mandatory Tender 11/17/1995 A-1+ 2,620,000
------------------------------------------------------
6,825,000 Carbon County, PA IDA, Resource Recovery Bonds, 3.85%
CP (Panther Creek)/(National Westminster Bank, PLC,
London LOC), Mandatory Tender 1/25/1996 A-1+ 6,825,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 1,545,000 Carbon County, PA IDA, Resource Recovery Bonds, 3.90%
CP (Panther Creek)/(National Westminster Bank, PLC,
London LOC), Mandatory Tender 1/16/1996 A-1+ $ 1,545,000
------------------------------------------------------
5,000,000 Carbon County, PA IDA, Solid Waste Disposal Revenue
Notes (Series 1995A), 4.00% RANs (Horsehead Resource
Development, Inc.)/(Chemical Bank, New York LOC),
12/1/1995 P-1 5,000,000
------------------------------------------------------
7,300,000 Clearfield County, PA IDA Weekly VRDNs (Penn Traffic
Co.)/(ABN AMRO Bank N.V., Amsterdam LOC) P-1 7,300,000
------------------------------------------------------
3,305,000 Clinton County, PA Municipal Authority, (Series A)
Weekly VRDNs (Lock Haven Hospital)/(Mellon Bank NA,
Pittsburgh LOC) P-1 3,305,000
------------------------------------------------------
3,000,000 Clinton County, PA, IDA Weekly VRDNs (Armstrong World
Industries, Inc.)/(Mellon Bank NA, Pittsburgh LOC) P-1 3,000,000
------------------------------------------------------
17,000,000 Commonwealth of Pennsylvania, (First Series of
1995-1996), 4.50% TANs, 6/28/1996 SP-1+ 17,079,453
------------------------------------------------------
1,600,000 Cumberland County, PA IDA, Variable Rate Demand/ Fixed
Industrial Development Bonds (Series 1994) Weekly
VRDNs (Lane Enterprises, Inc. Project)/(Meridian Bank,
Reading, PA LOC) P-1 1,600,000
------------------------------------------------------
3,900,000 East Hempfield Township, PA IDA, (Series 1985) Weekly
VRDNs (Yellow Freight System)/(Wachovia Bank of NC,
NA, Winston-Salem LOC) A-1 3,900,000
------------------------------------------------------
7,300,000 Erie County, PA Hospital Authority Weekly VRDNs (St.
Vincent Health System)/(Fuji Bank, Ltd., Tokyo LOC) A-1 7,300,000
------------------------------------------------------
500,000 Erie County, PA IDA Weekly VRDNs (P.H.B. Project)/
(PNC Bank, N.A. LOC) P-1 500,000
------------------------------------------------------
425,000 Erie County, PA IDA, (Series 1985) Weekly VRDNs (R.
P-C Value, Inc.)/(PNC Bank, N.A. LOC) P-1 425,000
------------------------------------------------------
600,000 Erie County, PA IDA, (Series B) Weekly VRDNs (P.H.B.
Project)/(PNC Bank, N.A. LOC) P-1 600,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 1,665,000 Erie County, PA IDA, Multi Mode Revenue Refunding
Bonds Weekly VRDNs (Corry Manor, Inc.)/(PNC Bank, N.A.
LOC) A-1 $ 1,665,000
------------------------------------------------------
500,000 Forest County, PA IDA Weekly VRDNs (Industrial Timber
& Land Co.)/(National City Bank, Cleveland, OH LOC) P-1 500,000
------------------------------------------------------
1,280,000 Forest County, PA IDA Weekly VRDNs (Marienville Health
Care Facility)/(PNC Bank, N.A. LOC) P-1 1,280,000
------------------------------------------------------
1,800,000 Franklin County, PA IDA Weekly VRDNs (The Guarriello
Limited Partnership)/(PNC Bank, N.A. LOC) P-1 1,800,000
------------------------------------------------------
2,800,000 Lackawanna County, PA IDA, (Series 1992) Weekly VRDNs
(Hem Project)/(Corestates Bank N.A., Philadelphia, PA
LOC) P-1 2,800,000
------------------------------------------------------
2,350,000 Lancaster, PA Higher Education Authority, College
Revenue Bonds (Series 1995) Weekly VRDNs (Franklin and
Marshall College Project) VMIG1 2,350,000
------------------------------------------------------
2,356,092 Lawrence County, PA IDA, (Series 1989A) Weekly VRDNs
(Ellwood Uddeholm Steel Co.)/(Society National Bank,
Cleveland, OH LOC) P-1 2,356,092
------------------------------------------------------
3,100,000 Lehigh County, PA IDA, (Series 1989A) Weekly VRDNs
(Hershey Pizza Co., Inc.)/(PNC Bank, N.A. LOC) A-1 3,100,000
------------------------------------------------------
1,000,000 Lehigh County, PA, General Purpose Authority Revenue
Bonds (Series 1990) Weekly VRDNs (Phoebe Terrace,
Inc.)/(Meridian Bank, Reading, PA LOC) P-1 1,000,000
------------------------------------------------------
3,300,000 Lehigh County, PA, IDA Weekly VRDNs (Cedar Crest
College)/(PNC Bank, N.A. LOC) A-1 3,300,000
------------------------------------------------------
1,005,000 McKean County, PA IDA, Multi-Mode Revenue Refunding
Bonds Weekly VRDNs (Bradford Manor, Inc.)/(PNC Bank,
N.A. LOC) A-1 1,005,000
------------------------------------------------------
3,300,000 Monroe County, PA IDA, PCR Weekly VRDNs (Cooper
Industries, Inc.)/(Sanwa Bank Ltd, Osaka LOC) A-1 3,300,000
------------------------------------------------------
2,600,000 Montgomery County, PA IDA, (Series 1984) Weekly VRDNs
(General Signal Corp.)/(Morgan Guaranty Trust Co., New
York LOC) P-1 2,600,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 3,500,000 Montgomery County, PA IDA, (Series 1984) Weekly VRDNs
(Seton Co.)/(Banque Paribas, Paris LOC) A-1 $ 3,500,000
------------------------------------------------------
1,300,000 Montgomery County, PA IDA, (Series 1992) Weekly VRDNs
(RJI Limited Partnership)/(Meridian Bank, Reading, PA
LOC) VMIG1 1,300,000
------------------------------------------------------
2,800,000 Montgomery County, PA IDA, (Series 84) Weekly VRDNs
(Thomas & Betts Corp.)/(Wachovia Bank of NC, NA,
Winston-Salem LOC) P-1 2,800,000
------------------------------------------------------
6,980,000 Montgomery County, PA IDA, Commercial Development
Revenue Bonds (Series 1992) Weekly VRDNs (Hickory
Pointe Project)/(First Fidelity Bank, NA, New Jersey
LOC) P-1 6,980,000
------------------------------------------------------
5,075,000 Moon Township, PA IDA Weekly VRDNs (Airport Hotel
Associates)/(ABN AMRO Bank N.V., Amsterdam LOC) A-1+ 5,075,000
------------------------------------------------------
5,000,000 North Lebanon Township, PA, Municipal Authority
Mortgage Weekly VRDNs (Grace Community, Inc.)/
(Meridian Bank, Reading, PA LOC) VMIG1 5,000,000
------------------------------------------------------
9,000,000 Northampton County, PA IDA, 3.85% CP (Citizens
Utilities Co.), Mandatory Tender 11/9/1995 A-1+ 9,000,000
------------------------------------------------------
2,000,000 Northampton County, PA IDA, 3.90% CP (Citizens
Utilities Co.), Mandatory Tender 12/14/1995 A-1+ 2,000,000
------------------------------------------------------
1,590,000 Northumberland County PA IDA, Variable Rate Demand/
Fixed Rate Revenue Bonds (Series A of 1995) Weekly
VRDNs (Furman Farms, Inc. Project)/(Meridian Bank,
Reading, PA LOC) P-1 1,590,000
------------------------------------------------------
1,875,000 Pennsylvania Education Development Authority Weekly
VRDNs (Cyrogenics, Inc.)/(PNC Bank, N.A. LOC) A-1 1,875,000
------------------------------------------------------
3,300,000 Pennsylvania Education Development Authority Weekly
VRDNs (Industrial Scientific Corp.)/(Mellon Bank NA,
Pittsburgh LOC) P-1 3,300,000
------------------------------------------------------
750,000 Pennsylvania Education Development Authority Weekly
VRDNs (Pioneer Fluid)/(PNC Bank, N.A. LOC) A-1 750,000
------------------------------------------------------
675,000 Pennsylvania Education Development Authority Weekly
VRDNs (RMF Associates)/(PNC Bank, N.A. LOC) P-1 675,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 900,000 Pennsylvania Education Development Authority Weekly
VRDNs (Reace Associates)/(PNC Bank, N.A. LOC) A-1 $ 900,000
------------------------------------------------------
4,400,000 Pennsylvania Education Development Authority Weekly
VRDNs (Walnut And Craig)/(PNC Bank, N.A. LOC) P-1 4,400,000
------------------------------------------------------
500,000 Pennsylvania Education Development Authority, (Series
B) Weekly VRDNs (Payne Printing Co.)/ (PNC Bank, N.A.
LOC) A-1 500,000
------------------------------------------------------
1,300,000 Pennsylvania Education Development Authority, Revenue
Bonds (Series G4) Weekly VRDNs (Metamora Products)/
(PNC Bank, N.A. LOC) A-1 1,300,000
------------------------------------------------------
325,000 Pennsylvania Education Development Authority, Revenue
Bonds Weekly VRDNs (DDI Pharmaceuticals, Inc.)/ (PNC
Bank, N.A. LOC) A-1 325,000
------------------------------------------------------
625,000 Pennsylvania Education Development Authority, Revenue
Bonds Weekly VRDNs (RAM Forest Products)/ (PNC Bank,
N.A. LOC) A-1 625,000
------------------------------------------------------
6,915,000 Pennsylvania Housing Finance Authority, 3.90% TOBs
(First National Bank of Chicago LIQ), Optional Tender
4/1/1996 NR(2) 6,915,000
------------------------------------------------------
980,000 Pennsylvania Housing Finance Authority, Section 8
Assisted Residential Development Refunding Bonds
(Series 1992A) Weekly VRDNs (CGIC INS)/(Citibank NA,
New York LIQ) NR(1) 980,000
------------------------------------------------------
2,420,000 Pennsylvania Housing Finance Authority, Tender Option
Bonds/Single Family Housing (Series O), 4.875% TOBs
(Meridian Bank, Reading, PA LIQ), Optional Tender
4/1/1996 NR(2) 2,420,000
------------------------------------------------------
3,190,000 Pennsylvania State Higher Education Assistance Agency,
4.50% TOBs (Carnegie-Mellon University), Optional
Tender 5/1/1996 A-1 3,190,000
------------------------------------------------------
9,405,000 Pennsylvania State Higher Education Facilities
Authority, 4.20% TOBs (Carnegie-Mellon University),
Optional Tender 11/1/1995 A-1 9,405,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 1,945,000 Pennsylvania State Higher Education Facilities
Authority, College & University Revenues/Drexel
University, 7.70% Bonds (United States Treasury PRF),
11/1/1995 (@102) Aaa $ 1,983,900
------------------------------------------------------
3,100,000 Pennsylvania State University, Series 1995 Notes,
5.25% BANs, 4/5/1996 MIG1 3,110,758
------------------------------------------------------
9,000,000 Philadelphia Redevelopment Authority, Multi-Family
Revenue Bonds (Series 1985) Weekly VRDNs (Franklin
Town Towers)/(Marine Midland Bank N.A., Buffalo, NY
LOC) P-2 9,000,000
------------------------------------------------------
7,440,000 Philadelphia, PA IDA, (Series 93) Weekly VRDNs
(Sackett Development)/(Mellon Bank NA, Pittsburgh LOC) A1 7,440,000
------------------------------------------------------
7,000,000 Philadelphia, PA IDA, 4.25% TOBs (Suite Hotel)/(First
National Bank of Boston, MA LOC), Optional Tender
6/1/1996 P-1 7,000,000
------------------------------------------------------
3,700,000 Philadelphia, PA IDA, Commercial Development Revenue
Bonds (Series A), 4.00% TOBs (Economy Inn)/ (First
National Bank of Boston, MA LOC), Optional Tender
7/1/1996 P-1 3,700,000
------------------------------------------------------
1,700,000 Philadelphia, PA IDA, Commercial Development Revenue
Bonds (Series B), 4.00% TOBs (Economy Inn)/(First
National Bank of Boston, MA LOC), Optional Tender
7/1/1996 A-2 1,700,000
------------------------------------------------------
5,500,000 Philadelphia, PA, (Series A), 4.50% TRANs, 6/27/1996 SP-1 5,517,306
------------------------------------------------------
4,000,000 Philadelphia, PA, GO (Series 1990), 3.85% CP (Fuji
Bank, Ltd., Tokyo LOC), Mandatory Tender 11/16/1995 VMIG1 4,000,000
------------------------------------------------------
4,010,000 Philadelphia, PA, GO (Series 1990), 4.00% CP (Fuji
Bank, Ltd., Tokyo LOC), Mandatory Tender 11/6/1995 Aa3 4,010,000
------------------------------------------------------
5,000,000 Port Authority of Allegheny County, PA, (Series
1995A), 3.875% GANs (PNC Bank, N.A. LOC), 6/28/1996 NR(3) 5,000,000
------------------------------------------------------
2,320,000 Sayre, PA, Health Care Facilities Authority Weekly
VRDNs (VHA of Pennsylvania)/(AMBAC INS)/(First
National Bank of Chicago LIQ) A-1 2,320,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 4,000,000 Temple University, Commonwealth System of Higher
Education University Funding Obligations (Series
1995), 5.00% BANs, 5/22/1996 SP-1+ $ 4,014,883
------------------------------------------------------
3,824,000 Upper Darby School District, PA, 4.13% TRANs,
6/28/1996 NR(3) 3,825,432
------------------------------------------------------
1,550,000 Venango, PA IDA, (Series A), 3.95% CP (Scrubgrass
Power Corp.)/(National Westminster Bank, PLC, London
LOC), Mandatory Tender 1/10/1996 A-1+ 1,550,000
------------------------------------------------------
4,000,000 Venango, PA IDA, Resource Recovery Bonds
(Series 1993), 3.80% CP (Scrubgrass Power Corp.)/
(National Westminster Bank, PLC, London LOC),
Mandatory Tender 11/13/1995 A-1+ 4,000,000
------------------------------------------------------
2,100,000 Venango, PA IDA, Resource Recovery Bonds
(Series 1993), 3.95% CP (Scrubgrass Power Corp.)/
(National Westminster Bank, PLC, London LOC),
Mandatory Tender 1/26/1996 A-1+ 2,100,000
------------------------------------------------------
870,000 Washington County, PA Hospital Authority, (Series
1990) Weekly VRDNs (Mac Plastics, Inc.)/(National City
Bank, Cleveland, OH LOC) AA 870,000
------------------------------------------------------
5,700,000 Washington County, PA Municipal Authority Facilities,
(Series 1985A) Weekly VRDNs (1985-A Pooled Equipment
Lease Program)/(Sanwa Bank Ltd, Osaka LOC) VMIG1 5,700,000
------------------------------------------------------
1,350,000 Washington County, PA, IDA (Series 1988) Weekly VRDNs
(Coca-Cola Co.)/(Mellon Bank NA, Pittsburgh LOC) P-1 1,350,000
------------------------------------------------------
1,100,000 West Cornwall Township, PA Municipal Authority,
Revenue Bonds (Series 1995) Weekly VRDNs (Lebanon
Valley Brethern Home Project (PA))/(Meridian Bank,
Reading, PA LOC) P-1 1,100,000
------------------------------------------------------
1,418,000 West York Area School District, PA, Tax & Revenue
Anticipation Notes (Series 1995), 4.26% TRANs,
6/28/1996 NR(3) 1,418,711
------------------------------------------------------
2,588,850 Woodland Hills School District, PA, 4.21% TRANs,
6/28/1996 NR 2,589,819
------------------------------------------------------ ------------
Total 304,856,354
------------------------------------------------------ ------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PUERTO RICO--0.2%
------------------------------------------------------
$ 600,000 Puerto Rico Government Development Bank Weekly VRDNs
(Credit Suisse, Zurich LOC) A-1+ $ 600,000
------------------------------------------------------ ------------
TOTAL INVESTMENTS, AT AMORTIZED COST(A) $305,456,354
------------------------------------------------------ ------------
</TABLE>
Securities that are subject to the Alternative Minimum Tax represent 56.5% of
the portfolio as calculated based upon total portfolio market value.
(a) Also represents cost for federal tax purposes.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($307,191,765) at October 31, 1995.
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronym(s) are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
BANs -- Bond Anticipation Notes
CGIC -- Capital Guaranty Insurance Corporation
CP -- Commercial Paper
GANs -- Grant Anticipation Notes
GO -- General Obligation
HDA -- Hospital Development Authority
IDA -- Industrial Development Authority
IDRB -- Industrial Development Revenue Bond
INS -- Insured
LIQ -- Liquidity Agreement
LOC -- Letter of Credit
PCR -- Pollution Control Revenue
PLC -- Public Limited Company
PRF -- Prerefunded
RANs -- Revenue Anticipation Notes
TANs -- Tax Anticipation Notes
TOBs -- Tender Option Bonds
TRANs -- Tax and Revenue Anticipation Notes
VHA -- Veterans Housing Administration
VRDNs -- Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Investments in securities, at amortized cost and value $305,456,354
- -------------------------------------------------------------------------------
Cash 302,320
- -------------------------------------------------------------------------------
Income receivable 2,170,862
- -------------------------------------------------------------------------------
Receivable for shares sold 2,272
- ------------------------------------------------------------------------------- ------------
Total assets 307,931,808
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Payable for shares redeemed 1,505
- --------------------------------------------------------------------
Income distribution payable 634,420
- --------------------------------------------------------------------
Accrued expenses 104,118
- -------------------------------------------------------------------- --------
Total liabilities 740,043
- ------------------------------------------------------------------------------- ------------
NET ASSETS for 307,191,765 shares outstanding $307,191,765
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES:
- -------------------------------------------------------------------------------
$276,407,484 / 276,407,484 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
CASH SERIES SHARES:
- -------------------------------------------------------------------------------
$28,255,264 / 28,255,264 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
INSTITUTIONAL SHARES:
- -------------------------------------------------------------------------------
$2,529,017 / 2,529,017 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest $11,660,838
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $1,445,400
- ------------------------------------------------------------------
Administrative personnel and services fee 218,834
- ------------------------------------------------------------------
Custodian fees 54,452
- ------------------------------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 51,317
- ------------------------------------------------------------------
Directors'/Trustees' fees 1,626
- ------------------------------------------------------------------
Auditing fees 14,983
- ------------------------------------------------------------------
Legal fees 3,910
- ------------------------------------------------------------------
Portfolio accounting fees 67,074
- ------------------------------------------------------------------
Distribution services fee--Cash Series Shares 96,501
- ------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 661,792
- ------------------------------------------------------------------
Shareholder services fee--Cash Series Shares 60,313
- ------------------------------------------------------------------
Shareholder services fee--Institutional Shares 596
- ------------------------------------------------------------------
Share registration costs 42,662
- ------------------------------------------------------------------
Printing and postage 15,292
- ------------------------------------------------------------------
Insurance premiums 6,469
- ------------------------------------------------------------------
Miscellaneous 5,970
- ------------------------------------------------------------------ ----------
Total expenses 2,747,191
- ------------------------------------------------------------------
Waivers--
- ------------------------------------------------------------------
Waiver of investment advisory fee $(222,841)
- ------------------------------------------------------
Waiver of distribution services fee--Cash Series
Shares (44,624)
- ------------------------------------------------------
Waiver of shareholder services fee--Institutional
Service Shares (496,060)
- ------------------------------------------------------
Waiver of shareholder services fee--Cash Series
Shares (1,766)
- ------------------------------------------------------
Waiver of shareholder services fee--Institutional
Shares (596)
- ------------------------------------------------------ ---------
Total waivers (765,887)
- ------------------------------------------------------------------ ----------
Net expenses 1,981,304
- ------------------------------------------------------------------ -----------
Net investment income $ 9,679,534
- --------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------
Net investment income $ 9,679,534 $ 6,997,846
- ------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------
Distributions from net investment income
- -------------------------------------------------------------
Institutional Service Shares (8,951,830) (6,625,711)
- -------------------------------------------------------------
Cash Series Shares (718,640) (372,135)
- -------------------------------------------------------------
Institutional Shares (9,064) 0
- ------------------------------------------------------------- ------------- -------------
Change in net assets resulting from distributions to
shareholders (9,679,534) (6,997,846)
- ------------------------------------------------------------- ------------- -------------
SHARE TRANSACTIONS--
- -------------------------------------------------------------
Proceeds from sale of shares 1,028,950,579 800,515,592
- -------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of distributions declared 2,339,163 1,321,124
- -------------------------------------------------------------
Cost of shares redeemed (971,610,388) (891,403,705)
- ------------------------------------------------------------- ------------- -------------
Change in net assets resulting from share transactions 59,679,354 (89,566,989)
- ------------------------------------------------------------- ------------- -------------
Change in net assets 59,679,354 (89,566,989)
- -------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------
Beginning of period 247,512,411 337,079,400
- ------------------------------------------------------------- ------------- -------------
End of period $ 307,191,765 $ 247,512,411
- ------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Pennsylvania
Municipal Cash Trust (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The Fund offers three classes of shares: Institutional Service Shares,
Cash Series Shares and Institutional Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
75.5% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
supported (backed) by a letter of credit for any one institution or agency
does not exceed 11.7% of total investments.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $307,191,765.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
INSTITUTIONAL SERVICE SHARES 1995 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 940,400,092 749,671,233
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 1,631,397 937,173
- ---------------------------------------------------------------
Shares redeemed (894,784,261) (839,966,777)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Institutional Service share
transactions 47,247,228 (89,358,371)
- --------------------------------------------------------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
CASH SERIES SHARES 1995 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 85,377,025 50,844,359
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 705,513 383,951
- ---------------------------------------------------------------
Shares redeemed (76,179,429) (51,436,928)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Cash Series share transactions 9,903,109 (208,618)
- --------------------------------------------------------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
INSTITUTIONAL SHARES 1995(A) 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 3,173,462 0
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 2,253 0
- ---------------------------------------------------------------
Shares redeemed (646,698) 0
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Institutional share transactions 2,529,017 0
- --------------------------------------------------------------- ------------ ------------
Net change resulting from share transactions 59,679,354 (89,566,989)
- --------------------------------------------------------------- ------------ ------------
</TABLE>
(a) For the period from August 23, 1995 (date of initial public investment) to
October 31, 1995.
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's Cash Series shares. The Plan provides that the Fund may incur
distribution expenses up to .40 of 1% of the average daily net assets of the
Cash Series Shares, annually to compensate FSC.
The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS,") the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive a portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion. For the fiscal year
ended October 31, 1995, the Institutional Shares fully waived its shareholder
services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the Fund.
This fee is based on the size, type, and number of accounts and transactions
made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common Officers. These
transactions were made at current market value pursuant to Rule 17a-7 under the
Act amounting to $488,240,000 and $437,690,000 respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Pennsylvania Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of
Pennsylvania Municipal Cash Trust (an investment portfolio of Federated
Municipal Trust, a Massachusetts business trust), including the schedule of
portfolio investments, as of October 31, 1995, the related statement of
operations for the year then ended, and the statement of changes in net assets
for each of the two years in the period then ended and the financial highlights
(see pages 2, 16 and 17 of the prospectus) for the periods presented. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pennsylvania Municipal Cash Trust (an investment portfolio of Federated
Municipal Trust) as of October 31, 1995, the results of its operations for the
year then ended, and the changes in its net assets for each of the two years in
the period then ended and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Pennsylvania Municipal Cash Trust
Institutional Service Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- -------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL
CASH TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated December 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229204
9101005A-SS (12/95)
PENNSYLVANIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares of Pennsylvania Municipal Cash Trust (the "Fund")
offered by this prospectus represent interests in a non-diversified portfolio of
Federated Municipal Trust (the "Trust"), an open-end management investment
company (a mutual fund). The Fund invests primarily in short-term Pennsylvania
municipal securities, including securities of states, territories, and
possessions of the United States which are not issued by or on behalf of
Pennsylvania, or its political subdivisions and financing authorities, but which
provide income exempt from federal regular income tax and the personal income
taxes imposed by the Commonwealth of Pennsylvania consistent with stability of
principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Pennsylvania Municipal Securities 6
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Institutional Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 9
- ------------------------------------------------------
HOW TO REDEEM SHARES 10
- ------------------------------------------------------
ACCOUNT AND SHARE INFORMATION 11
- ------------------------------------------------------
TAX INFORMATION 12
- ------------------------------------------------------
Federal Income Tax 12
State and Local Taxes 13
OTHER CLASSES OF SHARES 13
- ------------------------------------------------------
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
CASH SERIES SHARES 15
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES 16
- ------------------------------------------------------
FINANCIAL STATEMENTS 17
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 34
- ------------------------------------------------------
ADDRESSES 35
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)..................................................... 0.28%
12b-1 Fee............................................................................. None
Total Other Expenses.................................................................. 0.17%
Shareholder Services Fee (after waiver) (2).................................. 0.00%
Total Operating Expenses (3)..................................................... 0.45%
</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 operating expenses in the table above are based on expenses
expected during the fiscal year ending October 31, 1996. The total operating
expenses were 0.45% for the fiscal year ended October 31, 1995 and would have
been 0.91% absent the voluntary waivers of a portion of the management fee and
the shareholder services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Institutional Shares of the
Fund will bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Fund Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- --------------------------------------------------------------------------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.
......................................................................... $5 $14
</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.
PENNSYLVANIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 34.
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1995(A)
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- ------------------------------------------------------------------------------
Net investment income 0.01
- ------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------
Distributions from net investment income (0.01)
- ------------------------------------------------------------------------------ ---------
NET ASSET VALUE, END OF PERIOD $1.00
- ------------------------------------------------------------------------------ ---------
TOTAL RETURN (B) 1.03%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 0.45%*
- ------------------------------------------------------------------------------
Net investment income 3.81%*
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.46%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $2,529
- ------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 23, 1995 (date of initial
public investment) to October 31, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established three classes of shares known as Institutional Shares, Institutional
Service Shares and Cash Series Shares. This prospectus relates only to
Institutional Shares of the Fund, which are designed primarily for financial
institutions acting in a fiduciary or agency capacity as a convenient means of
accumulating an interest in a professionally managed, non-diversified portfolio
investing primarily in short-term Pennsylvania municipal securities. The Fund
may not be a suitable investment for retirement plans or for non-Pennsylvania
taxpayers because it invests in municipal securities of that state. A minimum
initial investment of $25,000 within a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the personal income taxes imposed by the Commonwealth of
Pennsylvania consistent with stability of principal. This investment objective
cannot be changed without shareholder approval. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
complying with the various requirements of Rule 2a-7 under the Investment
Company Act of 1940 which regulates money market mutual funds and by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Pennsylvania municipal securities (as defined below) maturing in 13 months or
less. As a matter of investment policy, which cannot be changed without
shareholder approval, at least 80% of the Fund's annual interest income will be
exempt from federal regular income tax and Pennsylvania dividend and interest
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 Pennsylvania and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and Pennsylvania state income tax imposed
upon non-corporate taxpayers ("Pennsylvania Municipal Securities"). Examples of
Pennsylvania Municipal Securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Pennsylvania
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Pennsylvania Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; obligations issued or guaranteed by
the U.S. government, its agencies, or instrumentalities; instruments issued by a
U.S. branch of a domestic bank or other deposit institution having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment; and repurchase agreements (arrangements in which the organization
selling the Fund a temporary investment agrees at the time of sale to repurchase
it at a mutually agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain Pennsylvania
Municipal Securities is subject to the federal alternative minimum tax.
PENNSYLVANIA MUNICIPAL SECURITIES
Pennsylvania Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
Pennsylvania Municipal Securities include industrial development bonds issued by
or on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Pennsylvania Municipal Securities are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed by
the bond or other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or charge against the general revenues of
a municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Pennsylvania Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of Pennsylvania Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of Pennsylvania
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Pennsylvania Municipal Securities which are repayable out
of revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Pennsylvania Municipal Securities could involve an increased risk to the Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Pennsylvania Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result
in greater fluctuation in the total market value of the Fund's portfolio. Any
economic, political, or regulatory developments affecting the value of the
securities in the Fund's portfolio will have a greater impact on the total value
of the portfolio than would be the case if the portfolio were diversified among
more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge up to 15% of the value of total assets to secure such
borrowings.
The Fund will invest in securities for income earnings rather than trading for
profit. The Fund will not vary its investments, except subject to certain
conditions.
The above investment limitations cannot be changed without shareholder approval.
As a matter of nonfundamental policy, the Fund will not invest more than 10% of
its net assets in illiquid securities.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife,
and Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee
of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for Institutional Shares
of the Fund. It is a Pennsylvania corporation organized on November 14, 1969,
and is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to .25 of 1% of the average
daily net asset value of Institutional Shares, computed at an annual rate, to
obtain certain personal services for shareholders and provide maintenance of
shareholder accounts ("shareholder services"). From time to time and for such
periods as deemed appropriate, the amount stated above may be reduced
voluntarily.
Under the Shareholder Services Agreement, Federated Shareholder Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- --------------------- -----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Institutional Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
net asset value per share is determined by subtracting liabilities attributable
to shares from the value of Fund assets attributable to shares, 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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is open for business. Shares may be purchased either by wire or by
check. The Fund reserves the right to reject any purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone. The
minimum initial investment is $25,000. However, an account may be opened with a
smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
PURCHASING SHARES BY WIRE. Shares may be purchased by Federal Reserve wire by
calling the Fund before 1:00 p.m. (Eastern time) to place an order. The order is
considered received immediately. Payment by federal funds must be received
before 3:00 p.m. (Eastern time) that day. Federal funds should be wired as
follows: Federated Services Company, c/o State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: Pennsylvania Municipal Cash
Trust--Institutional Shares; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by mailing a check made
payable to Pennsylvania Municipal Cash Trust--Institutional Shares to: Federated
Services Company, P.O. Box 8600, Boston, MA 02266-8600. Orders by mail are
considered received when payment by check is converted into federal funds. This
is normally the next business day after the check is received.
SUBACCOUNTING SERVICES. Financial institutions are encouraged to open single
master accounts. A subaccounting system is available through the transfer agent
to minimize internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Financial
institutions may charge or pass through subaccounting fees as part of or in
addition to normal trust or agency account fees. They may also charge fees for
other services provided which may be related to the ownership of Fund shares.
This prospectus should, therefore, be read together with any agreement between
the customer and the financial institution with regard to the services provided,
the fees charged for those services, and any restrictions and limitations
imposed. State securities laws may require certain financial institutions such
as depository institutions to register as dealers.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Federated
Services Company receives the redemption request. Redemptions will be made on
days on which the Fund computes its net asset value. Redemption requests must be
received in proper form and can be made as described below.
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 p.m. (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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement.
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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
ACCOUNT AND SHARE 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. Shares purchased by
wire before 1:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by check begin earning dividends the day after the check is converted
into federal funds.
CAPITAL GAINS. The Fund does not expect to realize any capital gains or losses.
If capital gains or losses were to occur, they could result in an increase or
decrease in dividends. The Fund will distribute in cash or additional shares any
realized net long-term capital gains at least once every 12 months.
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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance
falls below a required minimum value of $25,000 due to shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
VOTING RIGHTS. Each shareholder has one vote in Trustee elections and other
matters submitted to shareholders for vote. All shares of all classes of each
portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting 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 December 4, 1995, BHC Securities Inc., Philadelphia, PA, owned 35.87% of
the voting securities of the Fund's Cash Series Shares and BB Securities Co.,
Blue Ball, PA, owned 33.30% of the voting securities of the Fund's Institutional
Shares, 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.
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
In the opinion of Houston, Houston & Donnelly, counsel to the Trust, Fund shares
may be subject to personal property taxes imposed by counties, municipalities,
and school districts in Pennsylvania to the extent that the portfolio securities
in the Fund would be subject to such taxes if owned directly by residents of
those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PENNSYLVANIA TAXES. The Fund received a ruling from the Commonwealth of
Pennsylvania Department of Revenue that interest derived by the Fund from
obligations free from state taxation in Pennsylvania is not taxable on
pass-through to Fund shareholders for purposes of Pennsylvania personal income
taxes. This was based on the existence of the Pennsylvania Investment
Restrictions (see "Investment Limitations"). However, legislation enacted in
December 1993, eliminates the necessity of the Pennsylvania Investment
Restrictions. This legislation also generally repeals the Pennsylvania personal
income tax exemption for gains from the sale of tax-exempt obligations,
including the exemption for distributions from the Fund to the extent that they
are derived from gains from tax-exempt obligations.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers other classes. Cash Series Shares are sold at net asset
value primarily to retail customers of financial institutions and are subject to
a minimum initial investment of $10,000 over a 90-day period; and Institutional
Service Shares are sold at net asset value primarily to financial institutions
acting in an agency capacity and are subject to a minimum initial investment of
$25,000 over a 90-day period.
All classes are subject to certain of the same expenses.
Cash Series Shares are distributed under a 12b-1 Plan adopted by the Fund and
also are subject to shareholder services fees.
Institutional Service Shares are distributed with no 12b-1 Plan but are subject
to shareholder services fees.
Expense differences between classes may affect the performance of each class.
To obtain more information and a prospectus for any other class, investors may
call 1-800-235-4669.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the shares' tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
PENNSYLVANIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 34.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------
1995 1994 1993 1992 1991(A)
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.03
- --------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------
Distributions from net
investment income (0.03) (0.02) (0.02) (0.03) (0.03)
- -------------------------------------------- ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------- ------ ------ ------ ------ ------
TOTAL RETURN (B) 3.02% 1.84% 1.83% 2.67% 3.55%
- --------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------
Expenses 1.05% 1.04% 0.97% 0.96% 0.78%*
- --------------------------------------------
Net investment income 2.98% 1.73% 1.88% 2.64% 3.92%*
- --------------------------------------------
Expense waiver/reimbursement (c) 0.28% 0.18% 0.12% 0.12% 0.28%*
- --------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------
Net assets, end of period (000 omitted) $28,255 $18,352 $18,561 $24,694 $19,846
- --------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from January 25, 1991 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 34.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------
1995 1994 1993 1992 1991 1990(A)
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.05 0.05
- -----------------------------------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (0.03) (0.02) (0.02) (0.03) (0.05) (0.05)
- ----------------------------------- ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------- ------ ------ ------ ------ ------ ------
TOTAL RETURN (B) 3.44% 2.25% 2.24% 3.08% 4.64% 5.78%
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 0.65% 0.64% 0.57% 0.56% 0.55% 0.50%*
- -----------------------------------
Net investment income 3.38% 2.19% 2.21% 3.04% 4.53% 5.56%*
- -----------------------------------
Expense waiver/reimbursement (c) 0.27% 0.02% 0.12% 0.12% 0.11% 0.18%*
- -----------------------------------
SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period (000
omitted) $276,407 $229,160 $318,518 $308,200 $317,165 $275,882
- -----------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from November 21, 1989 (date of initial
public investment) to October 31, 1990.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.4%
- ------------------------------------------------------------------------
PENNSYLVANIA--99.2%
------------------------------------------------------
$ 2,350,000 Allegheny County, PA HDA, (Series 1988A) Weekly VRDNs
(Allegheny Hospital)/(PNC Bank, N.A. LOC) VMIG1 $ 2,350,000
------------------------------------------------------
1,000,000 Allegheny County, PA IDA, (Series 1991) Weekly VRDNs
(Mine Safety Appliances Co.)/(Sanwa Bank Ltd, Osaka
LOC) P-1 1,000,000
------------------------------------------------------
1,500,000 Allegheny County, PA, IDA, (Series 1991B) Weekly VRDNs
(Shandon, Inc.)/(PNC Bank, N.A. LOC) P-1 1,500,000
------------------------------------------------------
6,500,000 Allegheny County, PA IDA, 4.75% CP (Duquesne Light
Power Co.)/(Barclays Bank PLC, London LOC), Mandatory
Tender 12/7/1995 A-1+ 6,500,000
------------------------------------------------------
4,975,000 Allegheny County, PA IDA, Adjustable Rate Commercial
Development Revenue Bonds (Series 1992) Weekly VRDNs
(Eleven Parkway Center Associates)/(Integra Bank,
Pittsburgh LOC) A-1 4,975,000
------------------------------------------------------
5,000,000 Allegheny County, PA IDA, PCR (Series 1992A), 3.75%
TOBs (Duquesne Light Power Co.)/(Canadian Imperial
Bank of Commerce, Toronto LOC), Optional Tender
11/30/1995 P-1 5,000,000
------------------------------------------------------
3,000,000 Beaver County, PA IDA, PCR Refunding Bonds (1992
Series-E), 3.85% CP (Toledo Edison Co.)/(Toronto-
Dominion Bank LOC), Mandatory Tender 3/6/1996 A1 3,000,000
------------------------------------------------------
1,260,000 Berks County, PA IDA Weekly VRDNs (ADC Quaker Maid
Meats)/(Meridian Bank, Reading, PA LOC) VMIG1 1,260,000
------------------------------------------------------
1,580,000 Berks County, PA IDA Weekly VRDNs (Beacon Container)/
(Corestates Bank N.A., Philadelphia, PA LOC) P-1 1,580,000
------------------------------------------------------
2,000,000 Berks County, PA IDA, (Series 1988) Weekly VRDNs
(Arrow Electronics, Inc.)/(Corestates Bank N.A.,
Philadelphia, PA LOC) P-1 2,000,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 2,000,000 Berks County, PA IDA, Variable Rate Demand/Fixed Rate
Mfg Facilities Revenue Bonds (Series 1995) Weekly
VRDNs (Grafika Commercial Printing, Inc.)/(Meridian
Bank, Reading, PA LOC) P-1 $ 2,000,000
------------------------------------------------------
2,000,000 Berks County, PA, (Series 1995), 5.20% TRANs,
12/31/1995 NR(3) 2,000,000
------------------------------------------------------
2,445,000 Bucks County, PA IDA Weekly VRDNs (Double H Plastics,
Inc.)/(Meridian Bank, Reading, PA LOC) VMIG1 2,445,000
------------------------------------------------------
2,960,000 Bucks County, PA IDA Weekly VRDNs (Pennsylvania
Associates)/(Meridian Bank, Reading, PA LOC) P-1 2,960,000
------------------------------------------------------
5,090,000 Bucks County, PA IDA, (Series 1991) Weekly VRDNs
(Cabot Medical Corp.)/(Meridian Bank, Reading, PA LOC) VMIG1 5,090,000
------------------------------------------------------
4,000,000 Butler County, PA IDA Weekly VRDNs (Mine Safety
Appliances Co.)/(Sanwa Bank Ltd, Osaka LOC) P-1 4,000,000
------------------------------------------------------
1,000,000 Butler County, PA IDA, (Series 1992B) Weekly VRDNs
(Mine Safety Appliances Co.)/(Sanwa Bank Ltd, Osaka
LOC) P-1 1,000,000
------------------------------------------------------
2,435,000 Butler County, PA IDA, Variable Rate IDRB (Series
1994) Weekly VRDNs (Lue-Rich Holding Company, Inc.
Project)/(ABN AMRO Bank N.V., Amsterdam LOC) A-1+ 2,435,000
------------------------------------------------------
700,000 Cambria County, PA IDA Weekly VRDNs (Cambria
Cogeneration)/(Fuji Bank, Ltd., Tokyo LOC) A-1 700,000
------------------------------------------------------
1,900,000 Carbon County, PA IDA Weekly VRDNs (Summit Management
& Utilities, Inc.)/(PNC Bank, N.A. LOC) A-1 1,900,000
------------------------------------------------------
5,000,000 Carbon County, PA IDA, 3.90% CP (Panther Creek)/
(National Westminster Bank, PLC, London LOC),
Mandatory Tender 1/18/1996 A-1+ 5,000,000
------------------------------------------------------
2,620,000 Carbon County, PA IDA, Resource Recovery Bonds, 3.80%
CP (Panther Creek)/(National Westminster Bank, PLC,
London LOC), Mandatory Tender 11/17/1995 A-1+ 2,620,000
------------------------------------------------------
6,825,000 Carbon County, PA IDA, Resource Recovery Bonds, 3.85%
CP (Panther Creek)/(National Westminster Bank, PLC,
London LOC), Mandatory Tender 1/25/1996 A-1+ 6,825,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 1,545,000 Carbon County, PA IDA, Resource Recovery Bonds, 3.90%
CP (Panther Creek)/(National Westminster Bank, PLC,
London LOC), Mandatory Tender 1/16/1996 A-1+ $ 1,545,000
------------------------------------------------------
5,000,000 Carbon County, PA IDA, Solid Waste Disposal Revenue
Notes (Series 1995A), 4.00% RANs (Horsehead Resource
Development, Inc.)/(Chemical Bank, New York LOC),
12/1/1995 P-1 5,000,000
------------------------------------------------------
7,300,000 Clearfield County, PA IDA Weekly VRDNs (Penn Traffic
Co.)/(ABN AMRO Bank N.V., Amsterdam LOC) P-1 7,300,000
------------------------------------------------------
3,305,000 Clinton County, PA Municipal Authority, (Series A)
Weekly VRDNs (Lock Haven Hospital)/(Mellon Bank NA,
Pittsburgh LOC) P-1 3,305,000
------------------------------------------------------
3,000,000 Clinton County, PA, IDA Weekly VRDNs (Armstrong World
Industries, Inc.)/(Mellon Bank NA, Pittsburgh LOC) P-1 3,000,000
------------------------------------------------------
17,000,000 Commonwealth of Pennsylvania, (First Series of
1995-1996), 4.50% TANs, 6/28/1996 SP-1+ 17,079,453
------------------------------------------------------
1,600,000 Cumberland County, PA IDA, Variable Rate Demand/ Fixed
Industrial Development Bonds (Series 1994) Weekly
VRDNs (Lane Enterprises, Inc. Project)/(Meridian Bank,
Reading, PA LOC) P-1 1,600,000
------------------------------------------------------
3,900,000 East Hempfield Township, PA IDA, (Series 1985) Weekly
VRDNs (Yellow Freight System)/(Wachovia Bank of NC,
NA, Winston-Salem LOC) A-1 3,900,000
------------------------------------------------------
7,300,000 Erie County, PA Hospital Authority Weekly VRDNs (St.
Vincent Health System)/(Fuji Bank, Ltd., Tokyo LOC) A-1 7,300,000
------------------------------------------------------
500,000 Erie County, PA IDA Weekly VRDNs (P.H.B. Project)/
(PNC Bank, N.A. LOC) P-1 500,000
------------------------------------------------------
425,000 Erie County, PA IDA, (Series 1985) Weekly VRDNs (R.
P-C Value, Inc.)/(PNC Bank, N.A. LOC) P-1 425,000
------------------------------------------------------
600,000 Erie County, PA IDA, (Series B) Weekly VRDNs (P.H.B.
Project)/(PNC Bank, N.A. LOC) P-1 600,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 1,665,000 Erie County, PA IDA, Multi Mode Revenue Refunding
Bonds Weekly VRDNs (Corry Manor, Inc.)/(PNC Bank, N.A.
LOC) A-1 $ 1,665,000
------------------------------------------------------
500,000 Forest County, PA IDA Weekly VRDNs (Industrial Timber
& Land Co.)/(National City Bank, Cleveland, OH LOC) P-1 500,000
------------------------------------------------------
1,280,000 Forest County, PA IDA Weekly VRDNs (Marienville Health
Care Facility)/(PNC Bank, N.A. LOC) P-1 1,280,000
------------------------------------------------------
1,800,000 Franklin County, PA IDA Weekly VRDNs (The Guarriello
Limited Partnership)/(PNC Bank, N.A. LOC) P-1 1,800,000
------------------------------------------------------
2,800,000 Lackawanna County, PA IDA, (Series 1992) Weekly VRDNs
(Hem Project)/(Corestates Bank N.A., Philadelphia, PA
LOC) P-1 2,800,000
------------------------------------------------------
2,350,000 Lancaster, PA Higher Education Authority, College
Revenue Bonds (Series 1995) Weekly VRDNs (Franklin and
Marshall College Project) VMIG1 2,350,000
------------------------------------------------------
2,356,092 Lawrence County, PA IDA, (Series 1989A) Weekly VRDNs
(Ellwood Uddeholm Steel Co.)/(Society National Bank,
Cleveland, OH LOC) P-1 2,356,092
------------------------------------------------------
3,100,000 Lehigh County, PA IDA, (Series 1989A) Weekly VRDNs
(Hershey Pizza Co., Inc.)/(PNC Bank, N.A. LOC) A-1 3,100,000
------------------------------------------------------
1,000,000 Lehigh County, PA, General Purpose Authority Revenue
Bonds (Series 1990) Weekly VRDNs (Phoebe Terrace,
Inc.)/(Meridian Bank, Reading, PA LOC) P-1 1,000,000
------------------------------------------------------
3,300,000 Lehigh County, PA, IDA Weekly VRDNs (Cedar Crest
College)/(PNC Bank, N.A. LOC) A-1 3,300,000
------------------------------------------------------
1,005,000 McKean County, PA IDA, Multi-Mode Revenue Refunding
Bonds Weekly VRDNs (Bradford Manor, Inc.)/(PNC Bank,
N.A. LOC) A-1 1,005,000
------------------------------------------------------
3,300,000 Monroe County, PA IDA, PCR Weekly VRDNs (Cooper
Industries, Inc.)/(Sanwa Bank Ltd, Osaka LOC) A-1 3,300,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
<C> <C> <S> <C> <C>
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 2,600,000 Montgomery County, PA IDA, (Series 1984) Weekly VRDNs
(General Signal Corp.)/(Morgan Guaranty Trust Co., New
York LOC) P-1 $ 2,600,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 3,500,000 Montgomery County, PA IDA, (Series 1984) Weekly VRDNs
(Seton Co.)/(Banque Paribas, Paris LOC) A-1 $ 3,500,000
------------------------------------------------------
1,300,000 Montgomery County, PA IDA, (Series 1992) Weekly VRDNs
(RJI Limited Partnership)/(Meridian Bank, Reading, PA
LOC) VMIG1 1,300,000
------------------------------------------------------
2,800,000 Montgomery County, PA IDA, (Series 84) Weekly VRDNs
(Thomas & Betts Corp.)/(Wachovia Bank of NC, NA,
Winston-Salem LOC) P-1 2,800,000
------------------------------------------------------
6,980,000 Montgomery County, PA IDA, Commercial Development
Revenue Bonds (Series 1992) Weekly VRDNs (Hickory
Pointe Project)/(First Fidelity Bank, NA, New Jersey
LOC) P-1 6,980,000
------------------------------------------------------
5,075,000 Moon Township, PA IDA Weekly VRDNs (Airport Hotel
Associates)/(ABN AMRO Bank N.V., Amsterdam LOC) A-1+ 5,075,000
------------------------------------------------------
5,000,000 North Lebanon Township, PA, Municipal Authority
Mortgage Weekly VRDNs (Grace Community, Inc.)/
(Meridian Bank, Reading, PA LOC) VMIG1 5,000,000
------------------------------------------------------
9,000,000 Northampton County, PA IDA, 3.85% CP (Citizens
Utilities Co.), Mandatory Tender 11/9/1995 A-1+ 9,000,000
------------------------------------------------------
2,000,000 Northampton County, PA IDA, 3.90% CP (Citizens
Utilities Co.), Mandatory Tender 12/14/1995 A-1+ 2,000,000
------------------------------------------------------
1,590,000 Northumberland County PA IDA, Variable Rate Demand/
Fixed Rate Revenue Bonds (Series A of 1995) Weekly
VRDNs (Furman Farms, Inc. Project)/(Meridian Bank,
Reading, PA LOC) P-1 1,590,000
------------------------------------------------------
1,875,000 Pennsylvania Education Development Authority Weekly
VRDNs (Cyrogenics, Inc.)/(PNC Bank, N.A. LOC) A-1 1,875,000
------------------------------------------------------
3,300,000 Pennsylvania Education Development Authority Weekly
VRDNs (Industrial Scientific Corp.)/(Mellon Bank NA,
Pittsburgh LOC) P-1 3,300,000
------------------------------------------------------
750,000 Pennsylvania Education Development Authority Weekly
VRDNs (Pioneer Fluid)/(PNC Bank, N.A. LOC) A-1 750,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
<C> <C> <S> <C> <C>
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 675,000 Pennsylvania Education Development Authority Weekly
VRDNs (RMF Associates)/(PNC Bank, N.A. LOC) P-1 $ 675,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 900,000 Pennsylvania Education Development Authority Weekly
VRDNs (Reace Associates)/(PNC Bank, N.A. LOC) A-1 $ 900,000
------------------------------------------------------
4,400,000 Pennsylvania Education Development Authority Weekly
VRDNs (Walnut And Craig)/(PNC Bank, N.A. LOC) P-1 4,400,000
------------------------------------------------------
500,000 Pennsylvania Education Development Authority, (Series
B) Weekly VRDNs (Payne Printing Co.)/ (PNC Bank, N.A.
LOC) A-1 500,000
------------------------------------------------------
1,300,000 Pennsylvania Education Development Authority, Revenue
Bonds (Series G4) Weekly VRDNs (Metamora Products)/
(PNC Bank, N.A. LOC) A-1 1,300,000
------------------------------------------------------
325,000 Pennsylvania Education Development Authority, Revenue
Bonds Weekly VRDNs (DDI Pharmaceuticals, Inc.)/ (PNC
Bank, N.A. LOC) A-1 325,000
------------------------------------------------------
625,000 Pennsylvania Education Development Authority, Revenue
Bonds Weekly VRDNs (RAM Forest Products)/ (PNC Bank,
N.A. LOC) A-1 625,000
------------------------------------------------------
6,915,000 Pennsylvania Housing Finance Authority, 3.90% TOBs
(First National Bank of Chicago LIQ), Optional Tender
4/1/1996 NR(2) 6,915,000
------------------------------------------------------
980,000 Pennsylvania Housing Finance Authority, Section 8
Assisted Residential Development Refunding Bonds
(Series 1992A) Weekly VRDNs (CGIC INS)/(Citibank NA,
New York LIQ) NR(1) 980,000
------------------------------------------------------
2,420,000 Pennsylvania Housing Finance Authority, Tender Option
Bonds/Single Family Housing (Series O), 4.875% TOBs
(Meridian Bank, Reading, PA LIQ), Optional Tender
4/1/1996 NR(2) 2,420,000
------------------------------------------------------
3,190,000 Pennsylvania State Higher Education Assistance Agency,
4.50% TOBs (Carnegie-Mellon University), Optional
Tender 5/1/1996 A-1 3,190,000
------------------------------------------------------
9,405,000 Pennsylvania State Higher Education Facilities
Authority, 4.20% TOBs (Carnegie-Mellon University),
Optional Tender 11/1/1995 A-1 9,405,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 1,945,000 Pennsylvania State Higher Education Facilities
Authority, College & University Revenues/Drexel
University, 7.70% Bonds (United States Treasury PRF),
11/1/1995 (@102) Aaa $ 1,983,900
------------------------------------------------------
3,100,000 Pennsylvania State University, Series 1995 Notes,
5.25% BANs, 4/5/1996 MIG1 3,110,758
------------------------------------------------------
9,000,000 Philadelphia Redevelopment Authority, Multi-Family
Revenue Bonds (Series 1985) Weekly VRDNs (Franklin
Town Towers)/(Marine Midland Bank N.A., Buffalo, NY
LOC) P-2 9,000,000
------------------------------------------------------
7,440,000 Philadelphia, PA IDA, (Series 93) Weekly VRDNs
(Sackett Development)/(Mellon Bank NA, Pittsburgh LOC) A1 7,440,000
------------------------------------------------------
7,000,000 Philadelphia, PA IDA, 4.25% TOBs (Suite Hotel)/(First
National Bank of Boston, MA LOC), Optional Tender
6/1/1996 P-1 7,000,000
------------------------------------------------------
3,700,000 Philadelphia, PA IDA, Commercial Development Revenue
Bonds (Series A), 4.00% TOBs (Economy Inn)/ (First
National Bank of Boston, MA LOC), Optional Tender
7/1/1996 P-1 3,700,000
------------------------------------------------------
1,700,000 Philadelphia, PA IDA, Commercial Development Revenue
Bonds (Series B), 4.00% TOBs (Economy Inn)/(First
National Bank of Boston, MA LOC), Optional Tender
7/1/1996 A-2 1,700,000
------------------------------------------------------
5,500,000 Philadelphia, PA, (Series A), 4.50% TRANs, 6/27/1996 SP-1 5,517,306
------------------------------------------------------
4,000,000 Philadelphia, PA, GO (Series 1990), 3.85% CP (Fuji
Bank, Ltd., Tokyo LOC), Mandatory Tender 11/16/1995 VMIG1 4,000,000
------------------------------------------------------
4,010,000 Philadelphia, PA, GO (Series 1990), 4.00% CP (Fuji
Bank, Ltd., Tokyo LOC), Mandatory Tender 11/6/1995 Aa3 4,010,000
------------------------------------------------------
5,000,000 Port Authority of Allegheny County, PA, (Series
1995A), 3.875% GANs (PNC Bank, N.A. LOC), 6/28/1996 NR(3) 5,000,000
------------------------------------------------------
2,320,000 Sayre, PA, Health Care Facilities Authority Weekly
VRDNs (VHA of Pennsylvania)/(AMBAC INS)/(First
National Bank of Chicago LIQ) A-1 2,320,000
------------------------------------------------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
------------------------------------------------------
$ 4,000,000 Temple University, Commonwealth System of Higher
Education University Funding Obligations (Series
1995), 5.00% BANs, 5/22/1996 SP-1+ $ 4,014,883
------------------------------------------------------
3,824,000 Upper Darby School District, PA, 4.13% TRANs,
6/28/1996 NR(3) 3,825,432
------------------------------------------------------
1,550,000 Venango, PA IDA, (Series A), 3.95% CP (Scrubgrass
Power Corp.)/(National Westminster Bank, PLC, London
LOC), Mandatory Tender 1/10/1996 A-1+ 1,550,000
------------------------------------------------------
4,000,000 Venango, PA IDA, Resource Recovery Bonds
(Series 1993), 3.80% CP (Scrubgrass Power Corp.)/
(National Westminster Bank, PLC, London LOC),
Mandatory Tender 11/13/1995 A-1+ 4,000,000
------------------------------------------------------
2,100,000 Venango, PA IDA, Resource Recovery Bonds
(Series 1993), 3.95% CP (Scrubgrass Power Corp.)/
(National Westminster Bank, PLC, London LOC),
Mandatory Tender 1/26/1996 A-1+ 2,100,000
------------------------------------------------------
870,000 Washington County, PA Hospital Authority, (Series
1990) Weekly VRDNs (Mac Plastics, Inc.)/(National City
Bank, Cleveland, OH LOC) AA 870,000
------------------------------------------------------
5,700,000 Washington County, PA Municipal Authority Facilities,
(Series 1985A) Weekly VRDNs (1985-A Pooled Equipment
Lease Program)/(Sanwa Bank Ltd, Osaka LOC) VMIG1 5,700,000
------------------------------------------------------
1,350,000 Washington County, PA, IDA (Series 1988) Weekly VRDNs
(Coca-Cola Co.)/(Mellon Bank NA, Pittsburgh LOC) P-1 1,350,000
------------------------------------------------------
1,100,000 West Cornwall Township, PA Municipal Authority,
Revenue Bonds (Series 1995) Weekly VRDNs (Lebanon
Valley Brethern Home Project (PA))/(Meridian Bank,
Reading, PA LOC) P-1 1,100,000
------------------------------------------------------
1,418,000 West York Area School District, PA, Tax & Revenue
Anticipation Notes (Series 1995), 4.26% TRANs,
6/28/1996 NR(3) 1,418,711
------------------------------------------------------
2,588,850 Woodland Hills School District, PA, 4.21% TRANs,
6/28/1996 NR 2,589,819
------------------------------------------------------ ------------
Total 304,856,354
------------------------------------------------------ ------------
</TABLE>
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------ ---------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
PUERTO RICO--0.2%
------------------------------------------------------
$ 600,000 Puerto Rico Government Development Bank Weekly VRDNs
(Credit Suisse, Zurich LOC) A-1+ $ 600,000
------------------------------------------------------ ------------
TOTAL INVESTMENTS, AT AMORTIZED COST(A) $305,456,354
------------------------------------------------------ ------------
</TABLE>
Securities that are subject to the Alternative Minimum Tax represent 56.5% of
the portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($307,191,765) at October 31, 1995.
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronym(s) are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
BANs -- Bond Anticipation Notes
CGIC -- Capital Guaranty Insurance Corporation
CP -- Commercial Paper
GANs -- Grant Anticipation Notes
GO -- General Obligation
HDA -- Hospital Development Authority
IDA -- Industrial Development Authority
IDRB -- Industrial Development Revenue Bond
INS -- Insured
LIQ -- Liquidity Agreement
LOC -- Letter of Credit
PCR -- Pollution Control Revenue
PLC -- Public Limited Company
PRF -- Prerefunded
RANs -- Revenue Anticipation Notes
TANs -- Tax Anticipation Notes
TOBs -- Tender Option Bonds
TRANs -- Tax and Revenue Anticipation Notes
VHA -- Veterans Housing Administration
VRDNs -- Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Investments in securities, at amortized cost and value $305,456,354
- -------------------------------------------------------------------------------
Cash 302,320
- -------------------------------------------------------------------------------
Income receivable 2,170,862
- -------------------------------------------------------------------------------
Receivable for shares sold 2,272
- ------------------------------------------------------------------------------- ------------
Total assets 307,931,808
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Payable for shares redeemed 1,505
- --------------------------------------------------------------------
Income distribution payable 634,420
- --------------------------------------------------------------------
Accrued expenses 104,118
- -------------------------------------------------------------------- --------
Total liabilities 740,043
- ------------------------------------------------------------------------------- ------------
NET ASSETS for 307,191,765 shares outstanding $307,191,765
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES:
- -------------------------------------------------------------------------------
$276,407,484 / 276,407,484 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
CASH SERIES SHARES:
- -------------------------------------------------------------------------------
$28,255,264 / 28,255,264 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
INSTITUTIONAL SHARES:
- -------------------------------------------------------------------------------
$2,529,017 / 2,529,017 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------
Interest $11,660,838
- ---------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------
Investment advisory fee $1,445,400
- -----------------------------------------------------------------------
Administrative personnel and services fee 218,834
- -----------------------------------------------------------------------
Custodian fees 54,452
- -----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 51,317
- -----------------------------------------------------------------------
Directors'/Trustees' fees 1,626
- -----------------------------------------------------------------------
Auditing fees 14,983
- -----------------------------------------------------------------------
Legal fees 3,910
- -----------------------------------------------------------------------
Portfolio accounting fees 67,074
- -----------------------------------------------------------------------
Distribution services fee--Cash Series Shares 96,501
- -----------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 661,792
- -----------------------------------------------------------------------
Shareholder services fee--Cash Series Shares 60,313
- -----------------------------------------------------------------------
Shareholder services fee--Institutional Shares 596
- -----------------------------------------------------------------------
Share registration costs 42,662
- -----------------------------------------------------------------------
Printing and postage 15,292
- -----------------------------------------------------------------------
Insurance premiums 6,469
- -----------------------------------------------------------------------
Miscellaneous 5,970
- ----------------------------------------------------------------------- ----------
Total expenses 2,747,191
- -----------------------------------------------------------------------
Waivers--
- -----------------------------------------------------------------------
Waiver of investment advisory fee $(222,841)
- -----------------------------------------------------------
Waiver of distribution services fee--Cash Series Shares (44,624)
- -----------------------------------------------------------
Waiver of shareholder services fee--Institutional Service
Shares (496,060)
- -----------------------------------------------------------
Waiver of shareholder services fee--Cash Series Shares (1,766)
- -----------------------------------------------------------
Waiver of shareholder services fee--Institutional Shares (596)
- ----------------------------------------------------------- ---------
Total waivers (765,887)
- ----------------------------------------------------------------------- ----------
Net expenses 1,981,304
- --------------------------------------------------------------------------------------- -----------
Net investment income $ 9,679,534
- --------------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------
Net investment income $ 9,679,534 $ 6,997,846
- ------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------
Distributions from net investment income
- -------------------------------------------------------------
Institutional Service Shares (8,951,830) (6,625,711)
- -------------------------------------------------------------
Cash Series Shares (718,640) (372,135)
- -------------------------------------------------------------
Institutional Shares (9,064) 0
- ------------------------------------------------------------- ------------- -------------
Change in net assets resulting from distributions to
shareholders (9,679,534) (6,997,846)
- ------------------------------------------------------------- ------------- -------------
SHARE TRANSACTIONS--
- -------------------------------------------------------------
Proceeds from sale of shares 1,028,950,579 800,515,592
- -------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of distributions declared 2,339,163 1,321,124
- -------------------------------------------------------------
Cost of shares redeemed (971,610,388) (891,403,705)
- ------------------------------------------------------------- ------------- -------------
Change in net assets resulting from share transactions 59,679,354 (89,566,989)
- ------------------------------------------------------------- ------------- -------------
Change in net assets 59,679,354 (89,566,989)
- -------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------
Beginning of period 247,512,411 337,079,400
- ------------------------------------------------------------- ------------- -------------
End of period $ 307,191,765 $ 247,512,411
- ------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PENNSYLVANIA MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Pennsylvania
Municipal Cash Trust (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The Fund offers three classes of shares: Institutional Service Shares,
Cash Series Shares and Institutional Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
75.5% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
supported (backed) by a letter of credit for any one institution or agency
does not exceed 11.7% of total investments.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $307,191,765.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
INSTITUTIONAL SERVICE SHARES 1995 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 940,400,092 749,671,233
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 1,631,397 937,173
- ---------------------------------------------------------------
Shares redeemed (894,784,261) (839,966,777)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Institutional Service share
transactions 47,247,228 (89,358,371)
- --------------------------------------------------------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
CASH SERIES SHARES 1995 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 85,377,025 50,844,359
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 705,513 383,951
- ---------------------------------------------------------------
Shares redeemed (76,179,429) (51,436,928)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Cash Series share transactions 9,903,109 (208,618)
- --------------------------------------------------------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
INSTITUTIONAL SHARES 1995(A) 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 3,173,462 0
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 2,253 0
- ---------------------------------------------------------------
Shares redeemed (646,698) 0
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Institutional share transactions 2,529,017 0
- --------------------------------------------------------------- ------------ ------------
Net change resulting from share transactions 59,679,354 (89,566,989)
- --------------------------------------------------------------- ------------ ------------
</TABLE>
(a) For the period from August 23, 1995 (date of initial public investment) to
October 31, 1995.
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's Cash Series shares. The Plan provides that the Fund may incur
distribution expenses up to .40 of 1% of the average daily net assets of the
Cash Series Shares, annually to compensate FSC.
The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS,") the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive a portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion. For the fiscal year
ended October 31, 1995, the Institutional Shares fully waived its shareholder
services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the Fund.
This fee is based on the size, type, and number of accounts and transactions
made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
PENNSYLVANIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common Officers. These
transactions were made at current market value pursuant to Rule 17a-7 under the
Act amounting to $488,240,000 and $437,690,000 respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Pennsylvania Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of
Pennsylvania Municipal Cash
Trust (an investment portfolio of Federated Municipal Trust, a Massachusetts
business trust), including the schedule of portfolio investments, as of October
31, 1995, the related statement of operations for the year then ended, and the
statement of changes in net assets for each of the two years in the period then
ended and the financial highlights (see pages 2, 15 and 16 of the prospectus)
for the periods presented. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Pennsylvania Municipal Cash Trust (an investment portfolio of Federated
Municipal Trust) as of October 31, 1995, the results of its operations for the
year then ended, and the changes in its net assets for each of the two years in
the period then ended and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Pennsylvania Municipal Cash Trust
Institutional Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- -------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PENNSYLVANIA MUNICIPAL
CASH TRUST
INSTITUTIONAL SHARES
PROSPECTUS
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated December 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229717
G00214-01-IS (12/95)
(LOGO)
PENNSYLVANIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
CASH SERIES SHARES
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectuses of Pennsylvania Municipal Cash Trust (the "Fund"), a portfolio
of Federated Municipal Trust ( the "Trust") dated December 31, 1995. This
Statement is not a prospectus. You may request a copy of a prospectus or a
paper copy of this Statement, if you have received it electronically, free
of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated December 31, 1995
Federated Securities Corp.
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
INVESTMENT POLICIES 1
ACCEPTABLE INVESTMENTS 1
PARTICIPATION INTERESTS 1
MUNICIPAL LEASES 1
RATINGS 1
WHEN-ISSUED AND DELAYED DELIVERY
TRANSACTIONS 1
REPURCHASE AGREEMENTS 2
CREDIT ENHANCEMENT 2
PENNSYLVANIA INVESTMENT RISKS 2
INVESTMENT LIMITATIONS 2
FEDERATED MUNICIPAL TRUST MANAGEMENT
6
THE FUNDS 10
SHARE OWNERSHIP 11
TRUSTEES COMPENSATION 12
TRUSTEE LIABILITY 12
INVESTMENT ADVISORY SERVICES 13
INVESTMENT ADVISER 13
ADVISORY FEES 13
BROKERAGE TRANSACTIONS 13
OTHER SERVICES 14
FUND ADMINISTRATION 14
CUSTODIAN AND PORTFOLIO
RECORDKEEPER 14
TRANSFER AGENT 14
INDEPENDENT PUBLIC ACCOUNTANTS 14
DISTRIBUTION PLAN AND
SHAREHOLDER SERVICES AGREEMENT 14
DETERMINING NET ASSET VALUE 15
REDEMPTION IN KIND 15
MASSACHUSETTS PARTNERSHIP LAW 15
THE FUND'S TAX STATUS 15
PERFORMANCE INFORMATION 15
YIELD 16
EFFECTIVE YIELD 16
TAX-EQUIVALENT YIELD 16
TAX-EQUIVALENCY TABLE 17
TOTAL RETURN 17
PERFORMANCE COMPARISONS 18
ABOUT FEDERATED INVESTORS 18
MUTUAL FUND MARKET 18
INSTITUTIONAL CLIENTS 18
TRUST ORGANIZATIONS 18
BROKER/DEALERS AND BANK
BROKER/DEALER
SUBSIDIARIES 19
APPENDIX 20
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by the
Trustees without shareholder approval. Shareholders will be notified before
any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or any
guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation interests
include the right to demand payment from the issuers of those interests. By
purchasing participation interests having a seven day demand feature, the Fund
is buying a security meeting the maturity and quality requirements of the Fund
and also is receiving the tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments
by a governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the
appropriation for the lease. Furthermore, a lease may provide that the
participants cannot accelerate lease obligations upon default. The
participants would only be able to enforce lease payments as they became due.
In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Board of Trustees, will base its
determination on the following factors: whether the lease can be terminated by
the lessee; the potential recovery, if any, from a sale of the leased property
upon termination of the lease; the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and prospects);
the likelihood that the lessee will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to its
operations (e.g., the potential for an "event of non-appropriation"); and any
credit enhancement or legal recourse provided upon an event of non-
appropriation or other termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations ("NRSROs") or be of comparable quality to
securities having such ratings. An NRSRO's two highest rating categories are
determined without regard for sub-categories and gradations. For example,
securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Ratings Group
("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or
FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all
considered rated in one of the two highest short-term rating categories. The
Fund will follow applicable regulations in determining whether a security
rated by more than one NRSRO can be treated as being in one of the two highest
short-term rating categories; currently, such securities must be rated by two
NRSROs in one of their two highest rating categories. See "Regulatory
Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the
Fund`s records at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
brokers/dealers, and other recognized financial institutions sell securities
to the Fund and agree at the time of sale to repurchase them at a mutually
agreed upon time and price. To the extent that the seller does not repurchase
the securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. The Fund or its custodian will take
possession of the securities subject to repurchase agreements, and these
securities will be marked to market daily. In the event that a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of
the Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.
CREDIT ENHANCEMENT
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.
PENNSYLVANIA INVESTMENT RISKS
The Fund invests in obligations of Pennsylvania (the "Commonwealth") issuers
which result in the Fund's performance being subject to risks associated with
the overall conditions present within the Commonwealth. The following
information is a brief summary of the prevailing economic conditions and
general summary of the Commonwealth's financial condition. This information is
based on official statements relating to securities that are believed to be
reliable but should not be considered as a complete description of all
relevant information.
Pennsylvania's fiscal operations have greatly improved since the $1.1 billion
deficit in 1991. The Commonwealth completed fiscal 1995 with a $540 million
surplus, a $204 million increase from the previous year. Of the total 1995
surplus, $111 million was transferred to the Tax Stablization Reserve Fund or
"Rainy Day" Fund and $429 million was applied to the fiscal 1996 budgets. The
main themes of the 1996 operating budget are business tax cuts and controlled
social services spending. In addition, the Governor's budget hopes to build
up Pennsylvania's "Rainy Day" Fund to as much as 3% of expenditures in coming
years.
Pennsylvania's economic base is mature but substantial. However, the
Commonwealth's historical over-dependence upon manufacturing and mining
continues to leave it vulnerable to cyclical economic trends. Recent data
shows improvement in employment diversification, however, employment growth
still lags the nation. In addition, population growth, as in many industrial
states, has remained motionless.
The overall credit quality of the Commonwealth is further demonstrated by its
debt ratings. Pennsylvania maintains an A-1 rating by Moody's Investors
Service, Inc. that has been in effect since 1986. Standard & Poor's Ratings
Group rates the Commonwealth AA - ; this has remained since 1985.
The Fund's concentration in securities issued by the Commonwealth 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 Commonwealth or its municipalities to meet their obligations
will depend on the availability of tax and other revenues; economic,
political, and demographic conditions within the Commonwealth; and the
underlying fiscal condition of the Commonwealth, its counties, and its
municipalities.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for the
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money in amounts up to one-third of the value of its total assets, including
the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate management of
the portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while borrowings in
excess of 5% of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may pledge assets having a market
value not exceeding the lesser of the dollar amounts borrowed or 15% of the
value of total assets at the time of the pledge.
DIVERSIFICATION OF INVESTMENTS
At the close of each quarter of each fiscal year, no more than 25% of the
Fund's total assets will be invested in the securities of a single issuer,
but, with regard to at least 50% of the Fund's total assets, no more than 5%
of the Fund's total assets are to be invested in securities of a single
issuer.
Under this limitation, each governmental subdivision, including states,
territories, possessions of the United States, or their political
subdivisions, agencies, authorities, instrumentalities, or similar entities,
will be considered a separate issuer if its assets and revenues are separate
from those of the government body creating it and the security is backed only
by its own assets and revenues.
Industrial development bonds backed only by the assets and revenues of a
nongovernmental issuer are considered to be issued solely by that issuer. If
in the case of an industrial development bond or government-issued security, a
governmental or other entity guarantees the security, such guarantee would be
considered a separate security issued by the guarantor, as well as the other
issuer, subject to limited exclusions allowed by the Investment Company Act of
1940.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except that it may acquire publicly
or non publicly issued Pennsylvania municipal securities or temporary
investments or enter into repurchase agreements, in accordance with its
investment objective, policies and limitations.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its net assets in securities subject
to restrictions on resale under the Securities Act of 1933.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, 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.
PORTFOLIO TRADING
The Fund will invest in securities for income earnings rather than trading for
profit. The Fund will not vary its investments, except to: (i) eliminate
unsafe investments and investments not consistent with the preservation of the
capital or the tax status of the investments of the Fund; (ii) honor
redemption orders, meet anticipated redemption requirements, and negate gains
from discount purchases; (iii) maintain a constant net asset value per unit
pursuant to, and in compliance with, an order or rule of the United States
Securities and Exchange Commission; (iv) reinvest the earnings from securities
in like securities; or (v) defray normal administrative expenses (the
"Pennsylvania Investment Restrictions").
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, including repurchase agreements providing for settlement
in more than seven days after notice, and certain restricted securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies, except as
part of a merger, consolidation, or other acquisition.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers (including companies responsible for paying principal
and interest on industrial development bonds) which have records of less than
three years of continuous operations, including the operation of any
predecessor.
INVESTING FOR CONTROL
The Fund will not invest in securities of a company for the purpose of
exercising control or management.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
Officers and Trustees of the Trust or its investment adviser, owning
individually more than .50 of 1% of the issuer's securities, together own more
than 5% of the issuer's securities.
INVESTING IN OPTIONS
The Fund will not invest in puts, calls, straddles, spreads, or any
combination of them.
INVESTING IN MINERALS
The Fund will not purchase or sell interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase the
securities of issuers which invest in or sponsor such programs.
For purposes of the above limitations, the Fund considers instruments issued
by a U.S. branch of a domestic bank or savings and loan having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items." Except with respect to borrowing money, if a
percentage limitation is adhered to at the time of investment, a later
increase or decrease in percentage resulting from any change in value or net
assets will not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the
value of its net assets during the last fiscal year and has no present intent
to do so during the coming fiscal year.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940. In particular, the Fund
will comply with the various requirements of Rule 2a-7, 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 ability to participate in volume
transactions will be to the benefit of the Fund.
FEDERATED MUNICIPAL TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative
Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; founding Chairman, National Advisory
Council for Environmental Policy and Technology and Federal Emergency
Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global 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 of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Services Company; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice President,
Federated Shareholder Services; Vice President, Federated Administrative
Services; Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; President and
Trustee, Federated Shareholder Services; Director, Federated Securities Corp.;
Executive Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
THE FUNDS
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 3-5 Years; Federated U.S. Government Securities Fund: 5-10 Years; First
Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S.
Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility
Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc. - 1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; RIMCO Monument Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Targeted
Duration Trust; Tax-Free Instruments Trust; Trust for Financial Institutions;
Trust For Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; The Virtus Funds; World
Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees own less than 1% of the Trust`s outstanding shares.
As of December 4, 1995, the following shareholder(s) of record owned 5% or
more of the outstanding Cash Series Shares of the Fund: BHC Securities, Inc.,
Philadelphia, Pennsylvania, owned approximately 7,058,388 shares (35.87%).
As of December 4, 1995, the following shareholder(s) of record owned 5% or
more of the outstanding Institutional Service Shares of the Fund: Meridian
Asset Management, Reading, Pennsylvania, owned approximately 30,035,618 shares
(10.07%); ACO, Pittsburgh, Pennsylvania, owned approximately 18,367,433 shares
(6.16%); Keystone Financial, Inc., Altoona, Pennsylvania, owned approximately
28,420,134 shares (9.53%); Keystone Financial Inc., Altoona, Pennsylvania,
owned approximately 28,420,134 shares (9.53%); Anderson & Co., Philadelphia,
Pennsylvania, owned approximately 60,494,809 shares (20.28%); Saxon & Co.,
Philadelphia, Pennsylvania, owned approximately 17,034,070 shares (5.71%); and
Mellon Bank Capital Markets, Pittsburgh, Pennsylvania, owned approximately
15,973,393 shares (5.35%).
As of December 4, 1995, the following shareholder(s) of record owned 5% or
more of the outstanding Institutional Shares of the Fund: B B Securities, Blue
Ball, Pennsylvania, Pennsylvania, owned approximately 1,486,153 shares
(33.30%); Dickey & Co., Somerset, Pennsylvania, owned approximately 1,036,220
shares (23.22%); Boht & Company, Hanover, Pennsylvania, owned approximately
849,086 shares (19.03%); Kish Bank Asset Management, Reedsville, Pennsylvania,
owned approximately 286,622 shares (6.42%); and Douglas J. and Carol S.
MacPhail, Jt Wros, Sewickley, Pennsylvania, owned approximately 323, 455
shares (7.25%).
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION*# FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Fund and
Chairman and Director 68 other investment companies in the Fund
Complex
Thomas G. Bigley,$2,458 $20,688 for the Fund and
Director 49 other investment companies in the Fund Complex
John T. Conroy, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
William J. Copeland, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
James E. Dowd, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D., $3,266 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Edward L. Flaherty, Jr., $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Peter E. Madden, $2,757 $90,563 for the Fund and
Director 64 other investment companies in the Fund Complex
Gregor F. Meyer, $3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
John E. Murray, Jr., $1,762 $0 for the Fund and
Director 64 other investment companies in the Fund Complex
Wesley W. Posvar,$3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Marjorie P. Smuts, $3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of 15
portfolios.
+The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
INVESTMENT ADVISER
The Fund's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife and his
son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder of the
Fund for any losses that may be sustained in the purchase, holding, or sale of
any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus.
For the fiscal years ended October 31, 1995, 1994, and 1993, the adviser
earned $1,445,400, $1,617,472, and $1,740,351, respectively, of which
$222,841, $53,564, and $415,874, respectively, was voluntarily waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1-1/2% per
year of the remaining average net assets, the adviser will reimburse the
Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the adviser will generally use
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. The
adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to guidelines established by the Board of Trustees. The
adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services.
Research services provided by brokers and dealers may be used by the adviser
or its affiliates in advising the Trust and other accounts. To the extent that
receipt of these services may supplant services for which the adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage
and research services provided. During the fiscal years ended October 31,
1995, 1994, and 1993, 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.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated Administrative
Services, Inc., also a subsidiary of Federated Investors, served as the Fund's
Administrator. (For purposes of this Statement of Additional Information,
Federated Administrative Services and Federated Administrative Services, Inc.
may hereinafter collectively be referred to as the "Administrators".) For the
fiscal year ended October 31, 1995, the Administrators collectively earned
$218,834. For the fiscal years ended October 31, 1994 and 1993, Federated
Administrative Services, Inc. earned $274,571 and $338,801. 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.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT
With respect to Cash Series Shares, the Fund had adopted a Distribution Plan
pursuant to Rule 12b-1 which was promulgated by the Securities and Exchange
Commission pursuant to the Investment Company Act of 1940. Additionally, the
Fund has adopted a Shareholder Service Agreement with respect to Cash Series
Shares, Institutional Shares, and Institutional Service Shares.
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other personnel as necessary
or beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and
assisting clients in changing dividend options, account designations, and
addresses.
By adopting the Distribution Plan, the Trustees expect Cash Series Shares will
be able to achieve a more predictable flow of cash for investment purposes and
to meet redemptions. This will facilitate more efficient portfolio management
and assist the Fund in pursuing its investment objectives. By identifying
potential investors whose needs are served by the Fund's objectives, and
properly servicing these accounts, it may be possible to curb sharp
fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; and (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the fiscal year ended October 31, 1995, Cash Series Shares made payments
in the amount of $96,501 pursuant to the Distribution Plan, of which $44,624
was voluntarily waived. In addition, for this period, Cash Series Shares paid
Shareholder Services fees in the amount of $60,313, of which $1,766 was
volutarily waived.
For the fiscal period ended October 31, 1995, Institutional Shares paid
Shareholder Services fees in the amount of $596 of which $596 was
voluntarily waived.
For the fiscal period ended October 31, 1995, Institutional Service Shares
paid Shareholder Services fees in the amount of $661,792, of which $496,060
was voluntarily waived.
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.
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.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during
the year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers charge
fees in connection with services provided in conjunction with an investment in
shares of the Fund, the performance will be reduced for those shareholders
paying those fees.
YIELD
The Fund calculates its yield based upon the seven days ending on the day of
the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares; dividing the net change in
the account's value by the value of the account at the beginning of the base
period to determine the base period return; and multiplying the base period
return by 365/7.
For the seven-day period ended October 31, 1995, the yields for Cash Series
Shares, Institutional Shares, and Institutional Service Shares were 3.00%,
3.60%, and 3.40%, respectively.
EFFECTIVE YIELD
The Fund calculates its effective yield by compounding the unannualized base
period return by: adding 1 to the base period return; raising the sum to the
365/7th power; and subtracting 1 from the result.
For the seven-day period ended October 31, 1995, the effective yields for Cash
Series Shares, Institutional Shares, and Institutional Service Shares were
3.04%, 3.66%, and 3.46%, respectively.
TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Fund is calculated similarly to the yield but
is adjusted to reflect the taxable yield that the Fund would have had to earn
to equal its actual yield, assuming a 39.6% tax rate (the maximum effective
federal rate for individuals) and assuming that income is 100% exempt.
For the seven-day period ended October 31, 1995, the tax-equivalent yields for
Cash Series Shares, Institutional Shares, and Institutional Service Shares
were 4.99%, 5.96%, and 5.63%, respectively.
TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature. The
interest earned by the municipal securities in the Fund's portfolio generally
remains free from federal regular income tax,* and is often free from state
and local taxes as well. As the table below indicates, a "tax-free" investment
can be an attractive choice for investors, particularly in times of narrow
spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF PENNSYLVANIA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
17.80% 30.80% 33.80% 38.80% 42.40%
JOINT $1- $39,001- $94,251- $143,601- OVER
RETURN 39,000 94,250 143,600 256,500 256,500
SINGLE $1- $23,351- $56,550- $117,951- OVER
RETURN 23,350 56,550 117,950 256,500 $256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
1.50% 1.82% 2.17% 2.27% 2.45% 2.60%
2.00% 2.43% 2.89% 3.02% 3.27% 3.47%
2.50% 3.04% 3.61% 3.78% 4.08% 4.34%
3.00% 3.65% 4.34% 4.53% 4.90% 5.21%
3.50% 4.26% 5.06% 5.29% 5.27% 6.08%
4.00% 4.87% 5.78% 6.04% 6.54% 6.94%
4.50% 5.47% 6.50% 6.80% 7.35% 7.81%
5.00% 6.08% 7.23% 7.55% 8.17% 8.68%
5.50% 6.69% 7.95% 8.31% 8.99% 9.55%
6.00% 7.30% 8.67% 9.06% 9.80% 10.42%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL STATE
AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENTS WERE NOT USED TO
INCREASE FEDERAL DEDUCTIONS.
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is computed
by multiplying the number of shares owned at the end of the period by the net
asset value per share at the end of the period. The number of shares owned at
the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends and
distributions.
Cash Series Shares average annual total returns for the one-year period ended
October 31, 1995 and for the period from January 25, 1991 (date of initial
public investment) through October 31, 1995 were 3.02% and 2.67%,
respectively.
Institutional Shares cumulative total return for the period from August 23,
1995(date of initial public investment) through October 31, 1995 was 1.03%.
Institutional Service Shares average annual total returns for the one-year
period ended October 31, 1995 and for the period from November 21, 1989 (date
of initial public investment) through October 31, 1995 were 3.44% and 3.56%,
respectively
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
O LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports monthly
and 12-month-to-date investment results for the same money funds.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected
in its investment decision making-structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands
of clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market funds,
a principal means used by money managers today to value money market fund
shares. Other innovations include the first institutional tax-free money
market fund. As of December 31, 1994, Federated Investors managed more than
$31 billion in assets across approximately 43 money market funds, including 17
government, 8 prime and 18 municipal with assets approximating $17 billion,
$7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors's
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors's domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors's international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors Investors, through its subsidiaries, distributes mutual
funds for a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional
clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated Investors funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Investors mutual funds are available to consumers through major
brokerage firms nationwide--including 200 New York Stock Exchange firms--
supported by more wholesalers than any other mutual fund distributor. The
marketing effort to these firms is headed by James F. Getz, President,
Broker/Dealer Division.
*Source: Investment Company Institute
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a variable rate demand feature. The first rating (long-term
rating) addresses the likelihood of repayment of principal and interest when
due, and the second rating (short-term rating) describes the demand
characteristics. Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The
definitions for the long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
LONG-TERM DEBT RATINGS
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the
relative investment qualities of short-term obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the
use of the VMIG symbol to reflect such characteristics as payment upon
periodic demand rather than fixed maturity dates and payment relying on
external liquidity. In this case, two ratings are usually assigned, (for
example, AAA/VMIG-1); the first representing an evaluation of the degree of
risk associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1 Issuers rated PRIME-1 (or related supporting institutions) have
a superior capacity for repayment of short-term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries,
high rates of return on funds employed, conservative capitalization
structure with moderate reliance on debt and ample asset protection,
broad margins in earning coverage of fixed financial charges and high
internal cash generation, well-established access to a range of financial
markets and assured sources of alternate liquidity
P-2 Issuers rated PRIME-2 (or related supporting institutions) have
a strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited
above, but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
LONG-TERM DEBT RATINGS
AAA Bonds which are rated AAA are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes is can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
AA Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in AAA securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term
indebtedness. However, management considers them to be of comparable
quality to securities rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "AAA" by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "AA" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.
314229881
314229717
314229204
MINNESOTA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
CASH SERIES SHARES
PROSPECTUS
The Cash Series Shares of Minnesota Municipal Cash Trust (the "Fund") offered by
this prospectus represent interests in a non-diversified portfolio of Federated
Municipal Trust (the "Trust"), an open-end management investment company (a
mutual fund). The Fund invests primarily in short-term Minnesota municipal
securities, including securities of states, territories, and possessions of the
United States which are not issued by or on behalf of Minnesota, or its
political subdivisions and financing authorities, but which provide income
exempt from federal regular income tax and the regular personal income taxes
imposed by the State of Minnesota consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Minnesota Municipal Securities 6
Investment Risks 6
Non-Diversification 7
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Cash Series Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 10
- ------------------------------------------------------
Special Purchase Features 11
HOW TO REDEEM SHARES 11
- ------------------------------------------------------
Special Redemption Features 12
ACCOUNT AND SHARE INFORMATION 12
- ------------------------------------------------------
TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
State and Local Taxes 14
OTHER CLASSES OF SHARES 14
- ------------------------------------------------------
PERFORMANCE INFORMATION 15
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SHARES 16
- ------------------------------------------------------
FINANCIAL STATEMENTS 17
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 33
- ------------------------------------------------------
ADDRESSES 34
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CASH SERIES SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................................ None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)............................................. 0.13%
12b-1 Fee (after waiver)(2).................................................. 0.25%
Total Other Expenses......................................................... 0.42%
Shareholder Services Fee................................................... 0.25%
Total Operating Expenses(3)............................................. 0.80%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.40%.
(2) The maximum 12b-1 fee is 0.50%.
(3) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending October 31, 1996. The operating expense
were 0.70% for the fiscal year ended October 31, 1995 and would have been 1.32%
absent the voluntary waivers of a portion of the management fee, a portion of
the 12b-1 fee and a portion of the shareholder services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Cash Series Shares of the Fund
will bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Fund 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........ $ 8 $ 26 $ 44 $ 99
</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.
MINNESOTA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants, on page 33.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------
1995 1994 1993 1992 1991(A)
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.04
- ------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.02) (0.03) (0.04)
- ------------------------------------------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------ ------ ------ ------ ------ ------
TOTAL RETURN (B) 3.41% 2.17% 2.02% 2.78% 3.60%
- ------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------
Expenses 0.70% 0.71% 0.71% 0.71% 0.64%*
- ------------------------------------------
Net investment income 3.37% 2.15% 2.01% 2.75% 4.11%*
- ------------------------------------------
Expense waiver/reimbursement (c) 0.62% 0.61% 0.44% 0.44% 0.59%*
- ------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------
Net assets, end of period (000 omitted) $131,471 $94,335 $67,521 $75,044 $69,747
- ------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from January 7, 1991 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established two classes of shares known as Cash Series Shares and Institutional
Shares. This prospectus relates only to Cash Series Shares of the Fund, which
are designed primarily for retail customers of financial institutions as a
convenient means of accumulating an interest in a professionally managed,
non-diversified portfolio investing primarily in short-term Minnesota municipal
securities. The Fund may not be a suitable investment for retirement plans or
for non-Minnesota taxpayers because it invests in municipal securities of that
state. A minimum initial investment of $10,000 within 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
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INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the regular personal income taxes imposed by the State of
Minnesota consistent with stability of principal. This investment objective
cannot be changed without shareholder approval. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
complying with the various requirements of Rule 2a-7 under the Investment
Company Act of 1940 which regulates money market mutual funds and by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Minnesota municipal securities (as defined below) maturing in 13 months or less.
As a matter of investment policy, which cannot be changed without shareholder
approval, the Fund invests its assets so that (1) at least 80% of the Fund's
annual interest income will be exempt from federal regular income tax and
Minnesota regular personal income tax ("exempt interest dividends"); and (2) at
least 95% of the exempt interest dividends that the Fund pays to its
shareholders will derive interest income from Minnesota municipal obligations.
The remaining 5% of such exempt interest dividends paid to shareholders will
derive either from interest income on Minnesota municipal securities or interest
income which is exempt from both federal regular and Minnesota regular personal
income taxes. (Federal regular income tax does not include the federal
individual alternative minimum tax or the federal alternative minimum tax for
corporations.) The average maturity of the securities in the Fund's portfolio,
computed on a dollar-weighted basis, will be 90 days or less. Unless indicated
otherwise, the investment policies may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of Minnesota and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and Minnesota state income tax imposed upon non-corporate taxpayers ("Minnesota
Municipal Securities"). Examples of Minnesota Municipal Securities include, but
are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Minnesota
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Minnesota Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; 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 Minnesota
Municipal Securities is subject to the federal alternative minimum tax.
MINNESOTA MUNICIPAL SECURITIES
Minnesota Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
Minnesota Municipal Securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Minnesota Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Minnesota Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of Minnesota Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of Minnesota
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Minnesota Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Minnesota Municipal Securities could involve an increased risk to the Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Minnesota Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through 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. These investment limitations cannot be
changed without shareholder approval.
FUND INFORMATION
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MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife,
and Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee
of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF CASH SERIES SHARES
Federated Securities Corp. is the principal distributor for Cash Series Shares
of the Fund. It is a Pennsylvania corporation organized on November 14, 1969,
and is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the distributor may be paid a fee in an amount computed at an annual rate of .50
of 1% of the average daily net assets of Cash Series Shares to finance any
activity which is principally intended to result in the sale of Cash Series
Shares subject to the Distribution Plan. The distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide sales services or distribution-related
support services as agents for their clients or customers.
The Distribution Plan is a compensation-type Plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by Cash
Series Shares under the Distribution Plan.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to .25 of 1% of the average daily net asset value
of Cash Series Shares to obtain certain personal services for shareholders and
the maintenance of shareholder accounts. Under the Shareholder Services
Agreement, Federated Shareholders Services will either perform shareholder
services directly or will select financial institutions to perform shareholder
services. Financial institutions will receive fees based upon Cash Series Shares
owned by their clients or customers. The schedules of such fees and the basis
upon which such fees will be paid will be determined from time to time by the
Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to payments made
pursuant to the Distribution Plan and Shareholder Services Agreement, Federated
Securities Corp. and Federated Shareholder Services, from their own assets, may
pay financial institutions supplemental fees for the performance of substantial
sales services, distribution-related support services, or shareholder services.
The support may include sponsoring sales, educational and training seminars for
their employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support furnished by
the financial institution. Any payments made by the distributor may be
reimbursed by the Fund's investment adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- -------------- -------------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per share is determined by subtracting liabilities attributable to shares from
the value of Fund assets attributable to shares, 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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
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Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is 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 or more within a 90-day period. Financial institutions may impose
different minimum investment requirements on their customers.
In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before shares can be purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may purchase
shares through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives payment by
wire or converts payment by check from the financial institution into federal
funds. It is the financial institution's responsibility to transmit orders
promptly. Financial institutions may charge additional fees for their services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling the Fund
before 1:00 p.m. (Eastern time). The order is considered received immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern time) in
order to begin earning dividends that same day. Federal funds should be wired as
follows: Federated Services Company, c/o State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: Minnesota Municipal Cash Trust ,
Cash Series Shares; Fund Number (this number can be found on the account
statement or by contacting the Fund); Group Number or Order Number; Nominee or
Institution Name; and ABA Number 011000028. Shares cannot be purchased by wire
on holidays when wire transfers are restricted. Questions on wire purchases
should be directed to your shareholder services representative at the telephone
number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to Minnesota Municipal Cash Trust--Cash Series Shares.
Please include an account number on the check. Orders by mail are considered
received when payment by check is converted into federal funds (normally the
business day after the check is received), and shares begin earning dividends
the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM. A minimum of $100 can be automatically withdrawn
periodically from the shareholder's checking account at an Automated Clearing
House ("ACH") member and invested in Fund shares. Shareholders should contact
their financial institution or the Fund to participate in this program.
HOW TO REDEEM SHARES
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Shares are redeemed at their net asset value next determined after 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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If shares certificates have been
issued, they should be sent unendorsed with the written request by registered or
certified mail to the address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the 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 any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by a commercial
or savings bank, trust company or savings and loan association whose deposits
are insured by an organization which is administered by the Federal Deposit
Insurance Corporation; a member firm of a domestic stock exchange; or any other
"eligible guarantor institution," as defined in the Securities Exchange Act of
1934. The Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. Shareholder accounts will continue to
receive the daily dividend declared on the shares to be redeemed until the check
is presented to UMB Bank, N.A., the bank responsible for administering the
checkwriting program, for payment. However, checks should never be made payable
or sent to UMB Bank, N.A. or the Fund to redeem shares, and a check may not be
written to close an account.
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
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$10,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has one vote in Trustee elections and other
matters submitted to shareholders for vote. All shares of all classes of each
portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting 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 December 4, 1995, Resource Bank & Trust Co., Minneapolis, MN, and Var &
Co., St. Paul, MN, owned 25.57% and 49.63%, respectively, of the voting
securities of the Fund's Institutional Shares 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.
TAX INFORMATION
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FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Fund may purchase all types of municipal bonds, including private activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than
Minnesota. Shareholders are urged to consult their own tax advisers regarding
the status of their accounts under state and local tax laws.
MINNESOTA TAXES. Under existing Minnesota laws, distributions made by the Fund
will be exempt from Minnesota regular personal income taxes provided that such
distributions qualify as exempt-interest dividends under the Internal Revenue
Code, and provided further that 95% of such distributions are derived from
interest on obligations issued by the State of Minnesota or any of its political
or governmental subdivisions, municipalities, or governmental agencies or
instrumentalities. Distributions made by the Fund will also be exempt to the
extent that they are derived from interest on federal obligations and are
reported federally as dividend income by shareholders. Conversely, to the extent
that distributions made by the Fund are derived from other types of obligations,
such distributions will be subject to Minnesota regular personal income taxes.
Dividends of the Fund are not exempt from Minnesota corporate income taxes.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called Institutional Shares.
Institutional Shares are sold at net asset value primarily to financial
institutions acting in a fiduciary capacity and are subject to a minimum initial
investment of $25,000 over a 90-day period.
All classes are subject to certain of the same expenses.
Institutional Shares are distributed with no 12b-1 fees but are subject to
shareholder services fees.
Expense differences between classes may affect the performance of each class.
To obtain more information and a prospectus for any other class, investors may
call 1-800-235-4669.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the shares' tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
MINNESOTA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 33.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991 1990(A)
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------
Net investment income 0.04 0.03 0.02 0.03 0.05 0.01
- --------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------
Distributions from net investment
income (0.04) (0.03) (0.02) (0.03) (0.05) (0.01)
- -------------------------------------- ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------- ------ ------ ------ ------ ------ ------
TOTAL RETURN (B) 3.82% 2.58% 2.43% 3.19% 4.89% 0.90%
- --------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------
Expenses 0.30% 0.31% 0.31% 0.31% 0.30% 0.01%*
- --------------------------------------
Net investment income 3.77% 2.55% 2.40% 3.10% 4.73% 6.45%*
- --------------------------------------
Expense waiver/reimbursement (c) 0.52% 0.34% 0.34% 0.33% 0.43% 0.69%*
- --------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------
Net assets, end of period (000
omitted) $212,392 $159,704 $165,865 $245,168 $124,603 $75,904
- --------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 10, 1990 (date of initial
public investment) to October 31, 1990.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
MINNESOTA MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ----- ------------------------------------------------------- ------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.3%
- -------------------------------------------------------------------------
MINNESOTA--99.0%
-------------------------------------------------------
$ 6,750,000 Anoka City, MN Solid Waste Disposal Authority, 3.85% CP
(United Power Associates)/(National Rural Utilities
Cooperative Finance Corp. GTD), Mandatory Tender
11/10/1995 VMIG1 $ 6,750,000
-------------------------------------------------------
2,050,000 Anoka, MN, Multifamily Housing Revenue Bonds Weekly
VRDNs (Walker Plaza Project)/(First Bank NA,
Minneapolis LOC) A-1 2,050,000
-------------------------------------------------------
3,880,000 Apple Valley, MN, IDRB (Series 1995) Weekly VRDNs (AV
Development Company Project)/(Firstar Bank, Minnesota
LOC) A-1 3,880,000
-------------------------------------------------------
2,800,000 Baudette, MN, IDR (Series 1989) Weekly VRDNs (Reid
Powell, Inc.)/(Nationsbank of Georgia, N.A. LOC) P-1 2,800,000
-------------------------------------------------------
2,000,000 Becker, MN, PCR (Series 1993-B), 3.75% CP (Northern
States Power Co.), Mandatory Tender 1/25/1996 VMIG1 2,000,000
-------------------------------------------------------
4,500,000 Becker, MN, PCR (Series 1993A & B), 3.80% CP (Northern
States Power Co.), Mandatory Tender 11/21/1995 VMIG1 4,500,000
-------------------------------------------------------
4,000,000 Becker, MN, PCR (Series 1993A & B), 3.80% CP (Northern
States Power Co.), Mandatory Tender 11/22/1995 VMIG1 4,000,000
-------------------------------------------------------
1,000,000 Bloomington, MN Port Authority, Special Tax Revenue
Refunding Bonds (Series 1994B) Weekly VRDNs (Mall of
America)/(FSA INS)/(Credit Local de France LIQ) A-1+ 1,000,000
-------------------------------------------------------
3,600,000 Bloomington, MN, IDRB (Series 1995) Weekly VRDNs (Now
Technologies, Inc. Project)/(Norwest Bank Minnesota,
Minneapolis LOC) A-1+ 3,600,000
-------------------------------------------------------
5,000,000 Bloomington, MN, Multi-Family Housing Weekly VRDNs
(Crowl Bloomington Apartments)/(Citibank NA, New York
LOC) P-1 5,000,000
-------------------------------------------------------
3,490,000 Brooklyn Center, MN, ISD #286, 4.70% TANs (Minnesota
State GTD), 3/27/1996 NR(2) 3,491,332
-------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ----- ------------------------------------------------------- ------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------
MINNESOTA--CONTINUED
-------------------------------------------------------
$ 8,080,000 Burnsville, MN, Multi-Family Housing Weekly VRDNs
(Berkshire of Burnsville)/(Sumitomo Bank Ltd., Osaka
LOC) A-1 $ 8,080,000
-------------------------------------------------------
1,270,000 Chaska, MN IDA Weekly VRDNs (Laeration Industries)/
(Norwest Bank Minnesota, Minneapolis LOC) A-1+ 1,270,000
-------------------------------------------------------
1,900,000 Coon Rapids, MN Hospital Authority, (Series 1985)
Weekly VRDNs (Health Central System)/(First Bank NA,
Minneapolis LOC) A-1 1,900,000
-------------------------------------------------------
1,065,000 Crosby-Ironton, MN Independent School District No. 182,
GO Tax Anticipation Certificates of Indebtedness
(Series 1995A), 4.75% TANs (Minnesota State GTD),
3/22/1996 NR(2) 1,065,194
-------------------------------------------------------
5,500,000 Crystal, MN IDA Weekly VRDNs (Crystal Gallery Mall,
MN)/(Citibank NA, New York LOC) P-1 5,500,000
-------------------------------------------------------
10,745,000 Dakota County & Washington County MN Housing &
Redevelopment Authority, Bloomington Mortgage Revenue,
5.75% TOBs (GNMA COL)/(Meridan Bank, Reading, PA LIQ),
Optional Tender 9/1/1996 NR(1) 10,896,281
-------------------------------------------------------
1,835,000 Dakota County, MN Housing & Redevelopment Authority,
(Custodial Receipts), 5.10% TOBs (GNMA COL)/(Meridian
Bank, Reading, PA LIQ), Optional Tender 3/1/1996 NR(1) 1,835,000
-------------------------------------------------------
3,000,000 Dakota County, Washington County & Anoka City, MN
Housing & Redevelopment Authority, (Custodial
Receipts)/(Series 1988), 4.35% TOBs (United States
Treasury COL)/(Meridian Bank, Reading, PA LIQ),
Optional Tender 11/1/1995 NR(1) 3,000,000
-------------------------------------------------------
4,785,000 Duluth, MN, GO Certificate of Indebtedness (Series
1995), 5.00% TANs, 12/29/1995 NR(3) 4,785,874
-------------------------------------------------------
8,000,000 Eagan, MN, Multi-Family Housing (Series 1992A) Weekly
VRDNs (Cinnamon Ridge)/(Mellon Bank NA, Pittsburgh LOC) VMIG1 8,000,000
-------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ----- ------------------------------------------------------- ------- ------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------
MINNESOTA--CONTINUED
-------------------------------------------------------
$ 870,000 Eden Prairie, MN IDA, #194 Weekly VRDNs (Richard W.
Cohen Project)/(Norwest Bank Minnesota, Minneapolis
LOC) P-1 $ 870,000
-------------------------------------------------------
138,004 Eden Prairie, MN IDA, (Series 1987) Weekly VRDNs
(Minnesota Supply Co.)/(Norwest Bank Minnesota,
Minneapolis LOC) P-1 138,004
-------------------------------------------------------
1,200,000 Elk River, MN Weekly VRDNs (Tescom Project)/(Norwest
Bank Minnesota, Minneapolis LOC) P-1 1,200,000
-------------------------------------------------------
5,000,000 Faribault, MN IDA, (Series 1988) Weekly VRDNs (Jerome
Foods)/(Norwest Bank Minnesota, Minneapolis LOC) P-1 5,000,000
-------------------------------------------------------
1,000,000 Hennepin Co. MN, (Series 1995C) Weekly VRDNs (Hennepin
Co. MN GTD) NR(1) 1,000,000
-------------------------------------------------------
2,500,000 Hubbard County, MN, Solid Waste Disposal (Series 1990)
Weekly VRDNs (Potlatch Corp.)/(Credit Suisse, Zurich
LOC) A-1+ 2,500,000
-------------------------------------------------------
4,000,000 Maple Grove, MN IDA, (Series 1991A) Weekly VRDNs (Eagle
Ridge, MN Apartments)/(Sumitomo Bank Ltd., Osaka LOC) A-1 4,000,000
-------------------------------------------------------
3,000,000 Maple Grove, MN IDA, (Series 1991B) Weekly VRDNs (Eagle
Ridge, MN Apartments)/(First Bank NA, Minneapolis LOC) A-1 3,000,000
-------------------------------------------------------
2,025,000 Maplewood, MN, Multi-Family Housing (Series 1993)
Weekly VRDNs (Silver Ridge Project)/(Federal Home Loan
Bank of Chicago LOC) A-1+ 2,025,000
-------------------------------------------------------
2,640,000 Mendota Heights, MN, Multi-Family Revenue Bonds Weekly
VRDNs (Lexington Heights Apartments)/ (Sumitomo Bank
Ltd., Osaka LOC) A-1 2,640,000
-------------------------------------------------------
1,000,000 Metropolitan Council, MN, Minneapolis-St. Paul
Metropolitan Area (Series B), 5.50% Bonds, 12/1/1995 NR(1) 1,000,832
-------------------------------------------------------
5,000,000 Minneapolis Special School District, MN, GO Tax
Anticipation Certificate of Indebtedness Independent
School District No 1, 5.75% TANs, 1/25/1996 SP-1+ 5,007,196
-------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ----- ------------------------------------------------------- ------- ------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------
<S> <C> <C> <C>
MINNESOTA--CONTINUED
-------------------------------------------------------
$ 715,000 Minneapolis, MN IDA Weekly VRDNs (JTJ Co.)/(First Bank
NA, Minneapolis LOC) P-1 $ 715,000
-------------------------------------------------------
1,400,000 Minneapolis, MN, (Series 1989) Weekly VRDNs (Mt. Sinai
Medical Building Association)/(Norwest Bank Minnesota,
Minneapolis LOC) A-1+ 1,400,000
-------------------------------------------------------
7,000,000 Minneapolis, MN, (Series 1995B) Weekly VRDNs VMIG1 7,000,000
-------------------------------------------------------
3,000,000 Minneapolis, MN, GO Bonds (Series 1995) Weekly VRDNs
(Arena Acquisition Project (MN)) A-1+ 3,000,000
-------------------------------------------------------
3,870,000 Minneapolis, MN, Rental Housing Revenue Bonds (Series
1994A), 5.40% TOBs (Driftwood Apartments
Project)/(First Bank NA, Minneapolis LOC), Mandatory
Tender 11/1/1995 A-1 3,870,000
-------------------------------------------------------
4,800,000 (a) Minneapolis/St. Paul MN Housing Finance Board, SFM
Revenue Bonds, Merlots (Series D), 4.375% TOBs (GNMA
COL)/(Meridan Bank, Reading, PA LIQ), Optional Tender
4/1/1996 NR(1) 4,800,000
-------------------------------------------------------
1,276,000 Minneapolis/St. Paul MN Housing Finance Board, Single
Family Mortgage Revenue Bonds, 4.625% TOBs (GNMA
COL)/(Meridian Bank, Reading, PA LIQ), Optional Tender
11/1/1995 NR(1) 1,276,000
-------------------------------------------------------
8,000,000 Minnesota State Commissioner of Iron Range Resources &
Rehabilitation, (Series 1991) Weekly VRDNs (Louisiana-
Pacific Corp.)/(Wachovia Bank of NC, NA, Winston-Salem
LOC) P-1 8,000,000
-------------------------------------------------------
5,000,000 Minnesota State HFA, Single Family Mortgage Bonds
(Series V), 4.95% TOBs (Bayerische Landesbank
Girozentrale LOC), Mandatory Tender 12/14/1995 A-1+ 5,000,000
-------------------------------------------------------
3,800,000 Minnesota State Higher Education Coordinating Board,
(Series 1992A) Weekly VRDNs (First Bank NA, Minneapolis
LIQ) VMIG1 3,800,000
-------------------------------------------------------
7,000,000 Minnesota State Higher Education Coordinating Board,
1992 (Series B) Weekly VRDNs (First Bank NA,
Minneapolis LIQ) VMIG1 7,000,000
-------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ----- ------------------------------------------------------- ------- ------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------
<S> <C> <C> <C>
MINNESOTA--CONTINUED
-------------------------------------------------------
$ 6,500,000 Minnesota State Higher Education Coordinating Board,
1992 (Series C) Weekly VRDNs (First Bank NA,
Minneapolis LIQ) VMIG1 $ 6,500,000
-------------------------------------------------------
12,700,000 Minnesota State Higher Education Coordinating Board,
1992 (Series C) Weekly VRDNs (First Bank NA,
Minneapolis LIQ) VMIG1 12,700,000
-------------------------------------------------------
3,400,000 Minnesota State Higher Education Coordinating Board,
Supplemental Student Loan Program Variable Rate
Refunding Revenue Bonds (Series 1994A) Weekly VRDNs
(Norwest Bank Minnesota, Minneapolis LIQ) VMIG1 3,400,000
-------------------------------------------------------
4,300,000 Minnesota State Higher Education Facility Authority
Weekly VRDNs (Carlton College)/(Swiss Bank Corp., Basle
LOC) VMIG1 4,300,000
-------------------------------------------------------
5,925,000 Minnesota State, 7.00% Bonds (United States Treasury
PRF), 8/1/1996 (@100) NR(1) 6,069,103
-------------------------------------------------------
11,000,000 Minnesota Tax and Aid Anticipation Borrowing Program,
(Series 1995A), 4.25% TANs (Minnesota State GTD),
8/23/1996 NR(2) 11,025,570
-------------------------------------------------------
7,300,000 Minnesota Tax and Aid Anticipation Borrowing Program,
Certificates of Participation, Aid Anticipation Series
1995B, 4.30% TRANs (Minnesota State GTD), 9/13/1996 NR(2) 7,318,174
-------------------------------------------------------
9,800,000 Minnetonka, MN, Multi-Family Housing Revenue Bonds
Weekly VRDNs (The Cliffs at Ridgedale)/(Citibank NA,
New York LOC) A-1 9,800,000
-------------------------------------------------------
5,900,000 Minnetonka, MN, Multifamily Housing Revenue Refunding
Bonds (Series 1995) Weekly VRDNs (Southampton
Apartments Project (MN))/(National Bank of Canada,
Montreal LOC) P-1 5,900,000
-------------------------------------------------------
1,300,000 New Brighton, MN, IDR Weekly VRDNs (Unicare Homes,
Inc.)/(Banque Paribas, Paris LOC) A-1 1,300,000
-------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ----- ------------------------------------------------------- ------- ------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------
MINNESOTA--CONTINUED
-------------------------------------------------------
<S> <C> <C> <C>
$ 1,000,000 New Hope, MN IDRB, (Series 1994) Weekly VRDNs (Gaines
and Hanson Printing Co.)/(Norwest Bank Minnesota,
Minneapolis LOC) A-1+ $ 1,000,000
-------------------------------------------------------
3,825,000 New Hope, MN Weekly VRDNs (Paddock Labs)/ (Norwest Bank
Minnesota, Minneapolis LOC) P-1 3,825,000
-------------------------------------------------------
2,580,000 Olmsted County, MN Building Authority, Certificates of
Participation Weekly VRDNs (Human Services
Infrastructure)/(Sanwa Bank Ltd, Osaka LOC) A-1+ 2,580,000
-------------------------------------------------------
2,600,000 Perham, MN IDA Weekly VRDNs (Land O' Lakes, Inc.)/
(Rabobank Nederland, Utrecht LOC) A-1+ 2,600,000
-------------------------------------------------------
1,365,000 Plymouth, MN Weekly VRDNs (Nuaire, Inc.)/ (Norwest Bank
Minnesota, Minneapolis LOC) P-1 1,365,000
-------------------------------------------------------
5,000,000 Plymouth, MN, IDRB (Series 1994) Weekly
VRDNs (Olympic Steel, Inc.)/(National City Bank,
Cleveland, OH LOC) P-1 5,000,000
-------------------------------------------------------
1,690,000 Port of Austin, MN Weekly VRDNs (Mower House
Color)/(Norwest Bank Minnesota, Minneapolis LOC) P-1 1,690,000
-------------------------------------------------------
6,500,000 Rochester, MN Health Care Facility Authority Weekly
VRDNs (Mayo Foundation) VMIG1 6,500,000
-------------------------------------------------------
4,000,000 Rochester, MN Health Care Facility Authority Weekly
VRDNs (Mayo Foundation) VMIG1 4,000,000
-------------------------------------------------------
2,000,000 Rochester, MN Health Care Facility Authority, (Series
C), 3.70% CP (Mayo Foundation), Mandatory Tender
11/16/1995 VMIG1 2,000,000
-------------------------------------------------------
1,250,000 Rogers, MN IDA Weekly VRDNs (Metal Sales Manufacturing
Corp.)/(Society National Bank, Cleveland, OH LOC) P-1 1,250,000
-------------------------------------------------------
2,925,000 Rogers, MN IDA, Variable Rate Demand IDRB Weekly VRDNs
(DAC Development, LLC Project)/(Norwest Bank Minnesota,
Minneapolis LOC) A-1+ 2,925,000
-------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ----- ------------------------------------------------------- ------- ------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------
MINNESOTA--CONTINUED
-------------------------------------------------------
<S> <C> <C> <C>
$ 8,000,000 Shakopee, MN Hospital Finance Authority Weekly VRDNs
(St. Francis Regional Medical Center)/(Citibank NA, New
York LOC) A-1 $ 8,000,000
-------------------------------------------------------
2,000,000 Southern Minnesota Municipal Power Agency, 9.50% Bonds
(United States Treasury PRF), 1/1/1996 NR(1) 2,055,531
-------------------------------------------------------
7,000,000 St. Cloud, MN Hospital Facility Authority, (Series
1990A) Weekly VRDNs (St. Cloud Hospital)/(Kredietbank
N.V., Brussels LOC) A-1+ 7,000,000
-------------------------------------------------------
1,735,000 St. Cloud, MN Housing & Redevelopment Authority,
Revenue Refunding Bonds (Series 1994A) Weekly VRDNs
(Coborn's Incorporated Project)/(Norwest Bank
Minnesota, Minneapolis LOC) A-1+ 1,735,000
-------------------------------------------------------
3,000,000 St. Cloud, MN Housing & Redevelopment Authority,
Revenue Refunding Bonds (Series 1994B) Weekly VRDNs
(Coborn's Incorporated Project)/(Norwest Bank
Minnesota, Minneapolis LOC) A-1+ 3,000,000
-------------------------------------------------------
250,000 St. Louis Park Hennepin County, MN, GO (Series 1987C)
Weekly VRDNs (Bayerische Vereinsbank AG, Munich LOC) VMIG1 250,000
-------------------------------------------------------
5,000,000 St. Paul, MN Housing & Redevelopment Authority Weekly
VRDNs (District Cooling St. Paul, Inc.)/
(Credit Local de France LOC) A-1+ 5,000,000
-------------------------------------------------------
500,000 St. Paul, MN Housing & Redevelopment Authority Weekly
VRDNs (United Way)/(First Bank NA, Minneapolis LOC) A-1 500,000
-------------------------------------------------------
2,350,000 St. Paul, MN Housing & Redevelopment Authority,
(Series 1994) Weekly VRDNs (Minnesota Children's
Museum)/(First Bank NA, Minneapolis LOC) A-1 2,350,000
-------------------------------------------------------
2,000,000 St. Paul, MN Housing & Redevelopment Authority,
District Cooling Revenue Bonds (1995 Series I) Weekly
VRDNs (Credit Local de France LOC) P-1 2,000,000
-------------------------------------------------------
7,250,000 St. Paul, MN Independent School District No. 625,
(Series A), 5.375% TANs, 3/28/1996 MIG1 7,281,855
-------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ----- ------------------------------------------------------- ------- ------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------
<S> <C> <C> <C>
MINNESOTA--CONTINUED
-------------------------------------------------------
$ 4,600,000 St. Paul, MN Port Authority, (Series 1991) Weekly VRDNs
(West Gate Office)/(First Bank NA, Minneapolis LOC) A-1 $ 4,600,000
-------------------------------------------------------
1,850,000 St. Peter, MN Independent School District #508, Aid
Anticipation Certificates of Indebtedness, 3.96% BANs
(Minnesota State GTD), 8/29/1996 NR(2) 1,850,427
-------------------------------------------------------
1,000,000 Steele County, MN, IDRB (Series 1994) Weekly VRDNs
(Blount, Inc.)/(Nationsbank of Georgia, N.A. LOC) A-1 1,000,000
-------------------------------------------------------
6,500,000 University of Minnesota, (Series F), 3.65% TOBs
(Regents of University of Minnesota), Optional Tender
2/1/1996 A-1+ 6,500,000
-------------------------------------------------------
13,015,000 Washington County, MN Housing & Redevelopment
Authority, (Series 90) Weekly VRDNs (Granada Pond
Apartments)/(Sumitomo Bank Ltd., Osaka LOC) A-1 13,015,000
-------------------------------------------------------
1,490,000 Wells, MN, 5.00% TOBs (Stokely, Inc.)/(NBD Bank, NA,
Indianapolis LOC), Optional Tender 12/1/1995 A-1+ 1,490,000
-------------------------------------------------------
3,000,000 White Bear Lake, MN, (Series 1993) Weekly VRDNs (Taylor
Corp.)/(Norwest Bank Minnesota, Minneapolis LOC) A-1+ 3,000,000
-------------------------------------------------------
5,180,000 White Bear, MN Weekly VRDNs (Thermoform Plastic,
Inc.)/(Norwest Bank Minnesota, Minneapolis LOC) A-1+ 5,180,000
-------------------------------------------------------
2,000,000 Winsted, MN IDA Weekly VRDNs (Sterner Lighting
Systems)/(Fleet National Bank, Providence, R.I. LOC) A-1 2,000,000
------------------------------------------------------- ------------
Total 340,501,373
------------------------------------------------------- ------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ----- ------------------------------------------------------- ------- ------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------
<S> <C> <C> <C>
PUERTO RICO--0.3%
-------------------------------------------------------
$ 1,000,000 Puerto Rico Government Development Bank Weekly VRDNs
(Credit Suisse, Zurich LOC) A-1+ $ 1,000,000
------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $341,501,373
------------------------------------------------------- ------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 35.3% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
(a) Denotes a restricted security which is subject to restrictions on resale,
under Federal Securities laws. This security has been determined to be
liquid under criteria established by the Board of Trustees. At the end of
the period, this security amounted to $4,800,000 which represents 1.4% of
net assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($343,863,341) at October 31, 1995.
The following acronyms are used throughout this portfolio:
BANs -- Bond Anticipation Notes
COL -- Collateralized
CP -- Commercial Paper
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation
GTD -- Guaranty
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDR -- Industrial Development Revenue
IDRB -- Industrial Development Revenue Bonds
INS -- Insured
ISD -- Independent School District
LIQ -- Liquidity Agreement
LOC -- Letter of Credit
PCR -- Pollution Control Revenue
PRF -- Prerefunded
SFM -- Single Family Mortgage
TANs -- Tax Anticipation Notes
TOBs -- Tender Option Bonds
TRANs -- Tax and Revenue Anticipation Notes
VRDNs -- Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
MINNESOTA MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $341,501,373
- -------------------------------------------------------------------------------
Cash 780,299
- -------------------------------------------------------------------------------
Income receivable 2,441,223
- -------------------------------------------------------------------------------
Deferred expenses 2,452
- ------------------------------------------------------------------------------- ------------
Total assets 344,725,347
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Payable for shares redeemed $ 75,028
- --------------------------------------------------------------------
Income distribution payable 656,222
- --------------------------------------------------------------------
Accrued expenses 130,756
- -------------------------------------------------------------------- --------
Total liabilities 862,006
- ------------------------------------------------------------------------------- ------------
NET ASSETS for 343,863,341 shares outstanding $343,863,341
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- -------------------------------------------------------------------------------
($212,391,871 / 212,391,871 shares outstanding) $1.00
- ------------------------------------------------------------------------------- ------------
CASH SERIES SHARES:
- -------------------------------------------------------------------------------
($131,471,470 / 131,471,470 shares outstanding) $1.00
- ------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MINNESOTA MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest $13,813,482
- ----------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------
Investment advisory fee $1,357,870
- ---------------------------------------------------------------------
Administrative personnel and services fee 256,977
- ---------------------------------------------------------------------
Custodian fees 69,238
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 98,154
- ---------------------------------------------------------------------
Directors'/Trustees' fees 4,382
- ---------------------------------------------------------------------
Auditing fees 14,885
- ---------------------------------------------------------------------
Legal fees 3,834
- ---------------------------------------------------------------------
Portfolio accounting fees 66,897
- ---------------------------------------------------------------------
Distribution services fee--Cash Series Shares 599,206
- ---------------------------------------------------------------------
Shareholder services fee--Institutional Shares 549,269
- ---------------------------------------------------------------------
Shareholder services fee--Cash Series Shares 299,603
- ---------------------------------------------------------------------
Share registration costs 29,486
- ---------------------------------------------------------------------
Printing and postage 23,165
- ---------------------------------------------------------------------
Insurance premiums 8,171
- ---------------------------------------------------------------------
Miscellaneous 4,686
- --------------------------------------------------------------------- ----------
Total expenses 3,385,823
- ---------------------------------------------------------------------
Waivers--
- ---------------------------------------------------------------------
Waiver of investment advisory fee $(906,031)
- ----------------------------------------------------------
Waiver of distribution services fee--Cash Series Shares (407,672)
- ----------------------------------------------------------
Waiver of shareholder services fee--Institutional Shares (549,269)
- ----------------------------------------------------------
Waiver of shareholder services fee--Cash Series Shares (11,773)
- ---------------------------------------------------------- ---------
Total waivers (1,874,745)
- --------------------------------------------------------------------- ----------
Net expenses 1,511,078
- ---------------------------------------------------------------------------------- -----------
Net investment income $12,302,404
- ---------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MINNESOTA MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------
Net investment income $ 12,302,404 $ 6,226,990
- --------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------
Distributions from net investment income
- ---------------------------------------------------------------
Institutional Shares (8,269,227) (4,475,720)
- ---------------------------------------------------------------
Cash Series Shares (4,033,177) (1,751,270)
- --------------------------------------------------------------- ------------- -------------
Change in net assets resulting from distributions
to shareholders (12,302,404) (6,226,990)
- --------------------------------------------------------------- ------------- -------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------
Proceeds from sale of shares 1,040,754,759 931,933,710
- ---------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 4,384,166 1,945,475
- ---------------------------------------------------------------
Cost of shares redeemed (955,314,263) (913,227,051)
- --------------------------------------------------------------- ------------- -------------
Change in net assets resulting from share transactions 89,824,662 20,652,134
- --------------------------------------------------------------- ------------- -------------
Change in net assets 89,824,662 20,652,134
- ---------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------
Beginning of period 254,038,679 233,386,545
- --------------------------------------------------------------- ------------- -------------
End of period $ 343,863,341 $ 254,038,679
- --------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MINNESOTA MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Minnesota Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund offers two classes of shares: Institutional Shares and Cash Series Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
73.4% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
supported (backed) by a letter of credit for any one institution or agency
does not exceed 10.9% of total investments.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Board of Trustees. The Fund will not
incur any registration costs upon such resales. The Fund's restricted
securities are valued at the price provided by dealers in the secondary
market or, if no market prices are available, at the fair value as
determined by the Fund's pricing committee. Additional information on each
restricted security held at October 31, 1995 is as follows:
<TABLE>
<CAPTION>
FUND
SECURITY ACQUISITION DATE ACQUISITION COST
--------------------------------------- ----------------- -----------------
<S> <C> <C>
Minneapolis/St. Paul MN Housing Finance
Board, SFM Revenue Bonds, Merlots
(Series D) 10/5/95 4,800,000
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $343,863,341.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
INSTITUTIONAL SHARES 1995 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 546,893,719 554,305,186
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 425,031 266,557
- ---------------------------------------------------------------
Shares redeemed (494,630,825) (560,732,943)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Institutional share transactions 52,687,925 (6,161,200)
- --------------------------------------------------------------- ------------ ------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
CASH SERIES SHARES 1995 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 493,861,040 377,628,524
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 3,959,135 1,678,918
- ---------------------------------------------------------------
Shares redeemed (460,683,438) (352,494,108)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Cash Series share transactions 37,136,737 26,813,334
- --------------------------------------------------------------- ------------ ------------
Net change resulting from share transactions 89,824,662 20,652,134
- --------------------------------------------------------------- ------------ ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the daily net assets of the Fund to finance activities intended to result in the
sale of the Fund's Cash Series Shares. The Plan provides that the Fund may incur
distribution expenses up to .50 of 1% of the average daily net assets of the
Cash Series Shares, annually, to compensate FSC. FSC may voluntarily choose to
waive a portion of its fee. FSC can modify or terminate this voluntary waiver at
any time at its sole discretion.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of each class of shares for the period. This fee
is to obtain certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive a portion of its fee. FSS can
modify or terminate this voluntary waiver at any time at its sole discretion.
For the fiscal year ended, October 31, 1995, the Institutional Shares fully
waived its shareholder services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company, (FServ) serves as transfer and dividend disbursing agent for the Fund.
This fee is based on the size, type, and number of accounts and transactions
made by shareholders.
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS--During the year ended October 31, 1995, the Fund engaged
in purchase and sale transactions with funds that have a common investment
adviser, common Directors/Trustees, and/or common Officers. These transactions
were made at current market value pursuant to Rule 17a-7 under the Act amounting
to $476,190,000 and $428,480,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Minnesota Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of
Minnesota Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust, a Massachusetts business trust), including the schedule of portfolio
investments, as of October 31, 1995, the related statement of operations for the
year then ended, and the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights (see pages 2 and 16
of the prospectus) for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Minnesota Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations for the year then
ended, and the changes in its net assets for each of the two years in the period
then ended and the financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Minnesota Municipal Cash Trust
Cash Series Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
- ----------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- ----------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- ----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MINNESOTA MUNICIPAL
CASH TRUST
CASH SERIES SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated December 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229873
0082715A-CSS (12/95)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MINNESOTA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares of Minnesota Municipal Cash Trust (the "Fund") offered
by this prospectus represent interests in a non-diversified portfolio of
Federated Municipal Trust (the "Trust"), an open-end management investment
company (a mutual fund). The Fund invests primarily in short-term Minnesota
municipal securities, including securities of states, territories, and
possessions of the United States which are not issued by or on behalf of
Minnesota, or its political subdivisions and financing authorities, but which
provide income exempt from federal regular income tax and the regular personal
income taxes imposed by the State of Minnesota consistent with stability of
principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Minnesota Municipal Securities 6
Investment Risks 6
Non-Diversification 7
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Institutional Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 9
- ------------------------------------------------------
HOW TO REDEEM SHARES 10
- ------------------------------------------------------
ACCOUNT AND SHARE INFORMATION 11
- ------------------------------------------------------
TAX INFORMATION 12
- ------------------------------------------------------
Federal Income Tax 12
State and Local Taxes 13
OTHER CLASSES OF SHARES 13
- ------------------------------------------------------
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
CASH SERIES SHARES 15
- ------------------------------------------------------
FINANCIAL STATEMENTS 16
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 33
- ------------------------------------------------------
ADDRESSES 34
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)...................................................... 0.13%
12b-1 Fee............................................................................. None
Total Other Expenses.................................................................. 0.17%
Shareholder Services Fee (after waiver)(2)................................. 0.00%
Total Operating Expenses(3)...................................................... 0.30%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.40%.
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 0.82% absent the voluntary
waivers of a portion of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Institutional Shares of the
Fund will bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Fund Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ---------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period......... $3 $10 $17 $ 38
</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.
MINNESOTA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 33.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991 1990(A)
------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------
Net investment income 0.04 0.03 0.02 0.03 0.05 0.01
- --------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------
Distributions from net investment
income (0.04) (0.03) (0.02) (0.03) (0.05) (0.01)
- -------------------------------------- ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------- ------ ------ ------ ------ ------ ------
TOTAL RETURN (B) 3.82% 2.58% 2.43% 3.19% 4.89% 0.90%
- --------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------
Expenses 0.30% 0.31% 0.31% 0.31% 0.30% 0.01%*
- --------------------------------------
Net investment income 3.77% 2.55% 2.40% 3.10% 4.73% 6.45%*
- --------------------------------------
Expense waiver/reimbursement (c) 0.52% 0.34% 0.34% 0.33% 0.43% 0.69%*
- --------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------
Net assets, end of period (000
omitted) $212,392 $159,704 $165,865 $245,168 $124,603 $75,904
- --------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 10, 1990 (date of initial
public investment) to October 31, 1990.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust September 1, 1989. The Declaration of Trust permits the Trust to offer
separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established two classes of shares known as Institutional Shares and Cash Series
Shares. This prospectus relates only to Institutional Shares of the Fund, which
are designed primarily for financial institutions acting in a fiduciary capacity
as a convenient means of accumulating an interest in a professionally managed,
non-diversified portfolio investing primarily in short-term Minnesota municipal
securities. The Fund may not be a suitable investment for retirement plans or
for non-Minnesota taxpayers because it invests in municipal securities of that
state. A minimum initial investment of $25,000 within a 90-day period is
required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the regular personal income taxes imposed by the State of
Minnesota consistent with stability of principal. This investment objective
cannot be changed without shareholder approval. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
complying with the various requirements of Rule 2a-7 under the Investment
Company Act of 1940 which regulates money market mutual funds and by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Minnesota municipal securities (as defined below) maturing in 13 months or less.
As a matter of investment policy, which cannot be changed without shareholder
approval, the Fund invests its assets so that (1) at least 80% of the Fund's
annual interest income will be exempt from federal regular income tax and
Minnesota regular personal income tax ("exempt interest dividends"); and (2) at
least 95% of the exempt interest dividends that the Fund pays to its
shareholders will derive interest income from Minnesota municipal obligations.
The remaining 5% of such exempt interest dividends paid to shareholders will
derive either from interest income on Minnesota municipal securities or interest
income which is exempt from both federal regular and Minnesota regular personal
income taxes. (Federal regular income tax does not include the federal
individual alternative minimum tax or the federal alternative minimum tax for
corporations.) The average maturity of the securities in the Fund's portfolio,
computed on a dollar-weighted basis, will be 90 days or less. Unless indicated
otherwise, the investment policies may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of Minnesota and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and Minnesota state income tax imposed upon non-corporate taxpayers ("Minnesota
Municipal Securities"). Examples of Minnesota Municipal Securities include, but
are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Minnesota
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Minnesota Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be credit
enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; 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 Minnesota
Municipal Securities is subject to the federal alternative minimum tax.
MINNESOTA MUNICIPAL SECURITIES
Minnesota Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
Minnesota Municipal Securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Minnesota Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Minnesota Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of Minnesota Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of Minnesota
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Minnesota Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Minnesota Municipal Securities could involve an increased risk to the Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Minnesota Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through 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
its total assets to secure such borrowings. These investment limitations cannot
be changed without shareholder approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, Chairman and
Trustee of Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son,
J. Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for Institutional Shares
of the Fund. It is a Pennsylvania corporation organized on November 14, 1969,
and is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to .25 of 1% of the average
daily net asset value of Institutional Shares, computed at an annual rate, to
obtain certain personal services for shareholders and provide maintenance of
shareholder accounts ("shareholder services"). From time to time and for such
periods as deemed appropriate, the amount stated above may be reduced
voluntarily.
Under the Shareholder Services Agreement, Federated Shareholder Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- --------------------- -----------------------------------
.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
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Institutional Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
net asset value per share is determined by subtracting liabilities attributable
to shares from the value of Fund assets attributable to shares, 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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is open for business. Shares may be purchased either by wire or by
check. The Fund reserves the right to reject any purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone. The
minimum initial investment is $25,000. However, an account may be opened with a
smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
PURCHASING SHARES BY WIRE. Shares may be purchased by Federal Reserve wire by
calling the Fund before 1:00 p.m. (Eastern time) to place an order. The order is
considered received immediately. Payment by federal funds must be received
before 3:00 p.m. (Eastern time) that day. Federal funds should be wired as
follows: Federated Services Company, c/o State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: Minnesota Municipal Cash
Trust--Institutional Shares; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by mailing a check made
payable to Minnesota Municipal Cash Trust--Institutional Shares to: Federated
Services Company, P.O. Box 8600, Boston, MA 02266-8600. Orders by mail are
considered received when payment by check is converted into federal funds. This
is normally the next business day after the check is received.
SUBACCOUNTING SERVICES. Financial institutions are encouraged to open single
master accounts. A subaccounting system is available through the transfer agent
to minimize internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Financial
institutions may charge or pass through subaccounting fees as part of or in
addition to normal trust or agency account fees. They may also charge fees for
other services provided which may be related to the ownership of Fund shares.
This prospectus should, therefore, be read together with any agreement between
the customer and the financial institution with regard to the services provided,
the fees charged for those services, and any restrictions and limitations
imposed. State securities laws may require certain financial institutions such
as depository institutions to register as dealers.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Federated
Services Company receives the redemption request. Redemptions will be made on
days on which the Fund computes its net asset value. Redemption requests must be
received in proper form and can be made as described below.
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 p.m (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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement.
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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If shares certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
ACCOUNT AND SHARE 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. Shares purchased by
wire before 1:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by check begin earning dividends the day after the check is converted
into federal funds.
CAPITAL GAINS. The Fund does not expect to realize any capital gains or losses.
If capital gains or losses were to occur, they could result in an increase or
decrease in dividends. The Fund will distribute in cash or additional shares any
realized net long-term capital gains at least once every 12 months.
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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance
falls below a required minimum value of $25,000 due to shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
VOTING RIGHTS. Each shareholder has one vote in Trustee elections and other
matters submitted to shareholders for vote. All shares of all classes of each
portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting 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 December 4, 1995, Resource Bank & Trust Co., Minneapolis, MN, and Var &
Co., St. Paul, MN, owned 25.57% and 49.63%, respectively, of the voting
securities of the Fund's Institutional Shares 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.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Fund may purchase all types of municipal bonds, including private activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than
Minnesota. Shareholders are urged to consult their own tax advisers regarding
the status of their accounts under state and local tax laws.
MINNESOTA TAXES. Under existing Minnesota laws, distributions made by the Fund
will be exempt from Minnesota regular personal income taxes provided that such
distributions qualify as exempt-interest dividends under the Internal Revenue
Code, and provided further that 95% of such distributions are derived from
interest on obligations issued by the State of Minnesota or any of its political
or governmental subdivisions, municipalities, or governmental agencies or
instrumentalities. Distributions made by the Fund will also be exempt to the
extent that they are derived from interest on federal obligations and are
reported federally as dividend income by shareholders. Conversely, to the extent
that distributions made by the Fund are derived from other types of obligations,
such distributions will be subject to Minnesota regular personal income taxes.
Dividends of the Fund are not exempt from Minnesota corporate income taxes.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called Cash Series Shares. Cash
Series Shares are sold at net asset value primarily to retail customers of
financial institutions and are subject to a minimum initial investment of
$10,000 over a 90-day period.
All classes are subject to certain of the same expenses.
Cash Series Shares are distributed under a 12b-1 Plan adopted by the Fund and
also are subject to shareholder services fees.
Expense differences between classes may affect the performance of each class.
To obtain more information and a prospectus for any other class, investors may
call 1-800-235-4669.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the shares, tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
MINNESOTA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH SERIES SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants, on page 33.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------
1995 1994 1993 1992 1991(A)
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.04
- ------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.02) (0.03) (0.04)
- ------------------------------------------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------ ------ ------ ------ ------ ------
TOTAL RETURN (B) 3.41% 2.17% 2.02% 2.78% 3.60%
- ------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------
Expenses 0.70% 0.71% 0.71% 0.71% 0.64%*
- ------------------------------------------
Net investment income 3.37% 2.15% 2.01% 2.75% 4.11%*
- ------------------------------------------
Expense waiver/reimbursement (c) 0.62% 0.61% 0.44% 0.44% 0.59%*
- ------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------
Net assets, end of period (000 omitted) $131,471 $94,335 $67,521 $75,044 $69,747
- ------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from January 7, 1991 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
MINNESOTA MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.3%
- -----------------------------------------------------------------------
MINNESOTA--99.0%
-------------------------------------------------------
$ 6,750,000 Anoka City, MN Solid Waste Disposal Authority, 3.85% CP
(United Power Associates)/(National Rural Utilities
Cooperative Finance Corp. GTD), Mandatory Tender
11/10/1995 VMIG1 $ 6,750,000
-------------------------------------------------------
2,050,000 Anoka, MN, Multifamily Housing Revenue Bonds Weekly
VRDNs (Walker Plaza Project)/(First Bank NA,
Minneapolis LOC) A-1 2,050,000
-------------------------------------------------------
3,880,000 Apple Valley, MN, IDRB (Series 1995) Weekly VRDNs (AV
Development Company Project)/(Firstar Bank, Minnesota
LOC) A-1 3,880,000
-------------------------------------------------------
2,800,000 Baudette, MN, IDR (Series 1989) Weekly VRDNs (Reid
Powell, Inc.)/(Nationsbank of Georgia, N.A. LOC) P-1 2,800,000
-------------------------------------------------------
2,000,000 Becker, MN, PCR (Series 1993-B), 3.75% CP (Northern
States Power Co.), Mandatory Tender 1/25/1996 VMIG1 2,000,000
-------------------------------------------------------
4,500,000 Becker, MN, PCR (Series 1993A & B), 3.80% CP (Northern
States Power Co.), Mandatory Tender 11/21/1995 VMIG1 4,500,000
-------------------------------------------------------
4,000,000 Becker, MN, PCR (Series 1993A & B), 3.80% CP (Northern
States Power Co.), Mandatory Tender 11/22/1995 VMIG1 4,000,000
-------------------------------------------------------
1,000,000 Bloomington, MN Port Authority, Special Tax Revenue
Refunding Bonds (Series 1994B) Weekly VRDNs (Mall of
America)/(FSA INS)/(Credit Local de France LIQ) A-1+ 1,000,000
-------------------------------------------------------
3,600,000 Bloomington, MN, IDRB (Series 1995) Weekly VRDNs (Now
Technologies, Inc. Project)/(Norwest Bank Minnesota,
Minneapolis LOC) A-1+ 3,600,000
-------------------------------------------------------
5,000,000 Bloomington, MN, Multi-Family Housing Weekly VRDNs
(Crowl Bloomington Apartments)/(Citibank NA, New York
LOC) P-1 5,000,000
-------------------------------------------------------
3,490,000 Brooklyn Center, MN, ISD #286, 4.70% TANs (Minnesota
State GTD), 3/27/1996 NR(2) 3,491,332
-------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
MINNESOTA--CONTINUED
-------------------------------------------------------
$ 8,080,000 Burnsville, MN, Multi-Family Housing Weekly VRDNs
(Berkshire of Burnsville)/(Sumitomo Bank Ltd., Osaka
LOC) A-1 $ 8,080,000
-------------------------------------------------------
1,270,000 Chaska, MN IDA Weekly VRDNs (Laeration Industries)/
(Norwest Bank Minnesota, Minneapolis LOC) A-1+ 1,270,000
-------------------------------------------------------
1,900,000 Coon Rapids, MN Hospital Authority, (Series 1985)
Weekly VRDNs (Health Central System)/(First Bank NA,
Minneapolis LOC) A-1 1,900,000
-------------------------------------------------------
1,065,000 Crosby-Ironton, MN Independent School District No. 182,
GO Tax Anticipation Certificates of Indebtedness
(Series 1995A), 4.75% TANs (Minnesota State GTD),
3/22/1996 NR(2) 1,065,194
-------------------------------------------------------
5,500,000 Crystal, MN IDA Weekly VRDNs (Crystal Gallery Mall,
MN)/(Citibank NA, New York LOC) P-1 5,500,000
-------------------------------------------------------
10,745,000 Dakota County & Washington County MN Housing &
Redevelopment Authority, Bloomington Mortgage Revenue,
5.75% TOBs (GNMA COL)/(Meridian Bank, Reading, PA LIQ),
Optional Tender 9/1/1996 NR(1) 10,896,281
-------------------------------------------------------
1,835,000 Dakota County, MN Housing & Redevelopment Authority,
(Custodial Receipts), 5.10% TOBs (GNMA COL)/(Meridian
Bank, Reading, PA LIQ), Optional Tender 3/1/1996 NR(1) 1,835,000
-------------------------------------------------------
3,000,000 Dakota County, Washington County & Anoka City, MN
Housing & Redevelopment Authority, (Custodial
Receipts)/(Series 1988), 4.35% TOBs (United States
Treasury COL)/(Meridian Bank, Reading, PA LIQ),
Optional Tender 11/1/1995 NR(1) 3,000,000
-------------------------------------------------------
4,785,000 Duluth, MN, GO Certificate of Indebtedness (Series
1995), 5.00% TANs, 12/29/1995 NR(3) 4,785,874
-------------------------------------------------------
8,000,000 Eagan, MN, Multi-Family Housing (Series 1992A) Weekly
VRDNs (Cinnamon Ridge)/(Mellon Bank NA, Pittsburgh LOC) VMIG1 8,000,000
-------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
MINNESOTA--CONTINUED
-------------------------------------------------------
$ 870,000 Eden Prairie, MN IDA, #194 Weekly VRDNs (Richard W.
Cohen Project)/(Norwest Bank Minnesota, Minneapolis
LOC) P-1 $ 870,000
-------------------------------------------------------
138,004 Eden Prairie, MN IDA, (Series 1987) Weekly VRDNs
(Minnesota Supply Co.)/(Norwest Bank Minnesota,
Minneapolis LOC) P-1 138,004
-------------------------------------------------------
1,200,000 Elk River, MN Weekly VRDNs (Tescom Project)/(Norwest
Bank Minnesota, Minneapolis LOC) P-1 1,200,000
-------------------------------------------------------
5,000,000 Faribault, MN IDA, (Series 1988) Weekly VRDNs (Jerome
Foods)/(Norwest Bank Minnesota, Minneapolis LOC) P-1 5,000,000
-------------------------------------------------------
1,000,000 Hennepin Co. MN, (Series 1995C) Weekly VRDNs (Hennepin
Co. MN GTD) NR(1) 1,000,000
-------------------------------------------------------
2,500,000 Hubbard County, MN, Solid Waste Disposal (Series 1990)
Weekly VRDNs (Potlatch Corp.)/(Credit Suisse, Zurich
LOC) A-1+ 2,500,000
-------------------------------------------------------
4,000,000 Maple Grove, MN IDA, (Series 1991A) Weekly VRDNs (Eagle
Ridge, MN Apartments)/(Sumitomo Bank Ltd., Osaka LOC) A-1 4,000,000
-------------------------------------------------------
3,000,000 Maple Grove, MN IDA, (Series 1991B) Weekly VRDNs (Eagle
Ridge, MN Apartments)/(First Bank NA, Minneapolis LOC) A-1 3,000,000
-------------------------------------------------------
2,025,000 Maplewood, MN, Multi-Family Housing (Series 1993)
Weekly VRDNs (Silver Ridge Project)/(Federal Home Loan
Bank of Chicago LOC) A-1+ 2,025,000
-------------------------------------------------------
2,640,000 Mendota Heights, MN, Multi-Family Revenue Bonds Weekly
VRDNs (Lexington Heights Apartments)/ (Sumitomo Bank
Ltd., Osaka LOC) A-1 2,640,000
-------------------------------------------------------
1,000,000 Metropolitan Council, MN, Minneapolis-St. Paul
Metropolitan Area (Series B), 5.50% Bonds, 12/1/1995 NR(1) 1,000,832
-------------------------------------------------------
5,000,000 Minneapolis Special School District, MN, GO Tax
Anticipation Certificate of Indebtedness Independent
School District No 1, 5.75% TANs, 1/25/1996 SP-1+ 5,007,196
-------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
--------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
MINNESOTA--CONTINUED
-------------------------------------------------------
$ 715,000 Minneapolis, MN IDA Weekly VRDNs (JTJ Co.)/(First Bank
NA, Minneapolis LOC) P-1 $ 715,000
-------------------------------------------------------
1,400,000 Minneapolis, MN, (Series 1989) Weekly VRDNs (Mt. Sinai
Medical Building Association)/(Norwest Bank Minnesota,
Minneapolis LOC) A-1+ 1,400,000
-------------------------------------------------------
7,000,000 Minneapolis, MN, (Series 1995B) Weekly VRDNs VMIG1 7,000,000
-------------------------------------------------------
3,000,000 Minneapolis, MN, GO Bonds (Series 1995) Weekly VRDNs
(Arena Acquisition Project (MN)) A-1+ 3,000,000
-------------------------------------------------------
3,870,000 Minneapolis, MN, Rental Housing Revenue Bonds (Series
1994A), 5.40% TOBs (Driftwood Apartments
Project)/(First Bank NA, Minneapolis LOC), Mandatory
Tender 11/1/1995 A-1 3,870,000
-------------------------------------------------------
4,800,000 (a) Minneapolis/St. Paul MN Housing Finance Board, SFM
Revenue Bonds, Merlots (Series D), 4.375% TOBs (GNMA
COL)/(Meridian Bank, Reading, PA LIQ), Optional Tender
4/1/1996 NR(1) 4,800,000
-------------------------------------------------------
1,276,000 Minneapolis/St. Paul MN Housing Finance Board, Single
Family Mortgage Revenue Bonds, 4.625% TOBs (GNMA
COL)/(Meridian Bank, Reading, PA LIQ), Optional Tender
11/1/1995 NR(1) 1,276,000
-------------------------------------------------------
8,000,000 Minnesota State Commissioner of Iron Range Resources &
Rehabilitation, (Series 1991) Weekly VRDNs (Louisiana-
Pacific Corp.)/(Wachovia Bank of NC, NA, Winston-Salem
LOC) P-1 8,000,000
-------------------------------------------------------
5,000,000 Minnesota State HFA, Single Family Mortgage Bonds
(Series V), 4.95% TOBs (Bayerische Landesbank
Girozentrale LOC), Mandatory Tender 12/14/1995 A-1+ 5,000,000
-------------------------------------------------------
3,800,000 Minnesota State Higher Education Coordinating Board,
(Series 1992A) Weekly VRDNs (First Bank NA, Minneapolis
LIQ) VMIG1 3,800,000
-------------------------------------------------------
7,000,000 Minnesota State Higher Education Coordinating Board,
1992 (Series B) Weekly VRDNs (First Bank NA,
Minneapolis LIQ) VMIG1 7,000,000
-------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
--------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
MINNESOTA--CONTINUED
-------------------------------------------------------
$ 6,500,000 Minnesota State Higher Education Coordinating Board,
1992 (Series C) Weekly VRDNs (First Bank NA,
Minneapolis LIQ) VMIG1 $ 6,500,000
-------------------------------------------------------
12,700,000 Minnesota State Higher Education Coordinating Board,
1992 (Series C) Weekly VRDNs (First Bank NA,
Minneapolis LIQ) VMIG1 12,700,000
-------------------------------------------------------
3,400,000 Minnesota State Higher Education Coordinating Board,
Supplemental Student Loan Program Variable Rate
Refunding Revenue Bonds (Series 1994A) Weekly VRDNs
(Norwest Bank Minnesota, Minneapolis LIQ) VMIG1 3,400,000
-------------------------------------------------------
4,300,000 Minnesota State Higher Education Facility Authority
Weekly VRDNs (Carlton College)/(Swiss Bank Corp., Basle
LOC) VMIG1 4,300,000
-------------------------------------------------------
5,925,000 Minnesota State, 7.00% Bonds (United States Treasury
PRF), 8/1/1996 (@100) NR(1) 6,069,103
-------------------------------------------------------
11,000,000 Minnesota Tax and Aid Anticipation Borrowing Program,
(Series 1995A), 4.25% TANs (Minnesota State GTD),
8/23/1996 NR(2) 11,025,570
-------------------------------------------------------
7,300,000 Minnesota Tax and Aid Anticipation Borrowing Program,
Certificates of Participation, Aid Anticipation Series
1995B, 4.30% TRANs (Minnesota State GTD), 9/13/1996 NR(2) 7,318,174
-------------------------------------------------------
9,800,000 Minnetonka, MN, Multi-Family Housing Revenue Bonds
Weekly VRDNs (The Cliffs at Ridgedale)/(Citibank NA,
New York LOC) A-1 9,800,000
-------------------------------------------------------
5,900,000 Minnetonka, MN, Multifamily Housing Revenue Refunding
Bonds (Series 1995) Weekly VRDNs (Southampton
Apartments Project (MN))/(National Bank of Canada,
Montreal LOC) P-1 5,900,000
-------------------------------------------------------
1,300,000 New Brighton, MN, IDR Weekly VRDNs (Unicare Homes,
Inc.)/(Banque Paribas, Paris LOC) A-1 1,300,000
-------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
--------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
MINNESOTA--CONTINUED
-------------------------------------------------------
$ 1,000,000 New Hope, MN IDRB, (Series 1994) Weekly VRDNs (Gaines
and Hanson Printing Co.)/(Norwest Bank Minnesota,
Minneapolis LOC) A-1+ $ 1,000,000
-------------------------------------------------------
3,825,000 New Hope, MN Weekly VRDNs (Paddock Labs)/ (Norwest Bank
Minnesota, Minneapolis LOC) P-1 3,825,000
-------------------------------------------------------
2,580,000 Olmsted County, MN Building Authority, Certificates of
Participation Weekly VRDNs (Human Services
Infrastructure)/(Sanwa Bank Ltd, Osaka LOC) A-1+ 2,580,000
-------------------------------------------------------
2,600,000 Perham, MN IDA Weekly VRDNs (Land O' Lakes, Inc.)/
(Rabobank Nederland, Utrecht LOC) A-1+ 2,600,000
-------------------------------------------------------
1,365,000 Plymouth, MN Weekly VRDNs (Nuaire, Inc.)/ (Norwest Bank
Minnesota, Minneapolis LOC) P-1 1,365,000
-------------------------------------------------------
5,000,000 Plymouth, MN, IDRB (Series 1994) Weekly
VRDNs (Olympic Steel, Inc.)/(National City Bank,
Cleveland, OH LOC) P-1 5,000,000
-------------------------------------------------------
1,690,000 Port of Austin, MN Weekly VRDNs (Mower House
Color)/(Norwest Bank Minnesota, Minneapolis LOC) P-1 1,690,000
-------------------------------------------------------
6,500,000 Rochester, MN Health Care Facility Authority Weekly
VRDNs (Mayo Foundation) VMIG1 6,500,000
-------------------------------------------------------
4,000,000 Rochester, MN Health Care Facility Authority Weekly
VRDNs (Mayo Foundation) VMIG1 4,000,000
-------------------------------------------------------
2,000,000 Rochester, MN Health Care Facility Authority, (Series
C), 3.70% CP (Mayo Foundation), Mandatory Tender
11/16/1995 VMIG1 2,000,000
-------------------------------------------------------
1,250,000 Rogers, MN IDA Weekly VRDNs (Metal Sales Manufacturing
Corp.)/(Society National Bank, Cleveland, OH LOC) P-1 1,250,000
-------------------------------------------------------
2,925,000 Rogers, MN IDA, Variable Rate Demand IDRB Weekly VRDNs
(DAC Development, LLC Project)/(Norwest Bank Minnesota,
Minneapolis LOC) A-1+ 2,925,000
-------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
--------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
MINNESOTA--CONTINUED
-------------------------------------------------------
$ 8,000,000 Shakopee, MN Hospital Finance Authority Weekly VRDNs
(St. Francis Regional Medical Center)/(Citibank NA, New
York LOC) A-1 $ 8,000,000
-------------------------------------------------------
2,000,000 Southern Minnesota Municipal Power Agency, 9.50% Bonds
(United States Treasury PRF), 1/1/1996 NR(1) 2,055,531
-------------------------------------------------------
7,000,000 St. Cloud, MN Hospital Facility Authority, (Series
1990A) Weekly VRDNs (St. Cloud Hospital)/(Kredietbank
N.V., Brussels LOC) A-1+ 7,000,000
-------------------------------------------------------
1,735,000 St. Cloud, MN Housing & Redevelopment Authority,
Revenue Refunding Bonds (Series 1994A) Weekly VRDNs
(Coborn's Incorporated Project)/(Norwest Bank
Minnesota, Minneapolis LOC) A-1+ 1,735,000
-------------------------------------------------------
3,000,000 St. Cloud, MN Housing & Redevelopment Authority,
Revenue Refunding Bonds (Series 1994B) Weekly VRDNs
(Coborn's Incorporated Project)/(Norwest Bank
Minnesota, Minneapolis LOC) A-1+ 3,000,000
-------------------------------------------------------
250,000 St. Louis Park Hennepin County, MN, GO (Series 1987C)
Weekly VRDNs (Bayerische Vereinsbank AG, Munich LOC) VMIG1 250,000
-------------------------------------------------------
5,000,000 St. Paul, MN Housing & Redevelopment Authority Weekly
VRDNs (District Cooling St. Paul, Inc.)/
(Credit Local de France LOC) A-1+ 5,000,000
-------------------------------------------------------
500,000 St. Paul, MN Housing & Redevelopment Authority Weekly
VRDNs (United Way)/(First Bank NA, Minneapolis LOC) A-1 500,000
-------------------------------------------------------
2,350,000 St. Paul, MN Housing & Redevelopment Authority,
(Series 1994) Weekly VRDNs (Minnesota Children's
Museum)/(First Bank NA, Minneapolis LOC) A-1 2,350,000
-------------------------------------------------------
2,000,000 St. Paul, MN Housing & Redevelopment Authority,
District Cooling Revenue Bonds (1995 Series I) Weekly
VRDNs (Credit Local de France LOC) P-1 2,000,000
-------------------------------------------------------
7,250,000 St. Paul, MN Independent School District No. 625,
(Series A), 5.375% TANs, 3/28/1996 MIG1 7,281,855
-------------------------------------------------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
--------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
MINNESOTA--CONTINUED
-------------------------------------------------------
$ 4,600,000 St. Paul, MN Port Authority, (Series 1991) Weekly VRDNs
(West Gate Office)/(First Bank NA, Minneapolis LOC) A-1 $ 4,600,000
-------------------------------------------------------
1,850,000 St. Peter, MN Independent School District #508, Aid
Anticipation Certificates of Indebtedness, 3.96% BANs
(Minnesota State GTD), 8/29/1996 NR(2) 1,850,427
-------------------------------------------------------
1,000,000 Steele County, MN, IDRB (Series 1994) Weekly VRDNs
(Blount, Inc.)/(Nationsbank of Georgia, N.A. LOC) A-1 1,000,000
-------------------------------------------------------
6,500,000 University of Minnesota, (Series F), 3.65% TOBs
(Regents of University of Minnesota), Optional Tender
2/1/1996 A-1+ 6,500,000
-------------------------------------------------------
13,015,000 Washington County, MN Housing & Redevelopment
Authority, (Series 90) Weekly VRDNs (Granada Pond
Apartments)/(Sumitomo Bank Ltd., Osaka LOC) A-1 13,015,000
-------------------------------------------------------
1,490,000 Wells, MN, 5.00% TOBs (Stokely, Inc.)/(NBD Bank, NA,
Indianapolis LOC), Optional Tender 12/1/1995 A-1+ 1,490,000
-------------------------------------------------------
3,000,000 White Bear Lake, MN, (Series 1993) Weekly VRDNs (Taylor
Corp.)/(Norwest Bank Minnesota, Minneapolis LOC) A-1+ 3,000,000
-------------------------------------------------------
5,180,000 White Bear, MN Weekly VRDNs (Thermoform Plastic,
Inc.)/(Norwest Bank Minnesota, Minneapolis LOC) A-1+ 5,180,000
-------------------------------------------------------
2,000,000 Winsted, MN IDA Weekly VRDNs (Sterner Lighting
Systems)/(Fleet National Bank, Providence, R.I. LOC) A-1 2,000,000
------------------------------------------------------- ------------
Total 340,501,373
------------------------------------------------------- ------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
--------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
PUERTO RICO--0.3%
-------------------------------------------------------
$ 1,000,000 Puerto Rico Government Development Bank Weekly VRDNs
(Credit Suisse, Zurich LOC) A-1+ $ 1,000,000
------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $341,501,373
------------------------------------------------------- ------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 35.3% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. This security has been determined to be
liquid under criteria established by the Board of Trustees. At the end of
the period, this security amounted to $4,800,000 which represents 1.4% of
net assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($343,863,341) at October 31, 1995.
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
BANs -- Bond Anticipation Notes
COL -- Collateralized
CP -- Commercial Paper
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GO -- General Obligation
GTD -- Guaranty
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDR -- Industrial Development Revenue
IDRB -- Industrial Development Revenue Bonds
INS -- Insured
ISD -- Independent School District
LIQ -- Liquidity Agreement
LOC -- Letter of Credit
PCR -- Pollution Control Revenue
PRF -- Prerefunded
SFM -- Single Family Mortgage
TANs -- Tax Anticipation Notes
TOBs -- Tender Option Bonds
TRANs -- Tax and Revenue Anticipation Notes
VRDNs -- Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
MINNESOTA MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $341,501,373
- -------------------------------------------------------------------------------
Cash 780,299
- -------------------------------------------------------------------------------
Income receivable 2,441,223
- -------------------------------------------------------------------------------
Deferred expenses 2,452
- ------------------------------------------------------------------------------- ------------
Total assets 344,725,347
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Payable for shares redeemed $ 75,028
- --------------------------------------------------------------------
Income distribution payable 656,222
- --------------------------------------------------------------------
Accrued expenses 130,756
- -------------------------------------------------------------------- --------
Total liabilities 862,006
- ------------------------------------------------------------------------------- ------------
NET ASSETS for 343,863,341 shares outstanding $343,863,341
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- -------------------------------------------------------------------------------
($212,391,871 / 212,391,871 shares outstanding) $1.00
- ------------------------------------------------------------------------------- ------------
CASH SERIES SHARES:
- -------------------------------------------------------------------------------
($131,471,470 / 131,471,470 shares outstanding) $1.00
- ------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MINNESOTA MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest $13,813,482
- ----------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------
Investment advisory fee $1,357,870
- ---------------------------------------------------------------------
Administrative personnel and services fee 256,977
- ---------------------------------------------------------------------
Custodian fees 69,238
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 98,154
- ---------------------------------------------------------------------
Directors'/Trustees' fees 4,382
- ---------------------------------------------------------------------
Auditing fees 14,885
- ---------------------------------------------------------------------
Legal fees 3,834
- ---------------------------------------------------------------------
Portfolio accounting fees 66,897
- ---------------------------------------------------------------------
Distribution services fee--Cash Series Shares 599,206
- ---------------------------------------------------------------------
Shareholder services fee--Institutional Shares 549,269
- ---------------------------------------------------------------------
Shareholder services fee--Cash Series Shares 299,603
- ---------------------------------------------------------------------
Share registration costs 29,486
- ---------------------------------------------------------------------
Printing and postage 23,165
- ---------------------------------------------------------------------
Insurance premiums 8,171
- ---------------------------------------------------------------------
Miscellaneous 4,686
- --------------------------------------------------------------------- ----------
Total expenses 3,385,823
- ---------------------------------------------------------------------
Waivers--
- ---------------------------------------------------------------------
Waiver of investment advisory fee $(906,031)
- ----------------------------------------------------------
Waiver of distribution services fee--Cash Series Shares (407,672)
- ----------------------------------------------------------
Waiver of shareholder services fee--Institutional Shares (549,269)
- ----------------------------------------------------------
Waiver of shareholder services fee--Cash Series Shares (11,773)
- ---------------------------------------------------------- ---------
Total waivers (1,874,745)
- --------------------------------------------------------------------- ----------
Net expenses 1,511,078
- ---------------------------------------------------------------------------------- -----------
Net investment income $12,302,404
- ---------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MINNESOTA MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------
Net investment income $ 12,302,404 $ 6,226,990
- --------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------
Distributions from net investment income
- ---------------------------------------------------------------
Institutional Shares (8,269,227) (4,475,720)
- ---------------------------------------------------------------
Cash Series Shares (4,033,177) (1,751,270)
- --------------------------------------------------------------- ------------- -------------
Change in net assets resulting from distributions
to shareholders (12,302,404) (6,226,990)
- --------------------------------------------------------------- ------------- -------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------
Proceeds from sale of shares 1,040,754,759 931,933,710
- ---------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 4,384,166 1,945,475
- ---------------------------------------------------------------
Cost of shares redeemed (955,314,263) (913,227,051)
- --------------------------------------------------------------- ------------- -------------
Change in net assets resulting from share transactions 89,824,662 20,652,134
- --------------------------------------------------------------- ------------- -------------
Change in net assets 89,824,662 20,652,134
- ---------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------
Beginning of period 254,038,679 233,386,545
- --------------------------------------------------------------- ------------- -------------
End of period $ 343,863,341 $ 254,038,679
- --------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MINNESOTA MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Minnesota Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund offers two classes of shares: Institutional Shares and Cash Series Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
73.4% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
supported (backed) by a letter of credit for any one institution or agency
does not exceed 10.9% of total investments.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Board of Trustees. The Fund will not
incur any registration costs upon such resales. The Fund's restricted
securities are valued at the price provided by dealers in the secondary
market or, if no market prices are available, at the fair value as
determined by the Fund's pricing committee. Additional information on each
restricted security held at October 31, 1995 is as follows:
<TABLE>
<CAPTION>
FUND
SECURITY ACQUISITION DATE ACQUISITION COST
-------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Minneapolis/St. Paul MN Housing Finance Board, SFM
Revenue Bonds, Merlots (Series D) 10/15/95 $4,800,000
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $343,863,341.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
INSTITUTIONAL SHARES 1995 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 546,893,719 554,305,186
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 425,031 266,557
- ---------------------------------------------------------------
Shares redeemed (494,630,825) (560,732,943)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Institutional share transactions 52,687,925 (6,161,200)
- --------------------------------------------------------------- ------------ ------------
</TABLE>
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
CASH SERIES SHARES 1995 1994
- --------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 493,861,040 377,628,524
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 3,959,135 1,678,918
- ---------------------------------------------------------------
Shares redeemed (460,683,438) (352,494,108)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from Cash Series share transactions 37,136,737 26,813,334
- --------------------------------------------------------------- ------------ ------------
Net change resulting from share transactions 89,824,662 20,652,134
- --------------------------------------------------------------- ------------ ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the daily net assets of the Fund to finance activities intended to result in the
sale of the Fund's Cash Series Shares. The Plan provides that the Fund may incur
distribution expenses up to .50 of 1% of the average daily net assets of the
Cash Series Shares, annually, to compensate FSC. FSC may voluntarily choose to
waive a portion of its fee. FSC can modify or terminate this voluntary waiver at
any time at its sole discretion.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of each class of shares for the period. This fee
is to obtain certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive a portion of its fee. FSS can
modify or terminate this voluntary waiver at any time at its sole discretion.
For the fiscal year ended, October 31, 1995, the Institutional Shares fully
waived its shareholder services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company, (FServ) serves as transfer and dividend disbursing agent for the Fund.
This fee is based on the size, type, and number of accounts and transactions
made by shareholders.
MINNESOTA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS--During the year ended October 31, 1995, the Fund engaged
in purchase and sale transactions with funds that have a common investment
adviser, common Directors/Trustees, and/or common Officers. These transactions
were made at current market value pursuant to Rule 17a-7 under the Act amounting
to $476,190,000 and $428,480,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Minnesota Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of
Minnesota Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust, a Massachusetts business trust), including the schedule of portfolio
investments, as of October 31, 1995, the related statement of operations for the
year then ended, and the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights (see pages 2 and 15
of the prospectus) for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Minnesota Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations for the year then
ended, and the changes in its net assets for each of the two years in the period
then ended and the financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Minnesota Municipal Cash Trust
Institutional Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
- ----------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- ----------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- ----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MINNESOTA MUNICIPAL
CASH TRUST
INSTITUTIONAL SHARES
PROSPECTUS
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated December 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229402
0082715A-IS (12/95)
(LOGO)
MINNESOTA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL CASH TRUST)
CASH SERIES SHARES
INSTITUTIONAL SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectuses of Minnesota Municipal Cash Trust (the "Fund"), a portfolio
of Federated Municipal Trust (the "Trust") dated December 31, 1995. This
Statement is not a prospectus. You may request a copy of the prospectus
or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated December 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated
Investors
INVESTMENT POLICIES 2
Acceptable Investments 2
Participation Interests 2
Municipal Leases 2
Ratings 3
When-Issued and Delayed
Delivery Transactions 4
Repurchase Agreements 4
Reverse Repurchase Agreements 5
Credit Enhancement 5
MINNESOTA INVESTMENT RISKS 6
INVESTMENT LIMITATIONS 7
Regulatory Compliance 11
FEDERATED MUNICIPAL TRUST
MANAGEMENT 5
Share Ownership 10
Trustees Compensation 24
Trustee Liability 26
INVESTMENT ADVISORY SERVICES 26
Investment Adviser 26
Advisory Fees 26
BROKERAGE TRANSACTIONS 27
OTHER SERVICES 29
Fund Administration 29
Custodian and Portfolio
Recordkeeper 29
Transfer Agent 29
Independent Public Accountants 29
DISTRIBUTION PLAN AND SHAREHOLDER
SERVICES AGREEMENT 30
DETERMINING NET ASSET VALUE 31
REDEMPTION IN KIND 32
MASSACHUSETTS PARTNERSHIP LAW 32
THE FUND'S TAX STATUS 33
PERFORMANCE INFORMATION 33
Yield 34
Effective Yield 34
Tax-Equivalent Yield 34
Tax-Equivalency Table 35
Total Return 36
Performance Comparisons 37
ABOUT FEDERATED INVESTORS 38
APPENDIX 40
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by
the Board of Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or
any guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation interests
include the right to demand payment from the issuers of those interests. By
purchasing these participation interests, the Fund is buying a security
meeting the maturity and quality requirements of the Fund and also is
receiving the tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and other
rights under the lease provide for and secure payments on the certificates.
Lease obligations may be limited by municipal charter or the nature of the
appropriation for the lease. Furthermore, a lease may provide that the
participants cannot accelerate lease obligations upon default. The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Board of Trustees, will base
its determination on the following factors: whether the lease can be
terminated by the lessee; the potential recovery, if any, from a sale of the
leased property upon termination of the lease; the lessee's general credit
strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations ("NRSROs") or be of comparable quality to
securities having such ratings. An NRSRO's two highest rating categories are
determined without regard for sub-categories and gradations. For example,
securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Ratings Group
("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or
FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all
considered rated in one of the two highest short-term rating categories. The
Fund will follow applicable regulations in determining whether a security
rated by more than one NRSRO can be treated as being in one of the two
highest short-term rating categories; currently, such securities must be
rated by two NRSROs in one of their two highest rating categories. See
"Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund`s records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20%
of the total value of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price. To the extent that the seller does not
repurchase the securities from the Fund, the Fund could receive less than
the repurchase price on any sale of such securities. The Fund or its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by the
Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institutions, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in
the future the Fund will repurchase the portfolio instrument by remitting
the original consideration plus interest at an agreed-upon rate.
The use of reverse repurchase agreements may enable the Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase agreements
does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in
a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
CREDIT ENHANCEMENT
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.
MINNESOTA INVESTMENT RISKS
Minnesota has a diversified economy, the structure of which has increasingly
come to resemble the nation as a whole. Minnesota's emergence as a regional
center is evidenced by the comparatively high rates of employment growth in
trade, finance, insurance, and service industries over the past ten years.
Agriculture, which had been severely affected since 1981, appears to be
improving with land values now stabilizing at levels seen in the early
1980's. State unemployment rates remain below the national level; and
personal income has grown more rapidly than that of the nation as a whole,
with personal income per capita remaining slightly above the national
average.
Following a period of volatility in the early 1980's, Minnesota's fiscal
operations have been recently characterized by a strong financial position
and moderate debt burden. Minnesota has disciplined its budget process
through frequent reviews of revenue forecasts and timely legislative action.
1994-1995 revenues exceeded projections. The general fund is estimated to
have closed at June 30, 1995 with a balance of $421 million in addition to a
$500 million cash flow reserve. The 1996-1997 biennial budget decreases the
cash flow reserve to $350 million and maintains the general fund at $220
million.
Minnesota's debt position is excellent with nearly exclusive use of general
obligation bonds. Amortization of general obligation debt is rapid, with
nearly three-quarters due within ten years, fully characteristic of high
quality borrowers. Debt service requirements are a mere 3% of annual
expenditures. State credit for Northwest Airlines has been used this year to
back about $45 million in bonds, a much more modest amount than originally
planned.
The overall credit quality of the state is further demonstrated by its debt
ratings. Minnesota maintains an Aa1 rating from Moody's Investors Service,
Inc. Standard & Poor's Ratings Group rates the state 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 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 its total
assets are outstanding. During the period any reverse repurchase agreements
are outstanding, the Fund will restrict the purchase of portfolio securities
to money market instruments maturing on or before the expiration date of the
reverse repurchase agreements, but only to the extent necessary to assure
completion of the reverse repurchase agreements.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings. In those cases, it may pledge
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except that it may acquire publicly
or nonpublicly issued Minnesota municipal securities or temporary
investments or enter into repurchase agreements, in accordance with its
investment objective, policies, limitations, or its Declaration of Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate or real estate limited
partnerships , although it may invest in securities of issuers whose
business involves the purchase or sale of real estate or in securities which
are secured by real estate or interests in real estate.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
securities subject to restrictions on resale under federal securities law,
except for certain restricted securities which meet the criteria for
liquidity established by the Trustees.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase, 25%
or more of the value of its total assets would be invested in any one
industry, or in industrial development bonds or other securities, the
interest upon which is paid from revenues of similar types of projects.
However, the Fund may invest as temporary investments more than 25% of the
value of its assets in cash or cash items, securities issued or guaranteed
by the U.S.
government , its agencies, or instrumentalities, or instruments secured by
these money market instruments, such as repurchase agreements.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies, except
as part of a merger, consolidation, or other acquisition.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers (including companies responsible for paying principal
and interest on industrial development bonds) which have records of less
than three years of continuous operations, including the operation of any
predecessor.
INVESTING FOR CONTROL
The Fund will not invest in securities of a company for the purpose of
exercising control or management.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES
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 association having capital, surplus, and undivided profits
in excess of $100,000,000 at the time of investment to be "cash items."
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such limitation.
The Fund does not intend to borrow money or pledge securities in excess of
5% of the value of its net assets during the coming fiscal year.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940. In particular, the
Fund will comply with the various requirements of Rule 2a-7, 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.
FEDERATED MUNICIPAL TRUST MANAGEMENT
OFFICERS AND TRUSTEES ARE LISTED WITH THEIR ADDRESSES, BIRTHDATES, PRESENT
POSITIONS WITH FEDERATED MUNICIPAL TRUST, AND PRINCIPAL OCCUPATIONS.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director, Trustee, or Managing
General Partner of the Funds. Mr. Donahue is the father of J. Christopher
Donahue, Executive Vice President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative
Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the
Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; founding Chairman,
National Advisory Council for Environmental Policy and Technology and
Federal Emergency Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global 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 of
the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Services Company; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds;
President, Executive Vice President and Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice
President, Federated Shareholder Services; Vice President, Federated
Administrative Services; Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; President and
Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies: American Leaders Fund, Inc.; Annuity
Management Series; Arrow Funds; Automated Government Money Trust; Blanchard
Funds; Blanchard Precious Metals, Inc.; Cash Trust Series II; Cash Trust
Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust; Federated ARMs Fund; Federated Equity Funds; Federated Exchange Fund,
Ltd.; Federated GNMA Trust; Federated Government Trust; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Master Trust;
Federated Short-Term Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 3-5 Years; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal
Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government
Securities, Inc.; Government Income Securities, Inc.; High Yield Cash Trust;
Insurance Management Series; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Investment Series Trust;
Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty Municipal Securities Fund, Inc.; Liberty U.S. Government Money
Market Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.;
Liquid Cash Trust; Managed Series Trust; Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Trust; Municipal Securities
Income Trust; Newpoint Funds; 111 Corcoran Funds; Peachtree Funds; The
Planters Funds; RIMCO Monument Funds; The Shawmut Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust For Government Cash Reserves; Trust
for Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; The Virtus Funds; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.
As of December 4, 1995, the following shareholder(s) of record owned 5% or
more of the outstanding Cash Series Shares of the Minnesota Municipal Cash
Trust: King Holding Corp., St. Paul, MN, 5.35%; Voyageur Fund Managers,
Minneapolis, MN, 8.37%; Juran & Moody, Inc., St. Paul, MN, 8.93%; and FBS
Investment Series, Inc., Minneapolis, MN, 9.22%.
As of December 4, 1995, the following shareholder(s) of record owned 5% or
more of the outstanding Institutional Shares of the Minnesota Municipal Cash
Trust: Resource Bank & Trust Co., Minneapolis, MN, 25.57% and Var & Co.,
St. Paul, MN, 49.63%.
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 68 other investment companies in the
Fund Complex
Thomas G. Bigley $2,458 $20,688 for the Trust and
Trustee 49 other investment companies in the Fund
Complex
John T. Conroy, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
William J. Copeland $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Glen R. Johnson $0 $0 for the Trust and
President and Trustee 14 other investment companies in the
Fund Complex
James E. Dowd $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D. $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Peter E. Madden $2,757 $90,563 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Gregor F. Meyer $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,762 $0 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Wesley W. Posvar $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Marjorie P. Smuts $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of
15 portfolios.
+The information is provided for the last calendar year.
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 the Trust, the Fund, or any shareholder
of the Fund for any losses that may be sustained in the purchase, holding,
or sale of any security or for anything done or omitted by it, except acts
or omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus. For the fiscal years
ended October 31, 1995, 1994, and 1993, the adviser earned $1,357,870,
$1,025,614, and $1,077,211, respectively, of which $906,031, $868,068 and
$915,191, respectively, were waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1-1/2%
per year of the remaining average net assets, the adviser will
reimburse the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and selects
brokers and dealers subject to guidelines established by the Board of
Trustees. The adviser may select brokers and dealers who offer brokerage and
research services. These services may be furnished directly to the Fund or
to the adviser and may include: advice as to the advisability of investing
in securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by
the adviser or its affiliates in advising the 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, 1995, 1994, 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.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred to as
the "Administrators".) For the fiscal years ended October 31, 1995, 1994,
and 1993, the Administrators earned $256,977, $249,373, and $333,328,
respectively. Dr. Henry J. Gailliot, an officer of Federated Management, the
adviser to the Fund, holds approximately 20% of the outstanding common stock
and serves as a director of Commercial Data Services, Inc., a company which
provides computer processing services to Federated Administrative Services.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
TRANSFER AGENT
As transfer agent, Federated Services Company maintains all necessary
shareholder records. For its services, the transfer agent receives a fee
based on size, type, and number of accounts and transactions made by
shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular
circumstances and goals. These activities and services may include, but are
not limited to, marketing efforts; providing office space, equipment,
telephone facilities, and various clerical, supervisory, computer, and other
personnel as necessary or beneficial to establish and maintain shareholder
accounts and records; processing purchase and redemption transactions and
automatic investments of client account cash balances; answering routine
client inquiries; and assisting clients in changing dividend options,
account designations, and addresses.
By adopting the Distribution Plan, the Board of Trustees expects that the
Fund will be able to achieve a more predictable flow of cash for investment
purposes and to meet redemptions. This will facilitate more efficient
portfolio management and assist the Fund in pursuing its investment
objectives. By identifying potential investors whose needs are served by the
Fund's objectives, and properly servicing these accounts, it may be possible
to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the fiscal year ending October 31, 1995, payments in the amount of
$599,206 were made pursuant to the Distribution Plan, of which $407,672 was
waived. In addition, for this period, payments in the amount of $848,872
were made pursuant to the Shareholder Services Agreement, of which $561,042
was waived.
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.
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.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its net
income earned during the year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for those
shareholders paying those fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any additional
shares purchased with dividends earned from the original one share and all
dividends declared on the original and any purchased shares; dividing the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
For the seven-day period ended October 31, 1995, the yields for Cash Series
Shares and Institutional Shares were 3.39% and 3.79%, respectively.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base
period return by: adding 1 to the base period return; raising the sum to the
365/7th power; and subtracting 1 from the result.
For the seven-day period ended October 31, 1995, the effective yields for
Cash Series Shares and Institutional Shares were 3.44% and 3.86%,
respectively.
TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Fund is calculated similarly to the yield
but is adjusted to reflect the taxable yield that the Fund would have had to
earn to equal its actual yield, assuming a 39.6% tax rate (the maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
For the seven-day period ended October 31, 1995, the tax-equivalent yields
for Cash Series Shares and Institutional Shares were 6.53% and 7.30%,
respectively.
TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature. The
interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often free
from state and local taxes as well. As the table below indicates, a "tax-
free" investment can be an attractive choice for investors, particularly in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
State of Minnesota
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
23.00% 36.50% 39.50% 44.50% 48.10%
JOINT $1- $39,001- $94,251- $143,601- OVER
RETURN 39,000 94,250 143,600 256,500 256,500
SINGLE $1- $23,351- $56,551- $117,951- OVER
RETURN 23,350 56,550 117,950 256,500 256,500
Tax-Exempt
Yield Taxable Yield Equivalent
1.50% 1.95% 2.36% 2.48% 2.70% 2.89%
2.00% 2.60% 3.15% 3.31% 3.60% 3.85%
2.50% 3.25% 3.94% 4.13% 4.50% 4.82%
3.00% 3.90% 4.72% 4.96% 5.41% 5.78%
3.50% 4.55% 5.51% 5.79% 6.31% 6.74%
4.00% 5.19% 6.30% 6.61% 7.21% 7.71%
4.50% 5.84% 7.09% 7.44% 8.11% 8.67%
5.00% 6.49% 7.87% 8.26% 9.01% 9.63%
5.50% 7.14% 8.66% 9.09% 9.91% 10.60%
6.00% 7.79% 9.45% 9.92% 10.81% 11.56%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state
and local taxes paid on comparable taxable investments were not used to
increase federal deductions.
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.
For the one-year period ended October 31, 1995, and for the period from
January 7, 1991 (date of initial public investment) through October 31,
1995, the average annual total returns were 3.41% and 2.89%, respectively
for Cash Series Shares. For the one-year period ended October 31, 1995, and
for the period from September 10, 1990 (date of initial public investment)
through October 31, 1995, the average annual total returns were 3.82% and
3.46%, respectively, for Institutional Shares.
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:
O LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories based on total return, which assumes the reinvestment of all
income dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the same
money funds.
o MONEY, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day effective
yield.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making-structured, straightforward, and
consistent. This has resulted in a history of competitive performance with a
range of competitive investment products that have gained the confidence of
thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts,
and traders dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market
funds, a principal means used by money managers today to value money market
fund shares. Other innovations include the first institutional tax-free
money market fund. As of December 31, 1994, Federated Investors managed more
than $31 billion in assets across approximately 43 money market funds,
including 17 government, 8 prime and 18 municipal with assets approximating
$17 billion, $7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed
income management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $2 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds for
a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for
a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt
entities, foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional clients is
headed by John B. Fisher, President, Institutional Sales Division.
*Source: Investment Company Institute
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the
liquidity concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a variable rate demand feature. The first rating (long-
term rating) addresses the likelihood of repayment of principal and interest
when due, and the second rating (short-term rating) describes the demand
characteristics. Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The
definitions for the long-term and the short-term ratings are provided
below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
LONG-TERM DEBT RATINGS
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG
or VMIG ratings is to provide investors with a simple system by which the
relative investment qualities of short-term obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the
use of the VMIG symbol to reflect such characteristics as payment upon
periodic demand rather than fixed maturity dates and payment relying on
external liquidity. In this case, two ratings are usually assigned, (for
example, AAA/VMIG-1); the first representing an evaluation of the degree of
risk associated with scheduled principal and interest payments, and the
second representing an evaluation of the degree of risk associated with the
demand feature. The VMIG rating can be assigned a 1 or 2 designation using
the same definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1 Issuers rated PRIME-1 (or related supporting institutions)
have a superior capacity for repayment of short-term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by
the following characteristics: leading market positions in well
established industries, high rates of return on funds employed,
conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed
financial charges and high internal cash generation, well-established
access to a range of financial markets and assured sources of alternate
liquidity
P-2 Issuers rated PRIME-2 (or related supporting institutions)
have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is
maintained.
LONG-TERM DEBT RATINGS
AAA Bonds which are rated AAA are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change,
such changes is can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in AAA
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
NR Indicates that both the bonds and the obligor or credit enhancer are
not currently rated by S&P or Moody's with respect to short-term
indebtedness. However, management considers them to be of comparable
quality to securities rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "AAA" by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "AA" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.
Cusip 314229873
Cusip 314229402
NEW JERSEY MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares of New Jersey Municipal Cash Trust (the "Fund")
offered by this prospectus represent interests in a non-diversified portfolio of
Federated Municipal Trust (the "Trust"), an open-end management investment
company (a mutual fund). The Fund invests primarily in short-term New Jersey
municipal securities, including securities of states, territories, and
possessions of the United States which are not issued by or on behalf of New
Jersey, or its political subdivisions and financing authorities, but which
provide income exempt from federal regular income tax and New Jersey state
income tax imposed upon non-corporate taxpayers consistent with stability of
principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
New Jersey Municipal Securities 6
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Institutional Service Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 10
- ------------------------------------------------------
Special Purchase Features 10
HOW TO REDEEM SHARES 11
- ------------------------------------------------------
Special Redemption Features 12
ACCOUNT AND SHARE INFORMATION 12
- ------------------------------------------------------
TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
State and Local Taxes 14
OTHER CLASSES OF SHARES 14
- ------------------------------------------------------
PERFORMANCE INFORMATION 15
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 16
- ------------------------------------------------------
FINANCIAL STATEMENTS 17
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 29
- ------------------------------------------------------
ADDRESSES 30
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)..................................................... 0.19%
12b-1 Fee (after waiver) (2).......................................................... 0.00%
Total Other Expenses.................................................................. 0.46%
Shareholder Services Fee (after waiver) (3)................................ 0.15%
Total Operating Expenses (4)................................................... 0.65%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.40%.
(2) The maximum 12b-1 fee is 0.10%.
(3) The maximum shareholder services fee is 0.25%.
(4) The total operating expenses would have been 1.06% absent the voluntary
waivers of a portion of the management fee, 12b-1 fee and a portion of the
shareholder services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Institutional Service Shares of
the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Fund Information".
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- --------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period........ $7 $21 $36 $ 81
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
NEW JERSEY MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants, on page 29.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------
1995 1994 1993 1992 1991(A)
----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.04
- ---------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.02) (0.03) (0.04)
- --------------------------------------------- ----- ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------- ----- ----- ----- ----- ------
TOTAL RETURN (B) 3.36% 2.16% 2.12% 2.86% 3.82%
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 0.65% 0.65% 0.56% 0.55% 0.35%*
- ---------------------------------------------
Net investment income 3.28% 2.19% 2.08% 2.69% 4.11%*
- ---------------------------------------------
Expense waiver/reimbursement (c) 0.41% 0.41% 0.45% 0.51% 0.69%*
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period (000 omitted) $29,81 $36,70 $21,00 $26,84 $17,709
- ---------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from December 13, 1990 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established two classes of shares known as Institutional Service Shares and
Institutional Shares. This prospectus relates only to Institutional Service
Shares of the Fund, which are designed primarily for financial institutions
acting in an agency capacity as a convenient means of accumulating an interest
in a professionally managed, non-diversified portfolio investing primarily in
short-term New Jersey municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-New Jersey taxpayers because it
invests in municipal securities of that state. A minimum initial investment of
$25,000 within 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 New Jersey state income tax consistent with stability of
principal and liquidity. This investment objective cannot be changed without
shareholder approval. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by complying with the various
requirements of Rule 2a-7 under the Investment Company Act of 1940 which
regulates money market funds and by following the investment policies described
in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of New
Jersey municipal securities (as defined below) maturing in 13 months or less. As
a matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be exempt from
federal regular income tax and New Jersey 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 New Jersey and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and New Jersey state income tax imposed upon
non-corporate taxpayers ("New Jersey Municipal Securities"). Examples of New
Jersey Municipal Securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in New Jersey
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying New Jersey Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality to other
securities in which the Fund invests, such as: obligations issued by or on
behalf of municipal or corporate issuers; 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 New Jersey
Municipal Securities is subject to the federal alternative minimum tax.
NEW JERSEY MUNICIPAL SECURITIES
New Jersey Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
New Jersey Municipal Securities include industrial development bonds issued by
or on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of New Jersey Municipal Securities are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed by
the bond or other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or charge against the general revenues of
a municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on New Jersey Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of New Jersey Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of New Jersey
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in New Jersey Municipal Securities which are repayable out
of revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
New Jersey Municipal Securities could involve an increased risk to the Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of New Jersey Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for a percentage
of its cash value with an agreement to buy it back on a set date) or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge assets to secure such
borrowings. These investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .40 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan adopted in
accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"), the
distributor may be paid a fee in an amount computed at an annual rate of .10 of
1% of the average daily net asset value of Institutional Service Shares to
finance any activity which is principally intended to result in the sale of
shares subject to the Distribution Plan. The Fund does not currently make
payments to the distributor or charge a fee under the Distribution Plan and
shareholders will be notified if the Fund intends to charge a fee under the
Distribution Plan. The distributor may select financial institutions such as
banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide services or distribution-related support services as
agents for their clients or customers.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Fund
under the Distribution Plan.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up .25 of 1%
of the average daily net asset value of Institutional Service Shares to obtain
certain personal services for shareholders and for the maintenance of
shareholder accounts. Federated Shareholders Services will either perform
shareholder services directly or will select financial institutions to perform
shareholder services. Financial institutions will receive fees based upon shares
owned by their clients or customers. The schedules of such fees and the basis
upon which such fees will be paid will be determined from time to time by the
Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. With respect to Institutional
Service Shares, in addition to payments made pursuant to the Distribution Plan
and Shareholder Services Agreement, Federated Securities Corp. and Federated
Shareholder Services, from their own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution-related support services, or shareholder services. The support may
include sponsoring sales, educational and training seminars for their employees,
providing sales literature, and engineering computer software programs that
emphasize the attributes of the Fund. Such assistance will be predicated upon
the amount of shares the financial institution sells or may sell, and/or upon
the type and nature of sales or marketing support furnished by the financial
institution. Any payments made by the distributor may be reimbursed by the
Fund's investment adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- --------------------- -----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Institutional Service
Shares at $1.00 by valuing the portfolio securities using the amortized cost
method. The net asset value per share is determined by subtracting liabilities
attributable to shares from the value of Fund assets attributable to shares, 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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except
on New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days which the New York Stock Exchange
is 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 or more
within a 90-day period. 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: New Jersey Municipal Cash Trust,
Institutional Service Shares; Fund Number (This number can be found on the
account statement or by contacting the Fund.); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to New Jersey Municipal Cash Trust Institutional Service
Shares. 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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. 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 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If shares certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven
days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. The check writing service allows
shareholders to receive the daily dividend declared on the shares to be redeemed
until the check is presented to UMB Bank, N.A., the bank responsible for
administering the check writing program, for payment. However, checks should
never be made payable or sent to UMB Bank, N.A. or the Fund to redeem shares,
and a check may not be written to close an account.
DEBIT CARD. Upon request, a debit account will be established. This account
allows shareholders to redeem shares by using a debit card. A fee will be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of at
least $25,000, a systematic withdrawal program may be established whereby
automatic redemptions are made from the account and transferred electronically
to any commercial bank, savings bank, or credit union that is an ACH member.
Shareholders may apply for participation in this program through their financial
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$25,000 due to shareholder redemptions. Before shares are
redeemed to close an account, the shareholder is notified in writing and allowed
30 days to purchase additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has one vote in Trustee elections and other
matters submitted to shareholders for vote. All shares of all classes of each
portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 election of Trustees under certain
circumstances.
As of December 4, 1995, National Westminster Bank NJ, Jersey City, NJ, owned
40.78% of the voting securities of the Fund's Institutional Shares and Fiduciary
Trust Co. International, New York, NY, owned 33.94% of the voting securities of
the Fund's Institutional Service Shares, 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.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Fund may purchase all types of municipal bonds, including private activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than New
Jersey. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
NEW JERSEY TAXES. Under existing New Jersey laws, distributions made by the Fund
will not be subject to New Jersey income taxes to the extent that such dividends
qualify as exempt interest dividends under the Internal Revenue Code, and
represent (i) interest or gain from obligations issued by or on behalf of the
State of New Jersey or any county, municipality, school or other district
agency, authority, commission, instrumentality, public corporation, body
corporate and politic or political subdivision of New Jersey; or (ii) interest
or gain from obligations (such as obligations of the United States) that are
statutorily free from New Jersey taxation under federal or New Jersey state
laws. Conversely, to the extent that the distributions made by the Fund are
derived from other types of obligations, such dividends will be subject to New
Jersey personal income taxes.
Distributions received by a corporate shareholder from the Fund will not be
exempt from New Jersey corporation business taxes or New Jersey corporation
business taxes or New Jersey corporation income taxes.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called Institutional Shares that
are sold primarily to financial institutions acting in a fiduciary capacity.
Institutional Shares are sold at net asset value and are subject to a
Shareholder Services Agreement. Investments in Institutional Shares are subject
to a minimum initial investment of $25,000 within a 90-day period.
Institutional Service Shares and Institutional Shares are subject to certain of
the same expenses. Expense differences, however, between Institutional Service
Shares and Institutional Shares may affect the performance of each class.
To obtain more information and a prospectus for Institutional Shares, investors
may call 1-800-235-4669.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the shares' tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
NEW JERSEY MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 29.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------
1995 1994 1993** 1992 1991(A)
----- ----- ------ ----- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.04
- -------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.02 ) (0.03) (0.04)
- ------------------------------------------- ----- ----- ------ ----- ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------- ----- ----- ------ ----- ------
TOTAL RETURN (B) 3.46% 2.26% 2.22 % 2.96% 3.87%
- -------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------
Expenses 0.55% 0.54% 0.46 % 0.45% 0.27%*
- -------------------------------------------
Net investment income 3.41% 2.22% 2.19 % 2.86% 4.19%*
- -------------------------------------------
Expense waiver/reimbursement (c) 0.41% 0.39% 0.45 % 0.51% 0.67%*
- -------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------
Net assets, end of period (000 omitted) $86,94 $62,98 $66,34 $57,65 $39,423
- -------------------------------------------
</TABLE>
* Computed on an annualized basis.
** Prior to October 6, 1993, the Fund provided three classes of shares.
(a) Reflects operations for the period from December 13, 1990 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NEW JERSEY MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.2%
- -----------------------------------------------------------------------
NEW JERSEY--95.8%
-------------------------------------------------------
$ 700,000 Atlantic County, NJ Improvement Authority Weekly VRDNs
(Marine Midland Bank N.A., Buffalo, NY LOC) VMIG1 $ 700,000
-------------------------------------------------------
1,801,896 Atlantic Highlands, NJ, 5.125% BANs, 11/17/1995 NR(3) 1,802,216
-------------------------------------------------------
1,925,000 Bordentown, NJ, 4.15% BANs, 6/27/1996 NR 1,926,802
-------------------------------------------------------
1,000,000 Florence Township, NJ, 5.25% BANs, 2/15/1996 NR(3) 1,001,035
-------------------------------------------------------
4,500,000 Galloway Township, NJ, 5.25% BANs, 3/14/1996 NR(3) 4,505,882
-------------------------------------------------------
1,850,000 Hopewell Township, NJ, 4.15% BANs, 8/27/1996 NR 1,852,174
-------------------------------------------------------
1,961,389 Long Hill Township, NJ, 4.00% BANs, 7/19/1996 NR 1,964,891
-------------------------------------------------------
1,800,000 Mercer County, NJ Improvement Authority Weekly VRDNs
(Mercer County, NJ Pooled Governmental Loan
Program)/(Credit Suisse, Zurich LOC) A-1+ 1,800,000
-------------------------------------------------------
1,500,000 Middlesex County, NJ PCFA Weekly VRDNs (FMC Gold
Co.)/(Wachovia Bank of NC, NA, Winston-Salem LOC) P-1 1,500,000
-------------------------------------------------------
1,500,000 Montclair Township, NJ, 4.25% BANs, 6/28/1996 NR(3) 1,504,688
-------------------------------------------------------
3,000,000 Moorestown Township, NJ, 3.99% BANs, 9/5/1996 NR(3) 3,000,770
-------------------------------------------------------
2,500,000 New Jersey EDA Weekly VRDNs (Franciscan Oaks)/
(Bank of Scotland, Edinburgh LOC) A-1+ 2,500,000
-------------------------------------------------------
5,628,000 New Jersey EDA Weekly VRDNs (Meridan Health Care)/
(First National Bank of Maryland, Baltimore LOC) P-1 5,628,000
-------------------------------------------------------
4,323,000 New Jersey EDA Weekly VRDNs (Molins Machines)/
(Nationsbank of Virginia, N.A. LOC) P-1 4,323,000
-------------------------------------------------------
1,445,000 New Jersey EDA Weekly VRDNs (Nash Group)/
(Chemical Bank, New York LOC) A-1 1,445,000
-------------------------------------------------------
8,050,000 New Jersey EDA Weekly VRDNs (YA-YWHA of Bergen County,
NJ)/(Bank of New York, New York LOC) VMIG1 8,050,000
-------------------------------------------------------
1,600,000 New Jersey EDA, (1994 Series A), 4.35% TOBs (A.F.L.
Quality, Inc.)/(National Westminster Bank, PLC, London
LOC), Optional Tender 7/1/1996 AA- 1,600,000
-------------------------------------------------------
</TABLE>
NEW JERSEY MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
--------- ------- -----
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
NEW JERSEY--CONTINUED
-------------------------------------------------------
$ 560,000 New Jersey EDA, (1994 Series B), 4.35% TOBs (Two
Univac, L.L.C.)/(National Westminster Bank, PLC, London
LOC), Optional Tender 7/1/1996 SP-1+ $ 560,000
-------------------------------------------------------
2,700,000 New Jersey EDA, (Series 1984) Weekly VRDNs (Burmah-
Castrol Inc. Project)/(Barclays Bank PLC, London LOC) A-1+ 2,700,000
-------------------------------------------------------
4,200,000 New Jersey EDA, (Series 1986) Weekly VRDNs (Ridgefield
Associates)/(Bank of Tokyo Ltd., Tokyo LOC) P-1 4,200,000
-------------------------------------------------------
350,000 New Jersey EDA, (Series 1987G) Weekly VRDNs (W.Y. Urban
Renewal)/(National Westminster Bank, PLC, London LOC) VMIG1 350,000
-------------------------------------------------------
2,400,000 New Jersey EDA, (Series 1988-F) Weekly VRDNs (Lamington
Corners Associates)/(First Fidelity
Bank, NA, New Jersey LOC) VMIG1 2,400,000
-------------------------------------------------------
1,500,000 New Jersey EDA, (Series 1991), 3.75% CP (Chambers
Cogeneration Ltd Partnership)/(Swiss Bank Corp., Basle
LOC), Mandatory Tender 1/22/1996 A-1+ 1,500,000
-------------------------------------------------------
1,180,000 New Jersey EDA, (Series 1992 Q) Weekly VRDNs (Physical
Accoustics, Inc.)/(Banque Nationale de Paris LOC) VMIG1 1,180,000
-------------------------------------------------------
1,170,000 New Jersey EDA, (Series 1992 Z) Weekly VRDNs (West-Ward
Pharmaceuticals)/(Banque Nationale de Paris LOC) VMIG1 1,170,000
-------------------------------------------------------
1,080,000 New Jersey EDA, (Series 1992D-1) Weekly VRDNs
(Danlin Corp.)/(Banque Nationale de Paris LOC) VMIG1 1,080,000
-------------------------------------------------------
2,285,000 New Jersey EDA, (Series 1992I-1) Weekly VRDNs
(Geshem Realty)/(Banque Nationale de Paris LOC) VMIG1 2,285,000
-------------------------------------------------------
3,010,000 New Jersey EDA, (Series 1992L) Weekly VRDNs
(Kent Place School)/(Banque Nationale de Paris LOC) VMIG1 3,010,000
-------------------------------------------------------
1,600,000 New Jersey EDA, (Series 1995) Weekly VRDNs (Filtra
Corporation Project)/(Chemical Bank, New York LOC) P-1 1,600,000
-------------------------------------------------------
3,200,000 New Jersey EDA, (Series 1995) Weekly VRDNs (Hillcrest
Health Service System, Inc.)/(Industrial Bank of Japan
Ltd., Tokyo LOC) P-1 3,200,000
-------------------------------------------------------
</TABLE>
NEW JERSEY MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
--------- ------- -----
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
NEW JERSEY--CONTINUED
-------------------------------------------------------
$ 2,000,000 New Jersey EDA, (Series 1995) Weekly VRDNs
(International Vitamin Corporation Project)/
(National Westminster Bank, PLC, London LOC) P-1 $ 2,000,000
-------------------------------------------------------
1,250,000 New Jersey EDA, (Series 1995) Weekly VRDNs (Manhattan
Bagel Co., Inc.)/(First Fidelity Bank, NA, New Jersey
LOC) P-1 1,250,000
-------------------------------------------------------
1,005,000 New Jersey EDA, (Series W) Weekly VRDNs (Datatec
Industries, Inc.)/(Banque Nationale de Paris LOC) P-1 1,005,000
-------------------------------------------------------
2,815,000 New Jersey EDA, Adjustable/Fixed Rate Economic
Development Bonds Weekly VRDNs (Atlantic States
Cast Iron Pipe Company)/(Amsouth Bank N.A., Birmingham
LOC) VMIG1 2,815,000
-------------------------------------------------------
1,400,000 New Jersey EDA, Economic Development Bonds, 1987
Project Weekly VRDNs (United Jewish Community of Bergen
County)/(Bank of New York, New York LOC) P-1 1,400,000
-------------------------------------------------------
1,000,000 New Jersey EDA, Natural Gas Facilities Refunding
Revenue Bonds (Series 1995A) Daily VRDNs (New Jersey
Natural Gas Company)/(AMBAC INS)/(Union Bank of
Switzerland, Zurich LIQ) VMIG1 1,000,000
-------------------------------------------------------
3,120,000 New Jersey EDA, Pollution Control Revenue Refunding
Bonds (Series 1995A), 3.60% CP (Public Service Electric
and Gas Company)/(MBIA Insurance Corporation INS),
Mandatory Tender 11/27/1995 A-1+ 3,120,000
-------------------------------------------------------
3,055,000 New Jersey Housing & Mortgage Financing Authority,
(Series 1989-D), 4.00% TOBs (MBIA Insurance
Corporation INS)/(Citibank NA, New York LIQ),
Optional Tender 4/1/1996 NR(1) 3,055,000
-------------------------------------------------------
755,000 New Jersey Housing & Mortgage Financing Authority,
4.00% TOBs (MBIA Insurance Corporation INS)/
(Citibank NA, New York LIQ), Optional Tender 4/1/1996 NR(1) 755,000
-------------------------------------------------------
4,300,000 (a) New Jersey State Transportation Trust Fund Agency,
(Series 1993A) Weekly VRDNs (FSA INS)/(Merrill Lynch
Capital Services, Inc. LIQ) VMIG1 4,300,000
-------------------------------------------------------
</TABLE>
NEW JERSEY MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
--------- ------- -----
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
NEW JERSEY--CONTINUED
-------------------------------------------------------
$ 3,000,000 Port Authority of New York and New Jersey,
(Series 3) Weekly VRDNs (KIAC Partners)/
(Deutsche Bank, AG LOC) P-1 $ 3,000,000
-------------------------------------------------------
10,000,000 Port Authority of New York and New Jersey, (Series
1991-4) Weekly VRDNs 10,000,000
-------------------------------------------------------
1,000,000 Salem County, NJ Pollution Control Financing Authority,
(Series 1988A), 3.50% CP (Philadelphia Electric Co.)/
(FGIC INS), Mandatory Tender 11/13/1995 A-1+ 1,000,000
-------------------------------------------------------
2,900,000 South Plainfield, NJ, 3.95% BANs, 7/26/1996 NR 2,901,001
-------------------------------------------------------
3,200,421 West Milford Township, NJ, 5.50% BANs, 1/26/1996 NR 3,201,846
-------------------------------------------------------
750,000 Woodbury, NJ, 5.20% BANs, 4/12/1996 NR 751,273
------------------------------------------------------- ------------
Total 111,893,578
------------------------------------------------------- ------------
PUERTO RICO--3.4%
-------------------------------------------------------
4,000,000 Puerto Rico Government Development Bank, 3.80% CP,
Mandatory Tender 12/8/1995 A-1+ 4,000,000
------------------------------------------------------- ------------
TOTAL INVESTMENTS AT AMORTIZED COST (B) $115,893,578
------------------------------------------------------- ------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 35.1% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. These securities have been determined to be
liquid under criteria established by the Board of Trustees at the end of the
period, this security amounted to $4,300,000 which represents 3.7% of net
assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($116,761,516) at October 31, 1995.
NEW JERSEY MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC --American Municipal Bond Assurance Corporation
BANs --Bond Anticipation Notes
CP --Commercial Paper
EDA --Economic Development Authority
FGIC --Financial Guaranty Insurance Company
FSA --Financial Security Assurance
INS --Insurance
LIQ --Liquidity Agreement
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance
PLC --Public Limited Company
TOBs --Tender Option Bonds
VRDNs --Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW JERSEY MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $115,893,578
- -------------------------------------------------------------------------------
Cash 241,626
- -------------------------------------------------------------------------------
Income receivable 945,798
- -------------------------------------------------------------------------------
Receivable for shares sold 1,476
- ------------------------------------------------------------------------------- ------------
Total assets 117,082,478
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Payable for shares redeemed $ 1,938
- --------------------------------------------------------------------
Income distribution payable 287,785
- --------------------------------------------------------------------
Accrued expenses 31,239
- -------------------------------------------------------------------- --------
Total liabilities 320,962
- ------------------------------------------------------------------------------- ------------
NET ASSETS for 116,761,516 shares outstanding $116,761,516
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- -------------------------------------------------------------------------------
$86,944,238 / 86,944,238 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
INSTITUTIONAL SERVICE SHARES:
- -------------------------------------------------------------------------------
$29,817,278 / 29,817,278 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW JERSEY MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest $4,265,077
- ------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------
Investment advisory fee $ 431,160
- ----------------------------------------------------------------------
Administrative personnel and services fee 155,000
- ----------------------------------------------------------------------
Custodian fees 27,873
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 35,329
- ----------------------------------------------------------------------
Directors'/Trustees' fees 1,242
- ----------------------------------------------------------------------
Auditing fees 14,849
- ----------------------------------------------------------------------
Legal fees 2,454
- ----------------------------------------------------------------------
Portfolio accounting fees 39,750
- ----------------------------------------------------------------------
Distribution services fee--Institutional Service Shares 27,107
- ----------------------------------------------------------------------
Shareholder services fee--Institutional Shares 201,709
- ----------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 67,766
- ----------------------------------------------------------------------
Share registration costs 36,077
- ----------------------------------------------------------------------
Printing and postage 9,261
- ----------------------------------------------------------------------
Insurance premiums 5,936
- ----------------------------------------------------------------------
Taxes 821
- ----------------------------------------------------------------------
Miscellaneous 7,333
- ---------------------------------------------------------------------- ----------
Total expenses 1,063,667
- ----------------------------------------------------------------------
Waivers--
- ----------------------------------------------------------------------
Waiver of investment advisory fee $(228,371)
- ----------------------------------------------------------
Waiver of distribution services fee--Institutional
Service Shares (27,107)
- ----------------------------------------------------------
Waiver of shareholder services fee--Institutional Shares (159,821)
- ----------------------------------------------------------
Waiver of shareholder services fee--Institutional
Service Shares (26,242)
- ---------------------------------------------------------- ---------
Total waivers (441,541)
- ---------------------------------------------------------------------- ----------
Net expenses 622,126
- ------------------------------------------------------------------------------------ ----------
Net investment income $3,642,951
- ------------------------------------------------------------------------------------ ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW JERSEY MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------
Net investment income $ 3,642,951 $ 2,157,116
- ---------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------
Distributions from net investment income
- ----------------------------------------------------------------
Institutional Shares (2,752,708) (1,478,776)
- ----------------------------------------------------------------
Institutional Service Shares (890,243) (678,340)
- ---------------------------------------------------------------- ------------- -------------
Change in net assets resulting from distributions to
shareholders (3,642,951) (2,157,116)
- ---------------------------------------------------------------- ------------- -------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------
Proceeds from sale of shares 425,149,193 344,046,340
- ----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 545,318 426,614
- ----------------------------------------------------------------
Cost of shares redeemed (408,621,137) (332,135,904)
- ---------------------------------------------------------------- ------------- -------------
Change in net assets resulting from share transactions 17,073,374 12,337,050
- ---------------------------------------------------------------- ------------- -------------
Change in net assets 17,073,374 12,337,050
- ----------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------
Beginning of period 99,688,142 87,351,092
- ---------------------------------------------------------------- ------------- -------------
End of period $ 116,761,516 $ 99,688,142
- ---------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW JERSEY MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of New Jersey Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund offers two classes of shares: Institutional Shares and Institutional
Service Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
66.9% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or
NEW JERSEY MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
supported (backed) by a letter of credit for any one institution or agency
does not exceed 8.4% of total investments.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. Many restricted securities may
be resold in the secondary market in transactions exempt from registration.
In some cases, the restricted securities may be resold without registration
upon exercise of a demand feature. Such restricted securities may be
determined to be liquid under criteria established by the Board of
Trustees. The Fund will not incur any registration costs upon such resales.
Restricted securities are valued at amortized cost in accordance with Rule
2a-7 under the Investment Company Act of 1940.
Additional information on each restricted security held at October 31, 1995
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
-------------------------------------------------- ---------------- ----------------
<S> <C> <C>
New Jersey State Transportation Trust Fund Agency,
(Series 1993A) Weekly VRDNs (FSA INS)/(Merrill
Lynch Capital Services, Inc. LIQ) 10/4/95 $4,300,000
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $116,761,516.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
INSTITUTIONAL SHARES 1995 1994
- ----------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 334,240,209 240,111,228
- -----------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 15,613 2,995
- -----------------------------------------------------------------
Shares redeemed (310,295,248) (243,476,200)
- ----------------------------------------------------------------- ------------ ------------
Net change resulting from Institutional share transactions 23,960,574 (3,361,977)
- ----------------------------------------------------------------- ------------ ------------
</TABLE>
NEW JERSEY MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
INSTITUTIONAL SERVICE SHARES 1995 1994
- ----------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 90,908,984 103,935,112
- -----------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 529,705 423,619
- -----------------------------------------------------------------
Shares redeemed (98,325,889) (88,659,704)
- ----------------------------------------------------------------- ------------ ------------
Net change resulting from Institutional Service share
transactions (6,887,200) 15,699,027
- ----------------------------------------------------------------- ------------ ------------
Net change resulting from share transactions 17,073,374 12,337,050
- ----------------------------------------------------------------- ------------ ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
reimburse Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's Institutional Service Shares. The Plan provides that the Fund may
incur distribution expenses up to .10 of 1% of the average daily net assets of
the Institutional Service Shares, annually, to reimburse FSC.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive a portion of its fee. FSS can modify or terminate
this voluntarily waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the Fund.
This fee is based on the size, type, and number of accounts and transactions
made by shareholders.
NEW JERSEY MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $61,531 and start-up
administrative service expenses of $16,639 were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational and start-up
administrative expenses at an annual rate of .005 of 1% and .01% of 1% of
average daily net assets, respectively, until expenses initially borne are fully
reimbursed or the expiration of five years after December 10, 1990 (the date the
Fund became effective), whichever occurs earlier. For the period ended October
31, 1995, the Fund paid $5,318 and $0, respectively, pursuant to this agreement.
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common Officers. These
transactions were made at current market value pursuant to rule 17a-7 under the
Act amounting to $202,035,250 and $189,185,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(New Jersey Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of New
Jersey Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust, a Massachusetts business trust), including the schedule of portfolio
investments, as of October 31, 1995, the related statement of operations for the
year then ended, and the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights (see pages 2 and 16
of the prospectus) for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of New
Jersey Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations for the year then
ended, and the changes in its net assets for each of the two years in the period
then ended and the financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
New Jersey Municipal Cash Trust
Institutional Service Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- ------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- ------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NEW JERSEY MUNICIPAL
CASH TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated December 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229709
0100802A-SS (12/95)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NEW JERSEY MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares of New Jersey Municipal Cash Trust (the "Fund") offered
by this prospectus represent interests in a non-diversified portfolio of
Federated Municipal Trust (the "Trust"), an open-end management investment
company (a mutual fund). The Fund invests primarily in short-term New Jersey
municipal securities, including securities of states, territories, and
possessions of the United States which are not issued by or on behalf of New
Jersey, or its political subdivisions and financing authorities, but which
provide income exempt from federal regular income tax and New Jersey state
income tax imposed upon non-corporate taxpayers consistent with stability of
principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
New Jersey Municipal Securities 6
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Institutional Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 9
- ------------------------------------------------------
HOW TO REDEEM SHARES 10
- ------------------------------------------------------
ACCOUNT AND SHARE INFORMATION 11
- ------------------------------------------------------
TAX INFORMATION 12
- ------------------------------------------------------
Federal Income Tax 12
State and Local Taxes 13
OTHER CLASSES OF SHARES 13
- ------------------------------------------------------
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES 15
- ------------------------------------------------------
FINANCIAL STATEMENTS 16
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 28
- ------------------------------------------------------
ADDRESSES 29
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)..................................................... 0.19%
12b-1 Fee............................................................................. None
Total Other Expenses.................................................................. 0.36%
Shareholder Services Fee (after waiver) (2)................................ 0.05%
Total Operating Expenses (3)............................................ 0.55%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.40%.
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 0.96% absent the voluntary
waivers of a portion of the management fee and a portion of the shareholder
services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Institutional Shares of the
Fund will bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Fund Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- --------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2)
redemption at the end of each time period........ $6 $18 $31 $ 69
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
NEW JERSEY MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 28.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------------------------
1995 1994 1993** 1992 1991(A)
----- ----- ------ ----- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.04
- -------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.02 ) (0.03) (0.04)
- ------------------------------------------- ----- ----- ------ ----- ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------- ----- ----- ------ ----- ------
TOTAL RETURN (B) 3.46% 2.26% 2.22 % 2.96% 3.87%
- -------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------
Expenses 0.55% 0.54% 0.46 % 0.45% 0.27%*
- -------------------------------------------
Net investment income 3.41% 2.22% 2.19 % 2.86% 4.19%*
- -------------------------------------------
Expense waiver/reimbursement (c) 0.41% 0.39% 0.45 % 0.51% 0.67%*
- -------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------
Net assets, end of period (000 omitted) $86,944 $62,984 $66,346 $57,657 $39,423
- -------------------------------------------
</TABLE>
* Computed on an annualized basis.
** Prior to October 6, 1993, the Fund provided three classes of shares.
(a) Reflects operations for the period from December 13, 1990 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established two classes of shares known as Institutional Shares and
Institutional Service Shares. This prospectus relates only to Institutional
Shares of the Fund, which are designed primarily for financial institutions
acting in 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 New Jersey municipal securities. The Fund may not be a
suitable investment for retirement plans or for non-New Jersey taxpayers because
it invests in municipal securities of that state. A minimum initial investment
of $25,000 within 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 New Jersey state income tax imposed upon non-corporate
taxpayers consistent with stability of principal. This investment objective
cannot be changed without shareholder approval. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
complying with the various requirements of Rule 2a-7 under the Investment
Company Act of 1940 which regulates money market mutual funds and by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of New
Jersey municipal securities (as defined below) maturing in 13 months or less. As
a matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be exempt from
federal regular income tax and New Jersey state income tax imposed upon
non-corporate taxpayers. (Federal regular income tax does not include the
federal individual alternative minimum tax or the federal alternative minimum
tax for corporations.) The average maturity of the securities in the Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less. Unless
indicated otherwise, the investment policies may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued by
or on behalf of New Jersey and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and New Jersey state income tax imposed upon
non-corporate taxpayers ("New Jersey Municipal Securities"). Examples of New
Jersey Municipal Securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in New Jersey
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying New Jersey Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality to other
securities in which the Fund invests, such as: obligations issued by or on
behalf of municipal or corporate issuers; 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 New Jersey
Municipal Securities is subject to the federal alternative minimum tax.
NEW JERSEY MUNICIPAL SECURITIES
New Jersey Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
New Jersey Municipal Securities include industrial development bonds issued by
or on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of New Jersey Municipal Securities are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed by
the bond or other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or charge against the general revenues of
a municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on New Jersey Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of New Jersey Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of New Jersey
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in New Jersey Municipal Securities which are repayable out
of revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
New Jersey Municipal Securities could involve an increased risk to the Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of New Jersey Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for a percentage
of its cash value with an agreement to buy it back on a set date) or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 15% of the value of
its total assets to secure such borrowings. These investment limitations cannot
be changed without shareholder approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .40 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized 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. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for Institutional Shares
of the Fund. It is a Pennsylvania corporation organized on November 14, 1969,
and is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services Agreement
with Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to .25 of 1% of the average daily net asset
value of Institutional Shares, computed at an annual rate, to obtain certain
personal services for shareholders and provide maintenance of shareholder
accounts ("shareholder services"). From time to time and for such periods as
deemed appropriate, the amount stated above may be reduced voluntarily.
Under the Shareholder Services Agreement, Federated Shareholder Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- --------------------- -----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Institutional Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
net asset value per share is determined by subtracting liabilities attributable
to shares from the value of Fund assets attributable to shares, 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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is open for business. Shares may be purchased either by wire or by
check. The Fund reserves the right to reject any purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone. The
minimum initial investment is $25,000. However, an account may be opened with a
smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
PURCHASING SHARES BY WIRE. Shares may be purchased by Federal Reserve wire by
calling the Fund before 1:00 p.m. (Eastern time) to place an order. The order is
considered received immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern time) that
day. Federal funds should be wired as follows: Federated Services Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE; For Credit
to: New Jersey Municipal Cash Trust--Institutional Shares; Fund Number (this
number can be found on the account statement or by contacting the Fund); Group
Number or Order Number; Nominee or Institution Name; and ABA Number 011000028.
Shares cannot be purchased by wire on holidays when wire transfers are
restricted. Questions on wire purchases should be directed to your shareholder
services representative at the telephone number listed on your account
statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by mailing a check made
payable to New Jersey Municipal Cash Trust--Institutional Shares to: Federated
Services Company, P.O. Box 8600, Boston, MA 02266-8600. Orders by mail are
considered received when payment by check is converted into federal funds. This
is normally the next business day after the check is received.
SUBACCOUNTING SERVICES. Financial institutions are encouraged to open single
master accounts. A subaccounting system is available through the transfer agent
to minimize internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Financial
institutions may charge or pass through subaccounting fees as part of or in
addition to normal trust or agency account fees. They may also charge fees for
other services provided which may be related to the ownership of Fund shares.
This prospectus should, therefore, be read together with any agreement between
the customer and the financial institution with regard to the services provided,
the fees charged for those services, and any restrictions and limitations
imposed. State securities laws may require certain financial institutions such
as depository institutions to register as dealers.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Federated
Services Company receives the redemption request. Redemptions will be made on
days on which the Fund computes its net asset value. Redemption requests must be
received in proper form and can be made as described below.
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 p.m. (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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement.
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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
ACCOUNT AND SHARE 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. Shares purchased by
wire before 1:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by check begin earning dividends the day after the check is converted
into federal funds.
CAPITAL GAINS. The Fund does not expect to realize any capital gains or losses.
If capital gains or losses were to occur, they could result in an increase or
decrease in dividends. The Fund will distribute in cash or additional shares any
realized net long-term capital gains at least once every 12 months.
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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$25,000 due to shareholder redemptions. Before shares are
redeemed to close an account, the shareholder is notified in writing and allowed
30 days to purchase additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has one vote in Trustee elections and other
matters submitted to shareholders for vote. All shares of all classes of each
portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting 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 December 4, 1995, National Westminster Bank NJ, Jersey City, NJ, owned
40.78% of the voting securities of the Fund's Institutional Shares and Fiduciary
Trust Co. International, New York, NY, owned 33.94% of the voting securities of
the Fund's Institutional Service Shares, 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.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Fund may purchase all types of municipal bonds, including private activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than New
Jersey. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
NEW JERSEY TAXES. Under existing New Jersey laws, distributions made by the Fund
will not be subject to New Jersey income taxes to the extent that such
distributions qualify as exempt-interest dividends under the Internal Revenue
Code, and represent (i) interest or gain from obligations issued by or on behalf
of the State of New Jersey or any county, municipality, school or other
district, agency, authority, commission, instrumentality, public corporation,
body corporate and politic or political subdivision of New Jersey; or (ii)
interest or gain from obligations (such as obligations of the United States)
that are statutorily free from New Jersey taxation under federal or New Jersey
state laws. Conversely, to the extent that distributions by the Fund are
attributable to other types of obligations, such distributions will be subject
to New Jersey income taxes.
Distributions received by a corporate shareholder from the Fund will not be
exempt from New Jersey Corporation Business Tax or New Jersey Corporation Income
Tax.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called Institutional Service
Shares. Institutional Service Shares are sold at net asset value primarily to
financial institutions acting in an agency or fiduciary capacity and are subject
to a minimum initial investment of $25,000 over a 90-day period.
All classes are subject to certain of the same expenses.
Institutional Service Shares are distributed under a 12b-1 Plan adopted by the
Fund and also are subject to shareholder services fees.
Expense differences between classes may affect the performance of each class.
To obtain more information and a prospectus for any other class, investors may
call 1-800-235-4669.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the shares' tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
NEW JERSEY MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants, on page 28.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------
1995 1994 1993 1992 1991(A)
----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.04
- ---------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.02) (0.03) (0.04)
- --------------------------------------------- ----- ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------- ----- ----- ----- ----- ------
TOTAL RETURN (B) 3.36% 2.16% 2.12% 2.86% 3.82%
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 0.65% 0.65% 0.56% 0.55% 0.35%*
- ---------------------------------------------
Net investment income 3.28% 2.19% 2.08% 2.69% 4.11%*
- ---------------------------------------------
Expense waiver/reimbursement (c) 0.41% 0.41% 0.45% 0.51% 0.69%*
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period (000 omitted) $29,817 $36,704 $21,005 $26,844 $17,709
- ---------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from December 13, 1990 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NEW JERSEY MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.2%
- -----------------------------------------------------------------------
NEW JERSEY--95.8%
-------------------------------------------------------
$ 700,000 Atlantic County, NJ Improvement Authority Weekly VRDNs
(Marine Midland Bank N.A., Buffalo, NY LOC) VMIG1 $ 700,000
-------------------------------------------------------
1,801,896 Atlantic Highlands, NJ, 5.125% BANs, 11/17/1995 NR(3) 1,802,216
-------------------------------------------------------
1,925,000 Bordentown, NJ, 4.15% BANs, 6/27/1996 NR 1,926,802
-------------------------------------------------------
1,000,000 Florence Township, NJ, 5.25% BANs, 2/15/1996 NR(3) 1,001,035
-------------------------------------------------------
4,500,000 Galloway Township, NJ, 5.25% BANs, 3/14/1996 NR(3) 4,505,882
-------------------------------------------------------
1,850,000 Hopewell Township, NJ, 4.15% BANs, 8/27/1996 NR 1,852,174
-------------------------------------------------------
1,961,389 Long Hill Township, NJ, 4.00% BANs, 7/19/1996 NR 1,964,891
-------------------------------------------------------
1,800,000 Mercer County, NJ Improvement Authority Weekly VRDNs
(Mercer County, NJ Pooled Governmental Loan
Program)/(Credit Suisse, Zurich LOC) A-1+ 1,800,000
-------------------------------------------------------
1,500,000 Middlesex County, NJ PCFA Weekly VRDNs (FMC Gold
Co.)/(Wachovia Bank of NC, NA, Winston-Salem LOC) P-1 1,500,000
-------------------------------------------------------
1,500,000 Montclair Township, NJ, 4.25% BANs, 6/28/1996 NR(3) 1,504,688
-------------------------------------------------------
3,000,000 Moorestown Township, NJ, 3.99% BANs, 9/5/1996 NR(3) 3,000,770
-------------------------------------------------------
2,500,000 New Jersey EDA Weekly VRDNs (Franciscan Oaks)/
(Bank of Scotland, Edinburgh LOC) A-1+ 2,500,000
-------------------------------------------------------
5,628,000 New Jersey EDA Weekly VRDNs (Meridan Health Care)/
(First National Bank of Maryland, Baltimore LOC) P-1 5,628,000
-------------------------------------------------------
4,323,000 New Jersey EDA Weekly VRDNs (Molins Machines)/
(Nationsbank of Virginia, N.A. LOC) P-1 4,323,000
-------------------------------------------------------
1,445,000 New Jersey EDA Weekly VRDNs (Nash Group)/
(Chemical Bank, New York LOC) A-1 1,445,000
-------------------------------------------------------
8,050,000 New Jersey EDA Weekly VRDNs (YA-YWHA of Bergen County,
NJ)/(Bank of New York, New York LOC) VMIG1 8,050,000
-------------------------------------------------------
</TABLE>
NEW JERSEY MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
--------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
NEW JERSEY--CONTINUED
-------------------------------------------------------
$ 1,600,000 New Jersey EDA, (1994 Series A), 4.35% TOBs (A.F.L.
Quality, Inc.)/(National Westminster Bank, PLC, London
LOC), Optional Tender 7/1/1996 AA- $ 1,600,000
-------------------------------------------------------
560,000 New Jersey EDA, (1994 Series B), 4.35% TOBs (Two
Univac, L.L.C.)/(National Westminster Bank, PLC, London
LOC), Optional Tender 7/1/1996 SP-1+ 560,000
-------------------------------------------------------
2,700,000 New Jersey EDA, (Series 1984) Weekly VRDNs (Burmah-
Castrol Inc. Project)/(Barclays Bank PLC, London LOC) A-1+ 2,700,000
-------------------------------------------------------
4,200,000 New Jersey EDA, (Series 1986) Weekly VRDNs (Ridgefield
Associates)/(Bank of Tokyo Ltd., Tokyo LOC) P-1 4,200,000
-------------------------------------------------------
350,000 New Jersey EDA, (Series 1987G) Weekly VRDNs (W.Y. Urban
Renewal)/(National Westminster Bank, PLC, London LOC) VMIG1 350,000
-------------------------------------------------------
2,400,000 New Jersey EDA, (Series 1988-F) Weekly VRDNs (Lamington
Corners Associates)/(First Fidelity
Bank, NA, New Jersey LOC) VMIG1 2,400,000
-------------------------------------------------------
1,500,000 New Jersey EDA, (Series 1991), 3.75% CP (Chambers
Cogeneration Ltd Partnership)/(Swiss Bank Corp., Basle
LOC), Mandatory Tender 1/22/1996 A-1+ 1,500,000
-------------------------------------------------------
1,180,000 New Jersey EDA, (Series 1992 Q) Weekly VRDNs (Physical
Accoustics, Inc.)/(Banque Nationale de Paris LOC) VMIG1 1,180,000
-------------------------------------------------------
1,170,000 New Jersey EDA, (Series 1992 Z) Weekly VRDNs (West-Ward
Pharmaceuticals)/(Banque Nationale de Paris LOC) VMIG1 1,170,000
-------------------------------------------------------
1,080,000 New Jersey EDA, (Series 1992D-1) Weekly VRDNs
(Danlin Corp.)/(Banque Nationale de Paris LOC) VMIG1 1,080,000
-------------------------------------------------------
2,285,000 New Jersey EDA, (Series 1992I-1) Weekly VRDNs
(Geshem Realty)/(Banque Nationale de Paris LOC) VMIG1 2,285,000
-------------------------------------------------------
3,010,000 New Jersey EDA, (Series 1992L) Weekly VRDNs
(Kent Place School)/(Banque Nationale de Paris LOC) VMIG1 3,010,000
-------------------------------------------------------
1,600,000 New Jersey EDA, (Series 1995) Weekly VRDNs (Filtra
Corporation Project)/(Chemical Bank, New York LOC) P-1 1,600,000
-------------------------------------------------------
</TABLE>
NEW JERSEY MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
--------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
NEW JERSEY--CONTINUED
-------------------------------------------------------
$ 3,200,000 New Jersey EDA, (Series 1995) Weekly VRDNs (Hillcrest
Health Service System, Inc.)/(Industrial Bank of Japan
Ltd., Tokyo LOC) P-1 $ 3,200,000
-------------------------------------------------------
2,000,000 New Jersey EDA, (Series 1995) Weekly VRDNs
(International Vitamin Corporation Project)/
(National Westminster Bank, PLC, London LOC) P-1 2,000,000
-------------------------------------------------------
1,250,000 New Jersey EDA, (Series 1995) Weekly VRDNs (Manhattan
Bagel Co., Inc.)/(First Fidelity Bank, NA, New Jersey
LOC) P-1 1,250,000
-------------------------------------------------------
1,005,000 New Jersey EDA, (Series W) Weekly VRDNs (Datatec
Industries, Inc.)/(Banque Nationale de Paris LOC) P-1 1,005,000
-------------------------------------------------------
2,815,000 New Jersey EDA, Adjustable/Fixed Rate Economic
Development Bonds Weekly VRDNs (Atlantic States
Cast Iron Pipe Company)/(Amsouth Bank N.A., Birmingham
LOC) VMIG1 2,815,000
-------------------------------------------------------
1,400,000 New Jersey EDA, Economic Development Bonds, 1987
Project Weekly VRDNs (United Jewish Community of Bergen
County)/(Bank of New York, New York LOC) P-1 1,400,000
-------------------------------------------------------
1,000,000 New Jersey EDA, Natural Gas Facilities Refunding
Revenue Bonds (Series 1995A) Daily VRDNs (New Jersey
Natural Gas Company)/(AMBAC INS)/(Union Bank of
Switzerland, Zurich LIQ) VMIG1 1,000,000
-------------------------------------------------------
3,120,000 New Jersey EDA, Pollution Control Revenue Refunding
Bonds (Series 1995A), 3.60% CP (Public Service Electric
and Gas Company)/(MBIA Insurance Corporation INS),
Mandatory Tender 11/27/1995 A-1+ 3,120,000
-------------------------------------------------------
3,055,000 New Jersey Housing & Mortgage Financing Authority,
(Series 1989-D), 4.00% TOBs (MBIA Insurance
Corporation INS)/(Citibank NA, New York LIQ),
Optional Tender 4/1/1996 NR(1) 3,055,000
-------------------------------------------------------
755,000 New Jersey Housing & Mortgage Financing Authority,
4.00% TOBs (MBIA Insurance Corporation INS)/
(Citibank NA, New York LIQ), Optional Tender 4/1/1996 NR(1) 755,000
-------------------------------------------------------
</TABLE>
NEW JERSEY MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
--------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
NEW JERSEY--CONTINUED
-------------------------------------------------------
$ 4,300,000 (a) New Jersey State Transportation Trust Fund Agency,
(Series 1993A) Weekly VRDNs (FSA INS)/(Merrill Lynch
Capital Services, Inc. LIQ) VMIG1 $ 4,300,000
-------------------------------------------------------
3,000,000 Port Authority of New York and New Jersey,
(Series 3) Weekly VRDNs (KIAC Partners)/
(Deutsche Bank, AG LOC) P-1 3,000,000
-------------------------------------------------------
10,000,000 Port Authority of New York and New Jersey, (Series
1991-4) Weekly VRDNs 10,000,000
-------------------------------------------------------
1,000,000 Salem County, NJ Pollution Control Financing Authority,
(Series 1988A), 3.50% CP (Philadelphia Electric Co.)/
(FGIC INS), Mandatory Tender 11/13/1995 A-1+ 1,000,000
-------------------------------------------------------
2,900,000 South Plainfield, NJ, 3.95% BANs, 7/26/1996 NR 2,901,001
-------------------------------------------------------
3,200,421 West Milford Township, NJ, 5.50% BANs, 1/26/1996 NR 3,201,846
-------------------------------------------------------
750,000 Woodbury, NJ, 5.20% BANs, 4/12/1996 NR 751,273
------------------------------------------------------- ------------
Total 111,893,578
------------------------------------------------------- ------------
PUERTO RICO--3.4%
-------------------------------------------------------
4,000,000 Puerto Rico Government Development Bank, 3.80% CP,
Mandatory Tender 12/8/1995 A-1+ 4,000,000
------------------------------------------------------- ------------
TOTAL INVESTMENTS AT AMORTIZED COST (B) $115,893,578
------------------------------------------------------- ------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 35.1% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. These securities have been determined to be
liquid under criteria established by the Board of Trustees at the end of the
period, this security amounted to $4,300,000 which represents 3.7% of net
assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($116,761,516) at October 31, 1995.
NEW JERSEY MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC --American Municipal Bond Assurance Corporation
BANs --Bond Anticipation Notes
CP --Commercial Paper
EDA --Economic Development Authority
FGIC --Financial Guaranty Insurance Company
FSA --Financial Security Assurance
INS --Insurance
LIQ --Liquidity Agreement
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance
PLC --Public Limited Company
TOBs --Tender Option Bonds
VRDNs --Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW JERSEY MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $115,893,578
- -------------------------------------------------------------------------------
Cash 241,626
- -------------------------------------------------------------------------------
Income receivable 945,798
- -------------------------------------------------------------------------------
Receivable for shares sold 1,476
- ------------------------------------------------------------------------------- ------------
Total assets 117,082,478
- -------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------
Payable for shares redeemed $ 1,938
- --------------------------------------------------------------------
Income distribution payable 287,785
- --------------------------------------------------------------------
Accrued expenses 31,239
- -------------------------------------------------------------------- --------
Total liabilities 320,962
- ------------------------------------------------------------------------------- ------------
NET ASSETS for 116,761,516 shares outstanding $116,761,516
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- -------------------------------------------------------------------------------
$86,944,238 / 86,944,238 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
INSTITUTIONAL SERVICE SHARES:
- -------------------------------------------------------------------------------
$29,817,278 / 29,817,278 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW JERSEY MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest $4,265,077
- ------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------
Investment advisory fee $ 431,160
- ----------------------------------------------------------------------
Administrative personnel and services fee 155,000
- ----------------------------------------------------------------------
Custodian fees 27,873
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 35,329
- ----------------------------------------------------------------------
Directors'/Trustees' fees 1,242
- ----------------------------------------------------------------------
Auditing fees 14,849
- ----------------------------------------------------------------------
Legal fees 2,454
- ----------------------------------------------------------------------
Portfolio accounting fees 39,750
- ----------------------------------------------------------------------
Distribution services fee--Institutional Service Shares 27,107
- ----------------------------------------------------------------------
Shareholder services fee--Institutional Shares 201,709
- ----------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 67,766
- ----------------------------------------------------------------------
Share registration costs 36,077
- ----------------------------------------------------------------------
Printing and postage 9,261
- ----------------------------------------------------------------------
Insurance premiums 5,936
- ----------------------------------------------------------------------
Taxes 821
- ----------------------------------------------------------------------
Miscellaneous 7,333
- ---------------------------------------------------------------------- ----------
Total expenses 1,063,667
- ----------------------------------------------------------------------
Waivers--
- ----------------------------------------------------------
Waiver of investment advisory fee $(228,371)
- ----------------------------------------------------------
Waiver of distribution services fee--Institutional
Service Shares (27,107)
- ----------------------------------------------------------
Waiver of shareholder services fee--Institutional Shares (159,821)
- ----------------------------------------------------------
Waiver of shareholder services fee--Institutional
Service Shares (26,242)
- ---------------------------------------------------------- ---------
Total waivers (441,541)
- ---------------------------------------------------------------------- ----------
Net expenses 622,126
- ------------------------------------------------------------------------------------ ----------
Net investment income $3,642,951
- ------------------------------------------------------------------------------------ ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW JERSEY MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------
Net investment income $ 3,642,951 $ 2,157,116
- ---------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------
Distributions from net investment income
- ----------------------------------------------------------------
Institutional Shares (2,752,708) (1,478,776)
- ----------------------------------------------------------------
Institutional Service Shares (890,243) (678,340)
- ---------------------------------------------------------------- ------------- -------------
Change in net assets resulting from distributions to
shareholders (3,642,951) (2,157,116)
- ---------------------------------------------------------------- ------------- -------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------
Proceeds from sale of shares 425,149,193 344,046,340
- ----------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 545,318 426,614
- ----------------------------------------------------------------
Cost of shares redeemed (408,621,137) (332,135,904)
- ---------------------------------------------------------------- ------------- -------------
Change in net assets resulting from share transactions 17,073,374 12,337,050
- ---------------------------------------------------------------- ------------- -------------
Change in net assets 17,073,374 12,337,050
- ----------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------
Beginning of period 99,688,142 87,351,092
- ---------------------------------------------------------------- ------------- -------------
End of period $ 116,761,516 $ 99,688,142
- ---------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW JERSEY MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of New Jersey Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund offers two classes of shares: Institutional Shares and Institutional
Service Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
66.9% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or
NEW JERSEY MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
supported (backed) by a letter of credit for any one institution or agency
does not exceed 8.4% of total investments.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. Many restricted securities may
be resold in the secondary market in transactions exempt from registration.
In some cases, the restricted securities may be resold without registration
upon exercise of a demand feature. Such restricted securities may be
determined to be liquid under criteria established by the Board of
Trustees. The Fund will not incur any registration costs upon such resales.
Restricted securities are valued at amortized cost in accordance with Rule
2a-7 under the Investment Company Act of 1940.
Additional information on each restricted security held at October 31, 1995
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
---------------------------------------- ---------------- ----------------
<S> <C> <C>
New Jersey State Transportation Trust
Fund Agency, (Series 1993A) Weekly,
VRDNs (FSA Ins)/(Merrill Lynch Capital
Services, Inc. LIQ) 10/4/95 $4,300,000
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $116,761,516.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
INSTITUTIONAL SHARES 1995 1994
- ----------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 334,240,209 240,111,228
- -----------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 15,613 2,995
- -----------------------------------------------------------------
Shares redeemed (310,295,248) (243,476,200)
- ----------------------------------------------------------------- ------------ ------------
Net change resulting from Institutional share
transactions 23,960,574 (3,361,977)
- ----------------------------------------------------------------- ------------ ------------
</TABLE>
NEW JERSEY MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
INSTITUTIONAL SERVICE SHARES 1995 1994
- ----------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 90,908,984 103,935,112
- -----------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 529,705 423,619
- -----------------------------------------------------------------
Shares redeemed (98,325,889) (88,659,704)
- ----------------------------------------------------------------- ------------ ------------
Net change resulting from Institutional Service share
transactions (6,887,200) 15,699,027
- ----------------------------------------------------------------- ------------ ------------
Net change resulting from share transactions 17,073,374 12,337,050
- ----------------------------------------------------------------- ------------ ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
reimburse Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's Institutional Service Shares. The Plan provides that the Fund may
incur distribution expenses up to .10 of 1% of the average daily net assets of
the Institutional Service Shares, annually, to reimburse FSC.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive a portion of its fee. FSS can modify or terminate
this voluntarily waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the Fund.
This fee is based on the size, type, and number of accounts and transactions
made by shareholders.
NEW JERSEY MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $61,531 and start-up
administrative service expenses of $16,639 were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational and start-up
administrative expenses at an annual rate of .005 of 1% and .01% of 1% of
average daily net assets, respectively, until expenses initially borne are fully
reimbursed or the expiration of five years after December 10, 1990 (the date the
Fund became effective), whichever occurs earlier. For the period ended October
31, 1995, the Fund paid $5,318 and $0, respectively, pursuant to this agreement.
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common officers. These
transactions were made at current market value pursuant to rule 17a-7 under the
Act amounting to $202,035,250 and $189,185,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(New Jersey Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of New
Jersey Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust, a Massachusetts business trust), including the schedule of portfolio
investments, as of October 31, 1995, the related statement of operations for the
year then ended, and the statement of changes in net assets for each of the two
years in the period then ended and the financial highlights (see pages 2 and 15
of the prospectus) for the periods presented. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of New
Jersey Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations for the year then
ended, and the changes in its net assets for each of the two years in the period
then ended and the financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
New Jersey Municipal Cash Trust
Institutional Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- -------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NEW JERSEY MUNICIPAL
CASH TRUST
INSTITUTIONAL SHARES
PROSPECTUS
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated December 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229600
0100802A-IS (12/95)
(LOGO)
NEW JERSEY MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectuses of New Jersey Municipal Cash Trust (the "Fund"), a portfolio
of Federated Municipal Trust (the "Trust") dated December 31, 1995. This
Statement is not a prospectus. You may request a copy of a prospectus or a
paper copy of this Statement, if you have received it electronically, free
of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated December 31, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated Investors
INVESTMENT POLICIES 2
Acceptable Investments 2
Participation Interests 2
Municipal Leases 2
Ratings 3
When-Issued and Delayed Delivery
Transactions 4
Repurchase Agreements 4
Reverse Repurchase Agreements 5
Credit Enhancement 5
NEW JERSEY INVESTMENT RISKS 6
INVESTMENT LIMITATIONS 7
Regulatory Compliance 11
FEDERATED MUNICIPAL TRUST MANAGEMENT
11
Share Ownership 10
Trustees Compensation 21
Trustee Liability 23
INVESTMENT ADVISORY SERVICES 23
Investment Adviser 23
Advisory Fees 24
BROKERAGE TRANSACTIONS 24
OTHER SERVICES 26
Fund Administration 26
Custodian and Portfolio
Recordkeeper 13
Transfer Agent 13
Independent Public Accountants 13
DISTRIBUTION PLAN AND SHAREHOLDER
SERVICES AGREEMENT 13
DETERMINING NET ASSET VALUE 14
REDEMPTION IN KIND 14
MASSACHUSETTS PARTNERSHIP LAW 14
THE FUND'S TAX STATUS 14
PERFORMANCE INFORMATION 15
Yield 15
Effective Yield 15
Tax-Equivalent Yield 15
Tax-Equivalency Table 16
Total Return 17
Performance Comparisons 17
ABOUT FEDERATED INVESTORS 17
Mutual Fund Market 18
Institutional Clients 18
Trust Organizations 18
Broker/Dealers and Bank
Broker/Dealer Subsidiaries 18
APPENDIX 19
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by
the Board of Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or
any guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation interests
include the right to demand payment from the issuers of those interests. By
purchasing these participation interests, the Fund is buying a security
meeting the maturity and quality requirements of the Fund and also is
receiving the tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments
by a governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the
appropriation for the lease. Furthermore, a lease may provide that the
participants cannot accelerate lease obligations upon default. The
participants would only be able to enforce lease payments as they became due.
In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be terminated
by the lessee; the potential recovery, if any, from a sale of the leased
property upon termination of the lease; the lessee's general credit strength
(e.g., its debt, administrative, economic and financial characteristics and
prospects); the likelihood that the lessee will discontinue appropriating
funding for the leased property because the property is no longer deemed
essential to its operations (e.g., the potential for an "event of non-
appropriation"); and any credit enhancement or legal recourse provided upon
an event of non-appropriation or other termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations ("NRSROs") or be of comparable quality to
securities having such ratings. An NRSRO's two highest rating categories are
determined without regard for sub-categories and gradations. For example,
securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Ratings Group
("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or
FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all
considered rated in one of the two highest short-term rating categories. The
Fund will follow applicable regulations in determining whether a security
rated by more than one NRSRO can be treated as being in one of the two
highest short-term rating categories; currently, such securities must be
rated by two NRSROs in one of their two highest rating categories. See
"Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund`s records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20%
of the total value of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities
to the Fund and agree at the time of sale to repurchase them at a mutually
agreed upon time and price. To the extent that the seller does not repurchase
the securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. The Fund or its custodian will take
possession of the securities subject to repurchase agreements, and these
securities will be marked to market daily. In the event that a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of
the Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument in return
for a percentage of the instrument's market value in cash and agrees that on
a stipulated date in the future the Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an agreed
upon rate. The use of reverse repurchase agreements may enable the Fund to
avoid selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but does not ensure this result. When effecting reverse
repurchase agreements, liquid assets of the Fund, in a dollar amount
sufficient to make payment for the obligations to be purchased, are:
segregated on the Fund's records at the trade date; marked to market daily;
and maintained until the transaction is settled.
CREDIT ENHANCEMENT
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.
NEW JERSEY INVESTMENT RISKS
The Fund invests in obligations of New Jersey (the "State") issuers which
result in the Fund's performance being subject to risks associated with the
overall conditions present within the State. The following information is a
general summary of the State's financial condition and a brief summary of the
prevailing economic conditions. This information is based on official
statements relating to securities that are believed to be reliable but should
not be considered as a complete description of all relevant information.
Standard & Poor's Ratings Group ("S & P") recently changed its economic
outlook for New Jersey from negative to stable citing strong recovery from
the recent recession. The New Jersey economy is diversified with large retail
trade and service sectors and many headquarters of large U.S. corporations.
Economic growth was especially strong in the third and fourth quarters of
1994 with 50,000 new jobs created-more than double the rate of the prior two
years. However, the April 1995 unemployment rate was 6.3%, above the national
level of 5.8%. At 6.3%, New Jersey's unemployment rate is the third highest
in the nation behind California (7.3%) and New York (6.8%). In spite of the
unemployment figures, New Jersey still boasts very high wealth and income
indicators.
A new fiscal policy has emerged in New Jersey. In an attempt to spur economic
growth, the 1996 New Jersey budget includes significant personal income tax
cuts. Given lower tax revenue levels, expenditure reductions will be key to
balancing the budget. In 1996, total State spending is budgeted to grow by
3.0%. This low level growth can only be accomplished by significantly
curtailing the State's fastest growing Budge items-Medicaid and corrections.
In any fiscal scenario, the State's credit picture is greatly helped by
strong cash reserves. In recent years, the State has maintained cash basis
year-end balances exceeding 5.5% of revenues. The fiscal 1995 ending fund
balance was $966 million.
The overall credit quality of the State is further demonstrated by its debt
ratings. New Jersey maintains an Aa1 rating from Moody's Investors Service,
Inc. S & P rates the State AA+.
The Fund's concentration in municipal securities issued by the State and its
political subdivisions provides a greater level of risk than a fund which is
diversified across numerous states and municipal entities. The ability of the
State or its municipalities to meet their obligations will depend on the
availability of tax and other revenues; economic, political, and demographic
conditions within the State; and the underlying fiscal condition of the
State, its counties, and its municipalities.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for clearance
of transactions.
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 its total assets are
outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings. In those cases, it may pledge
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may acquire publicly
or nonpublicly issued New Jersey municipal securities or temporary
investments or enter into repurchase agreements, in accordance with its
investment objective, policies, limitations and its Declaration of Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its net assets in securities
subject to restrictions on resale under the Securities Act of 1933, except
for certain restricted securities which meet the criteria for liquidity as
established by the Board of Trustees.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, or real estate limited
partnerships, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are
secured by real estate or interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase, 25%
or more of the value of its total assets would be invested in any one
industry or in industrial development bonds or other securities the interest
upon which is paid from revenues of similar types of projects. However, the
Fund may invest as temporary investments more than 25% of the value of its
assets in cash or cash items, securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, or instruments secured by
these money market instruments, such as repurchase agreements.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies, except
as part of a merger, consolidation, or other acquisition.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers (including companies responsible for paying principal
and interest on industrial development bonds) which have records of less than
three years of continuous operations, including the operation of any
predecessor.
INVESTING FOR CONTROL
The Fund will not invest in securities of a company for the purpose of
exercising control or management.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES
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 association having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items." Except
with respect to borrowing money, if a percentage limitation is adhered to at
the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
limitation.
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.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in its
prospectus and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940. In particular, the Fund
will comply with the various requirements of Rule 2a-7, 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.
FEDERATED MUNICIPAL TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive
Vice President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative
Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management
Center; Director, Trustee, or Managing General Partner of the Funds;
President Emeritus, University of Pittsburgh; founding Chairman, National
Advisory Council for Environmental Policy and Technology and Federal
Emergency Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global 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 of
the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Services Company; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice
President, Federated Shareholder Services; Vice President, Federated
Administrative Services; Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; President and
Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated
U.S. Government Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 3-5 Years; First Priority Funds; Fixed Income Securities,
Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal
Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government
Securities, Inc.; Government Income Securities, Inc.; High Yield Cash Trust;
Insurance Management Series; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty
Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty
Municipal Securities Fund, Inc.; Liberty U.S. Government Money Market Trust;
Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; 111 Corcoran Funds; Peachtree Funds; The Planters Funds;
RIMCO Monument Funds; The Shawmut Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial Institutions; Trust For Government Cash Reserves; Trust for Short-
Term U.S. Government Securities; Trust for U.S. Treasury Obligations; The
Virtus Funds; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.
As of December 4, 1995, the following shareholder(s) of record owned 5% or
more of the outstanding Institutional Shares of the New Jersey Municipal Cash
Trust: National Westminster Bank NJ, Jersey City, NJ, 40.78%; Corestates Bank
NA, Philadelphia, PA, 17.18%; The Bopac Company, Clifton, NJ, 10.67%;
Fiduciary Trust Co. International, New York, NY, 8.56%; and Tellson & Co.,
Gladstone, NJ, 11.29%.
As of December 4, 1995, the following shareholder(s) of record owned 5% or
more of the outstanding Institutional Service Shares of the New Jersey
Municipal Cash Trust: Fiduciary Trust Co. International, New York, NY,
33.94%; Newbridge & Co., Lakehurst, NJ, 5.31%; Gardiner-Caldwell Synermed,
Califon, NJ, 9.08%; Frank V. Grace, Long Valley, NJ, 7.14%; and Radnor Alloys
Inc., Harrison, NJ, 11.11%.
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 68 other investment companies in the
Fund Complex
Thomas G. Bigley $2,458 $20,688 for the Trust and
Trustee 49 other investment companies in the Fund
Complex
John T. Conroy, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
William J. Copeland $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Glen R. Johnson $0 $0 for the Trust and
President and Trustee 14 other investment companies in the
Fund Complex
James E. Dowd $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D. $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Peter E. Madden $2,757 $90,563 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Gregor F. Meyer $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,762 $0 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Wesley W. Posvar $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Marjorie P. Smuts $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of
fifteen portfolios.
+The information is provided for the last calendar year.
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 the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the fiscal years ended
October 31, 1995, 1994, and 1993, the adviser earned $431,160, $390,387, and
$404,029, respectively, of which $228,371, $380,881, and $404,029,
respectively, were waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1-1/2%
per year of the remaining average net assets, the adviser will reimburse
the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
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, 1995, 1994,
1993, 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.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated Administrative
Services, Inc., also a subsidiary of Federated Investors, served as the
Fund's Administrator. (For purposes of this Statement of Additional
Information, Federated Administrative Services and Federated Administrative
Services, Inc. may hereinafter collectively be referred to as the
"Administrators".) For the fiscal year ended October 31, 1995, Federated
Administrative Services earned $155,000. For the fiscal year ended ended
October 31, 1994, the Administrators collectively earned $203,429. For the
fiscal year ended ended October 31, 1993, Federated Administrative Services,
Inc., earned $292,432. 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 the size, type and number of accounts and transactions made by
shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT
With respect to Institutional Service Shares, the Fund has adopted a
Distribution Plan pursuant to Rule 12b-1 which was promulgated by the
Securities and Exchange Commission pursuant to the Investment Company Act of
1940. Additionally, the Fund has adopted a Shareholder Service Agreement with
respect to both Institutional Service Shares and Institutional Shares.
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular
circumstances and goals. These activities and services may include, but are
not limited to, marketing efforts; providing office space, equipment,
telephone facilities, and various clerical, supervisory, computer, and other
personnel as necessary or beneficial to establish and maintain shareholder
accounts and records; processing purchase and redemption transactions and
automatic investments of client account cash balances; answering routine
client inquiries; and assisting clients in changing dividend options, account
designations, and addresses.
By adopting the Distribution Plan, the Trustees expect that the Fund will be
able to achieve a more predictable flow of cash for investment purposes and
to meet redemptions. This will facilitate more efficient portfolio management
and assist the Fund in pursuing its investment objectives. By identifying
potential investors whose needs are served by the Fund's objectives, and
properly servicing these accounts, it may be possible to curb sharp
fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; and (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the fiscal period ending October 31, 1995, payments in the amount of
$27,107 were made pursuant to the Distribution Plan on behalf of
Institutional Service Shares, all of which were waived. In addition, for this
period, the Fund's Institutional Shares and Institutional Service Shares paid
shareholder services fees in the amount of $201,709 and $67,766,
respectively, of which $159,821 and $26,242 , respectively, were waived.
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.
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.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its net
income earned during the year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for those
shareholders paying those fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding
capital changes but including the value of any additional shares purchased
with dividends earned from the original one share and all dividends declared
on the original and any purchased shares; dividing the net change in the
account's value by the value of the account at the beginning of the base
period to determine the base period return; and multiplying the base period
return by 365/7.
For the seven-day period ended October 31, 1995, the yields for
Institutional Shares and Institutional Service Shares were 3.41% and 3.31%,
respectively.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
For the seven-day period ended ended October 31, 1995, the effective yields
for Institutional Shares and Institutional Service Shares were 3.46% and
3.36%, respectively.
TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Fund is calculated similarly to the yield but
is adjusted to reflect the taxable yield that the Fund would have had to earn
to equal its actual yield, assuming a 39.6% tax rate (the maximum effective
federal rate for individuals) and assuming that income is 100% exempt.
For the seven-day period ended October 31, 1995, the tax-equivalent yields
for Institutional Shares and Institutional Service Shares were 6.34% and
6.16%, respectively.
TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature. The
interest earned by the municipal securities in the Fund's portfolio generally
remains free from federal regular income tax,* and is often free from state
and local taxes as well. As the table below indicates, a "tax-free"
investment can be an attractive choice for investors, particularly in times
of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
State of New Jersey
TAX BRACKET:
FEDERAL
15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL
AND STATE 17.38% 34.18% 37.65% 42.65% 46.25%
SINGLE $1- $23,351- $56,551- $117,951- OVER
RETURN 23,350 56,550 117,950 256,500 256,500
Tax-Exempt
Yield Taxable Yield Equivalent
1.50% 1.82% 2.28% 2.41% 2.62% 2.79%
2.00% 2.42% 3.04% 3.21% 3.49% 3.72%
2.50% 3.03% 3.80% 4.01% 4.36% 4.65%
3.00% 3.63% 4.56% 4.81% 5.23% 5.58%
3.50% 4.24% 5.32% 5.61% 6.10% 6.51%
4.00% 4.84% 6.08% 6.42% 6.97% 7.44%
4.50% 5.45% 6.84% 7.22% 7.85% 8.37%
5.00% 6.05% 7.60% 8.02% 8.72% 9.30%
5.50% 6.66% 8.36% 8.82% 9.59% 10.23%
6.00% 7.26% 9.12% 9.62% 10.46% 11.16%
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.
For the one-year period ended October 31, 1995, and for the period from
December 13, 1990 (date of initial public investment) through October 31,
1995, the average annual total returns were 3.46% and 3.02%, respectively,
for Institutional Shares, and were 3.36% and 2.93%, respectively, for
Institutional Service Shares.
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:
O LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports
monthly and 12-month-to-date investment results for the same money
funds.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected
in its investment decision making-structured, straightforward, and
consistent. This has resulted in a history of competitive performance with a
range of competitive investment products that have gained the confidence of
thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market funds,
a principal means used by money managers today to value money market fund
shares. Other innovations include the first institutional tax-free money
market fund. As of December 31, 1994, Federated Investors managed more than
$31 billion in assets across approximately 43 money market funds, including
17 government, 8 prime and 18 municipal with assets approximating $17
billion, $7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $2 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional
clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
*Source: Investment Company Institute
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a variable rate demand feature. The first rating (long-term
rating) addresses the likelihood of repayment of principal and interest when
due, and the second rating (short-term rating) describes the demand
characteristics. Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The
definitions for the long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
LONG-TERM DEBT RATINGS
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the
relative investment qualities of short-term obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the
use of the VMIG symbol to reflect such characteristics as payment upon
periodic demand rather than fixed maturity dates and payment relying on
external liquidity.
In this case, two ratings are usually assigned, (for example, Aaa/VMIG-1);
the first representing an evaluation of the degree of risk associated with
scheduled principal and interest payments, and the second representing an
evaluation of the degree of risk associated with the demand feature. The VMIG
rating can be assigned a 1 or 2 designation using the same definitions
described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1 Issuers rated PRIME-1 (or related supporting institutions)
have a superior capacity for repayment of short- term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well
established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on
debt and ample asset protection, broad margins in earning
coverage of fixed financial charges and high internal cash generation,
well-established access to a range of financial markets and assured
sources of alternate liquidity
P-2 Issuers rated PRIME-2 (or related supporting institutions)
have a strong capacity for repayment of short- term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is
maintained.
LONG-TERM DEBT RATINGS
AAA Bonds which are rated AAA are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large or by
an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes is can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in AAA securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger
than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to
securities rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "Aaa" by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "Aa" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.
Cusip
314229600
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OHIO MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
CASH II SHARES
PROSPECTUS
The Cash II Shares of Ohio Municipal Cash Trust (the "Fund") offered by this
prospectus represent interests in a non-diversified portfolio of Federated
Municipal Trust (the "Trust"), an open-end management investment company (a
mutual fund). The Fund invests primarily in short-term Ohio municipal
securities, including securities of states, territories, and possessions of the
United States which are not issued by or on behalf of Ohio, or its political
subdivisions and financing authorities, but which provide income exempt from
federal regular income tax and the personal income taxes imposed by the State of
Ohio and Ohio municipalities consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
CASH II SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Ohio Municipal Securities 6
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Cash II Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 10
- ------------------------------------------------------
Special Purchase Features 10
HOW TO REDEEM SHARES 11
- ------------------------------------------------------
Special Redemption Features 12
ACCOUNT AND SHARE INFORMATION 12
- ------------------------------------------------------
TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
State and Local Taxes 14
OTHER CLASSES OF SHARES 14
- ------------------------------------------------------
PERFORMANCE INFORMATION 15
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
Institutional Shares 16
- ------------------------------------------------------
FINANCIAL STATEMENTS 17
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 35
- ------------------------------------------------------
ADDRESSES 36
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CASH II SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................................ None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)............................................. 0.36%
12b-1 Fee (after waiver)(2).................................................. 0.05%
Total Other Expenses......................................................... 0.46%
Shareholder Services Fee................................................... 0.25%
Total Operating Expenses(3)........................................... 0.87%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.40%.
(2) The maximum 12b-1 fee is 0.30%.
(3) The total operating expenses would have been 1.16% absent the voluntary
waivers of a portion of the management fee and a portion of the 12b-1 fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Cash II Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Fund Information." Wire-transferred redemptions
of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- --------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2)
redemption at the end of each time period........ $9 $28 $48 $107
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH II SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 35.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------
1995 1994 1993 1992 1991(A)
----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.02
- -------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.02) (0.03) (0.02)
- ------------------------------------------- ----- ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------- ----- ----- ----- ----- ------
TOTAL RETURN (B) 3.30% 2.10% 2.02% 2.90% 2.27%
- -------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------
Expenses 0.87% 0.85% 0.78% 0.76% 0.63%*
- -------------------------------------------
Net investment income 3.25% 2.09% 2.01% 2.86% 4.18%*
- -------------------------------------------
Expense waiver/reimbursement (c) 0.29% 0.24% 0.19% 0.25% 0.34%*
- -------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------
Net assets, end of period (000 omitted) $188,234 $156,051 $127,017 $133,877 $94,081
- -------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 22, 1991 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established two classes of shares known as Cash II Shares and Institutional
Shares. This prospectus relates only to Cash II Shares of the Fund, which are
designed primarily for the retail customers of financial institutions as a
convenient means of accumulating an interest in a professionally managed,
non-diversified portfolio investing primarily in short-term Ohio municipal
securities. The Fund may not be a suitable investment for retirement plans or
for non-Ohio taxpayers because it invests in municipal securities of that state.
A minimum initial investment of $25,000 within 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
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INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the personal income taxes imposed by the State of Ohio
and Ohio municipalities consistent with stability of principal. This investment
objective cannot be changed without shareholder approval. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by complying with the various requirements of Rule 2a-7 under the
Investment Company Act of 1940 which regulates money market funds and by
following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of Ohio
municipal securities (as defined below) maturing in 13 months or less. As a
matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be exempt from
federal regular income tax and Ohio state income taxes. (Federal regular income
tax does not include the federal individual alternative minimum tax or the
federal alternative minimum tax for corporations.) The average maturity of the
securities in the Fund's portfolio, computed on a dollar-weighted basis, will be
90 days or less. Unless indicated otherwise, the investment policies may be
changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued by
or on behalf of Ohio and its political subdivisions and financing authorities,
and obligations of other states, territories, and possessions of the United
States, including the District of Columbia, and any political subdivision or
financing authority of any of these, the income from which is, in the opinion of
qualified legal counsel, exempt from federal regular income tax and Ohio state
income tax imposed upon non-
corporate taxpayers ("Ohio Municipal Securities"). Examples of Ohio Municipal
Securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Ohio Municipal
Securities from financial institutions such as commercial and investment
banks, savings associations, and insurance companies. These interests may
take the form of participations, beneficial interests in a trust,
partnership interests or any other form of indirect ownership that allows
the Fund to treat the income from the investment as exempt from federal
income tax. The Fund invests in these participation interests in order to
obtain credit enhancement or demand features that would not be available
through direct ownership of the underlying Ohio Municipal Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality to other
securities in which the Fund invests, such as: obligations issued by or on
behalf of municipal or corporate issuers obligations issued or guaranteed by the
U.S. government, its agencies, or instrumentalities; instruments issued by a
U.S. branch of a domestic bank or other deposit institution having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment; and repurchase agreements (arrangements in which the organization
selling the Fund a temporary investment agrees at the time of sale to repurchase
it at a mutually agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain Ohio Municipal
Securities is subject to the federal alternative minimum tax.
OHIO MUNICIPAL SECURITIES
Ohio Municipal Securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.
Ohio Municipal Securities include industrial development bonds issued by or on
behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Ohio Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Ohio Municipal Securities depend on a variety of factors, including:
the general conditions of the short-term municipal note market and of the
municipal bond market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue. The ability of the Fund to achieve its
investment objective also depends on the continuing ability of the issuers of
Ohio Municipal Securities and participation interests, or the credit enhancers
of either, to meet their obligations for the payment of interest and principal
when due. In addition, from time to time, the supply of Ohio Municipal
Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Ohio Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Ohio Municipal Securities could involve an increased risk to the Fund should any
of these related projects or facilities experience financial difficulties.
Obligations of issuers of Ohio Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for a percentage
of its cash value with an agreement to buy it back on a set date) or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge assets up to 15% to secure
such borrowings. These investment limitations cannot be changed without
shareholder approval.
FUND INFORMATION
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MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .40 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF CASH II SHARES
Federated Securities Corp. is the principal distributor for Cash II Shares of
the Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan adopted in
accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"), the
distributor may be paid a fee in an amount computed at an annual rate of .30 of
1% of the average daily net asset value of Cash II Shares to finance any
activity which is principally intended to result in the sale of shares subject
to the Distribution Plan. The distributor may select financial institutions such
as banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide services or distribution-related support services as
agents for their clients or customers.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Fund
under the Distribution Plan.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up .25 of 1% of the average daily net asset value of
Cash II Shares to obtain certain personal services for shareholders and for the
maintenance of shareholder accounts. Federated Shareholders Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to payments made
pursuant to the Distribution Plan and Shareholder Services Agreement, Federated
Securities Corp. and Federated Shareholder Services, from their own assets, may
pay financial institutions supplemental fees for the performance of substantial
sales services, distribution-related support services, or shareholder services.
The support may include sponsoring sales, educational and training seminars for
their employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support furnished by
the financial institution. Any payments made by the distributor may be
reimbursed by the Fund's investment adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- --------------------- -----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of Cash II Shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting liabilities attributable to shares
from the value of Fund assets attributable to shares, 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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
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Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days which the New York Stock Exchange
is 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 within a
90-day period. 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 of State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: Ohio Municipal Cash Trust, Cash
II Shares; Fund Number (This number can be found on the account statement or by
contacting the Fund.); Group Number or Order Number; Nominee or Institution
Name; and ABA Number 011000028. Shares cannot be purchased by wire on holidays
when wire transfers are restricted. Questions on wire purchases should be
directed to your shareholder services representative at the telephone number
listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to Ohio Municipal Cash Trust -- Cash II Shares. 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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. 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 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If shares certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven
days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. The check writing service allows
shareholders to receive the daily dividend declared on the shares to be redeemed
until the check is presented to UMB Bank, N.A., the bank responsible for
administering the check writing program, for payment. However, checks should
never be made payable or sent to UMB Bank, N.A. or the Fund to redeem shares,
and a check may not be written to close an account.
DEBIT CARD. Upon request, a debit account will be established. This account
allows shareholders to redeem shares by using a debit card. A fee will be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of at
least $25,000, a systematic withdrawal program may be established whereby
automatic redemptions are made from the account and transferred electronically
to any commercial bank, savings bank, or credit union that is an ACH member.
Shareholders may apply for participation in this program through their financial
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$25,000 due to shareholder redemptions. Before shares are
redeemed to close an account, the shareholder is notified in writing and allowed
30 days to purchase additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has 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. 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 election of Trustees under certain circumstances.
As of December 4, 1995, Parcol & Co., Akron, OH, owned 34.39% of the voting
securities of the Fund's Institutional Shares and Gradison & Company Inc.,
Cincinnati, OH, owned 80.64% of the voting securities of the Fund's Cash II
Shares, 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.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Fund may purchase all types of municipal bonds, including private activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than
Ohio. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
OHIO TAXES. Under existing Ohio laws, distributions made by the Fund will not be
subject to Ohio income taxes to the extent that such distributions qualify as
exempt interest dividends under the Internal Revenue Code, and represent (i)
interest on obligations of Ohio, or its subdivisions which is exempt from
federal income tax; or (ii) interest or dividends from obligations issued by the
United States and its territories or possessions or by any authority, commission
or instrumentality of the United States which are exempt from state income tax
under federal laws. Conversely, to the extent that the distributions made by the
Fund are derived from other types of obligations, such distributions will be
subject to Ohio individual income taxes.
Distributions made by the Fund will not be subject to Ohio corporate franchise
tax to the extent that such distributions qualify as exempt interest dividends
under the Internal Revenue Code, and represent (i) interest from obligations of
Ohio, or its subdivisions which is exempt from federal income tax; or (ii) net
interest income from obligations issued by the United States and its territories
or possessions or by any authority, commission or instrumentality of the United
States which is included in federal taxable income and which is exempt from
state income tax under federal laws.
Exempt-interest dividends that represent interest from obligations held by the
Fund which are issued by Ohio or its political subdivisions will be exempt from
any Ohio municipal income tax (even if the municipality is permitted under Ohio
laws to levy a tax on intangible income).
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called Institutional Shares that
are sold primarily to financial institutions acting in a fiduciary or agency
capacity. Institutional Shares are sold at net asset value and are subject to a
Shareholder Services Agreement. Investments in Institutional Shares are subject
to a minimum initial investment of $25,000 within a 90-day period.
Cash II Shares and Institutional Shares are subject to certain of the same
expenses. Expense differences, however, between Cash II Shares and Institutional
Shares may affect the performance of each class.
To obtain more information and a prospectus for Institutional Shares, investors
may call 1-800-235-4669.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the shares' tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants, on page 35.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------
1995 1994 1993 1992 1991(A)
----- ----- ----- ----- -------
<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 0.04 0.02 0.02 0.03 0.02
- ---------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from net investment income (0.04) (0.02) (0.02) (0.03) (0.02)
- --------------------------------------------- ----- ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------- ----- ----- ----- ----- ------
TOTAL RETURN (B) 3.61% 2.41% 2.33% 3.21% 2.40%
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 0.57% 0.55% 0.48% 0.46% 0.35%*
- ---------------------------------------------
Net investment income 3.56% 2.36% 2.30% 3.10% 4.46%*
- ---------------------------------------------
Expense waiver/reimbursement (c) 0.29% 0.07% 0.19% 0.25% 0.32%*
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period (000 omitted) $72,93 $62,49 $81,74 $74,34 $44,771
- ---------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 22, 1991 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
OHIO MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.1%
- -----------------------------------------------------------------------
OHIO--99.1%
-------------------------------------------------------
$ 2,000,000 Anthony Wayne School District, OH, 4.00% BANs, NR $ 2,000,691
12/14/1995
-------------------------------------------------------
5,875,000 Belmont County, OH Weekly VRDNs (Lesco, Inc.)/ (PNC A-1 5,875,000
Bank, N.A. LOC)
-------------------------------------------------------
1,000,000 Belmont County, OH, County Jail Improvement Notes NR 1,002,306
(Third Series), 4.34% BANs, 8/30/1996
-------------------------------------------------------
1,675,000 Berea, OH, BANS, 4.07%, 10/24/1996 NR(3) 1,677,671
-------------------------------------------------------
3,000,000 Brecksville-Broadview Heights CSD, OH, GO Unlimited Tax NR(3) 3,000,667
School Improvement, 5.71% BANs, 1/18/1996
-------------------------------------------------------
1,175,000 Butler County, OH, Limited GO's, 5.07% BANs, 3/15/1996 NR(3) 1,176,946
-------------------------------------------------------
2,000,000 Cincinnati City School District, OH, 5.80% TANs, NR(3) 2,001,209
12/29/1995
-------------------------------------------------------
5,760,000 (a) Cleveland, OH City School District, Energy Conservation A-1+ 5,760,000
Improvement Bonds (Series 1994) Weekly VRDNs
(Internationale Nederlanden Bank N.V. LIQ)/
(Internationale Nederlanden Bank N.V. LOC)
-------------------------------------------------------
2,000,000 Cleveland-Cuyahoga County, OH Port Authority, (Series A-1+ 2,000,000
1993) Weekly VRDNs (Rock & Roll Hall of Fame
Museum)/(Credit Local de France LOC)
-------------------------------------------------------
1,800,000 Clinton County, OH Hospital Authority Weekly VRDNs P-1 1,800,000
(Clinton Memorial Hospital)/(National City Bank,
Columbus, OH LOC)
-------------------------------------------------------
2,000,000 Columbiana County, OH, Adjustable Rate Industrial P-1 2,000,000
Development Revenue Bonds Weekly VRDNs
(C & S Land Company Project)/(Bank One, Youngstown, NA
LOC)
-------------------------------------------------------
1,800,000 Conneaut, OH, 4.45% BANs, 7/26/1996 NR 1,803,793
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 1,200,000 Cuyahoga County, OH Hospital Authority Daily VRDNs VMIG1 $ 1,200,000
(University Hospital of Cleveland)/(Dai-Ichi Kangyo
Bank Ltd., Tokyo LOC)
-------------------------------------------------------
800,000 Cuyahoga County, OH IDA Weekly VRDNs (Animal Protection VMIG1 800,000
League (Cuyahoga County))/(Society National Bank,
Cleveland, OH LOC)
-------------------------------------------------------
1,800,000 Cuyahoga County, OH IDA Weekly VRDNs (East Park P-1 1,800,000
Community, Inc.)/(Society National Bank, Cleveland, OH
LOC)
-------------------------------------------------------
655,000 Cuyahoga County, OH IDA Weekly VRDNs (Interstate Diesel P-1 655,000
Service, Inc.)/(Huntington National Bank, Columbus, OH
LOC)
-------------------------------------------------------
715,000 Cuyahoga County, OH IDA Weekly VRDNs (Parma-Commerce P-1 715,000
Parkway West)/(Society National Bank, Cleveland, OH
LOC)
-------------------------------------------------------
1,200,000 Cuyahoga County, OH IDA Weekly VRDNs (Premier P-1 1,200,000
Manufacturing Corp.)/(National City Bank, Kentucky LOC)
-------------------------------------------------------
2,000,000 Cuyahoga County, OH IDA, IDRB (Series 1995) Weekly P-1 2,000,000
VRDNs (Avalon Precision Casting Co. Project)/(Society
National Bank, Cleveland, OH LOC)
-------------------------------------------------------
3,000,000 Dayton, OH, Revenue Refunding Bonds (Series 1993E) VMIG1 3,000,000
Weekly VRDNs (Emery Air Freight Corp.)/(Mellon Bank NA,
Pittsburgh LOC)
-------------------------------------------------------
1,700,000 Delaware County, OH, IDRB (Series 1995) Weekly VRDNs P-1 1,700,000
(Air Waves, Inc. Project)/(Society National Bank,
Cleveland, OH LOC)
-------------------------------------------------------
1,240,000 Elyria, OH, General Limited Tax Various Purpose BANS, NR(3) 1,242,922
4.26%, 10/11/1996
-------------------------------------------------------
2,000,000 Euclid City School District, OH, 4.83% RANs, 12/15/1995 NR(3) 2,000,416
-------------------------------------------------------
1,000,000 Franklin County, OH Hospital Facility Authority Weekly VMIG1 1,000,000
VRDNs (Riverside United Methodist Hospital)/(National
City Bank, Cleveland, OH LOC)
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 4,500,000 Franklin County, OH IDA Weekly VRDNs P-1 $ 4,500,000
(Heekin Can, Inc.)/(PNC Bank, Ohio, N.A. LOC)
-------------------------------------------------------
3,160,000 Franklin County, OH IDA Weekly VRDNs (Unicorn Leasing P-1 3,160,000
Corp.)/(Fifth Third Bank, Cincinnati LOC)
-------------------------------------------------------
3,670,000 Franklin County, OH IDA, (Series 1995) Weekly VRDNs P-1 3,670,000
(Fabcon L.L.C. Project)/(Norwest Bank Minnesota,
Minneapolis LOC)
-------------------------------------------------------
2,000,000 Franklin County, OH IDA, IDRB Weekly VRDNs (Tigerpoly P-1 2,000,000
Manufacturing, Inc.)/(Mitsubishi Bank Ltd, Tokyo LOC)
-------------------------------------------------------
2,000,000 Franklin County, OH, Ltd. GO's (Series 8/95), 4.10% SP-1+ 2,003,106
BANs, 8/23/1996
-------------------------------------------------------
1,200,000 Gates Mills Village, OH, Water System Improvement BANS, NR 1,201,105
4.10%, 10/17/1996
-------------------------------------------------------
1,950,000 Hamilton County, OH Health System Weekly VRDNs (West VMIG1 1,950,000
Park Community)/(Fifth Third Bank, Cincinnati LOC)
-------------------------------------------------------
1,500,000 Hamilton County, OH Hospital Facilities Authority, A-1 1,500,000
Revenue Bonds (Series 1986A) Weekly VRDNs (Good
Samaritan Hospital)
-------------------------------------------------------
3,000,000 Hamilton, OH, Ltd. Tax GO's, 3.91% BANs, 1/18/1996 NR(3) 3,000,050
-------------------------------------------------------
2,200,000 Hamilton, OH, Real Estate Acquisition/Electric NR(3) 2,200,259
Improvement System BANs (Series A), 4.02%, 6/14/1996
-------------------------------------------------------
2,000,000 Holmes County, OH IDA Weekly VRDNs (Poultry A-1+ 2,000,000
Processing)/(Rabobank Nederland, Utrecht LOC)
-------------------------------------------------------
1,250,000 Huber Heights, OH, IDRB (Series 1994) Weekly VRDNs P-1 1,250,000
(Lasermike, Inc. Project)/(Society National Bank,
Cleveland, OH LOC)
-------------------------------------------------------
1,000,000 Huron City, OH, General Limited Tax Various Purpose, NR 1,001,336
4.49% BANs, 5/31/1996
-------------------------------------------------------
300,000 Kettering, OH IDA Weekly VRDNs (Center-Plex Venture)/ P-1 300,000
(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 1,680,000 Lake County, OH, General and SA Limited Tax Various NR(2) $ 1,681,816
BANS, 4.07%, 10/10/1996
-------------------------------------------------------
2,885,000 Lorain County, OH, Health Facilities Revenue Bonds P-1 2,885,000
(Series 1992A) Weekly VRDNs (Elyria United Methodist
Home)/(Fifth Third Bank, Cincinnati LOC)
-------------------------------------------------------
4,565,000 Lorain Port Authority, OH, (Series 1994) Weekly VRDNs P-1 4,565,000
(Spitzer Great Lakes Ltd., Inc.)/(Bank One, Cleveland,
N.A. LOC)
-------------------------------------------------------
1,600,000 Lucas County, OH IDA Weekly VRDNs (Kuhlman Corp.)/ P-1 1,600,000
(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
1,905,000 Lucas County, OH, Hospital Facility Improvement Revenue P-1 1,905,000
Bonds (Series 93) Weekly VRDNs (Lott Industries, Inc.)/
(National City Bank,
Cleveland, OH LOC)
-------------------------------------------------------
300,000 Lucas County, OH, Hospital Improvement Revenue Weekly P-1 300,000
VRDNs (Sunshine Children's Home)/(National City Bank,
Cleveland, OH LOC)
-------------------------------------------------------
8,500,000 Lucas County, OH, Hospital Refunding Revenue Bonds P-1 8,500,000
Weekly VRDNs (Riverside Hospital, OH)/(Huntington
National Bank, Columbus, OH LOC)
-------------------------------------------------------
3,500,000 Lucas County, OH, Various Purpose Improvement Notes NR(4) 3,501,985
(Series 1994), 5.75% BANs, 11/30/1995
-------------------------------------------------------
5,325,000 Mahoning County, OH Multifamily HFA Weekly VRDNs A-1 5,325,000
(International Towers, Inc.)/(PNC Bank, N.A. LOC)
-------------------------------------------------------
6,900,000 Mahoning County, OH, Housing Revenue Bonds (Series A-1 6,900,000
1995) Weekly VRDNs (Copeland Oaks Project)/ (Bank One,
Akron, N.A. LOC)
-------------------------------------------------------
40,000 Mahoning County, OH, IDR Weekly VRDNs (Tru-Cut Die P-1 40,000
Corp.)/(PNC Bank, Ohio, N.A. LOC)
-------------------------------------------------------
1,120,000 Mansfield, OH, IDR Weekly VRDNs (Designed Metal P-1 1,120,000
Products, Inc.)/(Bank One, Columbus, N.A. LOC)
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 2,000,000 Marysville Exempted Village School District, OH, NR $ 2,001,101
General Unlimited Tax School Improvement Bond
Anticipation Notes, 4.27% BANs, 12/20/1995
-------------------------------------------------------
460,000 Medina County, OH, IDR, 4.05% TOBs (Bopco)/(Bank One, P-1 460,000
Akron, N.A. LOC), Optional Tender 3/1/1996
-------------------------------------------------------
5,400,000 Medina County, OH, Solid Waste Disposal Revenue Bonds P-1 5,400,000
(Series 1995) Weekly VRDNs (Valley City
Steel Company Project)/(Society National Bank,
Cleveland, OH LOC)
-------------------------------------------------------
7,000,000 Montgomery County, OH, Ltd. Tax GO's Certificate of NR(2) 7,022,709
Indebtedness (1995 Series A), 5.00% BANs, 4/26/1996
-------------------------------------------------------
2,010,000 Montgomery, OH IDA Weekly VRDNs (Bethesda Two Limited A-1 2,010,000
Partnership)/(Huntington National Bank, Columbus, OH
LOC)
-------------------------------------------------------
3,600,000 Morrow County, OH, Detention Facilities Bond NR 3,601,564
Anticipation Notes (Series 1995), 4.25% BANs, 4/15/1996
-------------------------------------------------------
500,000 Muskingham County, OH Hospital Facilities Authority VMIG1 500,000
Weekly VRDNs (Bethesda Care System)/(National City
Bank, Columbus, OH LOC)
-------------------------------------------------------
370,000 North Olmsted, OH IDA Weekly VRDNs (Bryant & P-1 370,000
Stratton)/(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
730,000 North Olmsted, OH IDA, 4.00% TOBs (Therm-All)/ P-1 730,000
(National City Bank, Cleveland, OH LOC), Optional
Tender 2/1/1996
-------------------------------------------------------
4,000,000 North Olmsted, OH, Various Purpose Improvement Notes, NR(3) 4,010,198
(Series 1995), 4.67% BANs, 6/20/1996
-------------------------------------------------------
2,135,000 Ohio HFA Weekly VRDNs (Westchester Village)/(Society P-1 2,135,000
National Bank, Cleveland, OH LOC)
-------------------------------------------------------
7,405,000 Ohio HFA, 4.40% TOBs (Comerica, Inc.)/(Comerica, Inc. P-1 7,405,000
LOC), Optional Tender 11/1/1995
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 6,435,000 (a) Ohio HFA, Single Family Mortgage (Series PT-8) Weekly A-1+ $ 6,435,000
VRDNs (GNMA COL)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LIQ)
-------------------------------------------------------
2,000,000 Ohio State Air Quality Development Authority, (Series P-1 2,000,000
1998A) Weekly VRDNs (PPG Industries, Inc.)
-------------------------------------------------------
1,800,000 Ohio State Air Quality Development Authority, 3.75% CP AAA 1,800,000
(Cincinnati Gas and Electric Co.)/(Union Bank of
Switzerland, Zurich LOC), Mandatory Tender 11/7/1995
-------------------------------------------------------
3,000,000 Ohio State Air Quality Development Authority, 3.75% CP AAA 3,000,000
(Cincinnati Gas and Electric Co.)/(Union Bank of
Switzerland, Zurich LOC), Mandatory Tender 11/9/1995
-------------------------------------------------------
4,500,000 Ohio State Air Quality Development Authority, 3.80% CP A-1+ 4,500,000
(Cincinnati Gas and Electric Co.)/(J.P. Morgan
Delaware, Wilmington LOC), Mandatory Tender 12/8/1995
-------------------------------------------------------
1,000,000 Ohio State Water Development Authority Weekly VRDNs P-1 1,000,000
(PPG Industries, Inc.)
-------------------------------------------------------
2,500,000 Ohio State Water Development Authority, Multimodal A-1+ 2,500,000
Water Development (Series 1993) Weekly VRDNs (Timken
Co.)/(Wachovia Bank of Georgia NA, Atlanta LOC)
-------------------------------------------------------
5,000,000 Ohio State Water Development Authority, Ohio PCR Bonds A-1+ 5,000,000
(Series 1989) Weekly VRDNs (Duquesne Light Power
Co.)/(Barclays Bank PLC, London LOC)
-------------------------------------------------------
3,500,000 Ohio State Water Development Authority, Pollution AAA 3,515,335
Control Facilities Revenue Bonds, 4.75% TOBs (Union
Bank of Switzerland, Zurich LOC), Optional Tender
5/1/1996
-------------------------------------------------------
700,000 Ohio State Weekly VRDNs (John Carroll University, OH)/ P-1 700,000
(PNC Bank, N.A. LOC)
-------------------------------------------------------
1,420,000 Ohio State, IDR (Series 1991) Weekly VRDNs (Standby A-1+ 1,420,000
Screw, Inc.)/(National City Bank, Columbus, OH LOC)
-------------------------------------------------------
1,400,000 Ohio State, IDRB (Series 1994) Weekly VRDNs (Anomatic P-1 1,400,000
Corporation)/(National City Bank, Columbus, OH LOC)
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 1,350,000 Orrville, OH IDA Weekly VRDNs (O.S. Associates/ A-1 $ 1,350,000
Contours, Inc.)/(National City Bank, Cleveland, OH LOC)
-------------------------------------------------------
1,000,000 Pickaway County, OH IDA Weekly VRDNs P-1 1,000,000
(PPG Industries, Inc.)
-------------------------------------------------------
210,000 Portage County, OH IDA Weekly VRDNs P-1 210,000
(D & W Associates)/(Bank One, Akron, N.A. LOC)
-------------------------------------------------------
400,000 Portage County, OH IDA, 4.05% TOBs (Neidlinger)/ P-1 400,000
(Society National Bank, Cleveland, OH LOC), Optional
Tender 3/1/1996
-------------------------------------------------------
900,000 Portage County, OH IDA, Adjustable Rate Industrial P-1 900,000
Revenue Bonds Weekly VRDNs (Lovejoy Industries)/(Star
Bank, NA, Cincinnati LOC)
-------------------------------------------------------
5,000,000 Richland County, OH, Special Assessment Limited Tax NR 5,002,622
Sewer Improvement BANS (Series 1995), 4.25%, 12/14/1995
-------------------------------------------------------
1,000,000 Rickenbacker, OH Port Authority, (Series 1992) Weekly P-1 1,000,000
VRDNs (Rickenbacker Holdings, Inc.)/(Bank One,
Columbus, N.A. LOC)
-------------------------------------------------------
1,250,000 Ross County, OH, Hospital Facilities Revenue Bonds AA- 1,250,000
(Series 1995) Weekly VRDNs (Medical Center Hospital
Project)/(Fifth Third Bank, Cincinnati LOC)
-------------------------------------------------------
1,200,000 Sharonville, OH, IDR Weekly VRDNs (Xtek, Inc.)/(Fifth VMIG1 1,200,000
Third Bank, Cincinnati LOC)
-------------------------------------------------------
1,150,000 Shelby City, OH, General Ltd. Tax Water System NR 1,152,218
Improvement BANS (Series 1995), 4.50%, 8/22/1996
-------------------------------------------------------
880,000 Solon, OH, IDR Weekly VRDNs (Graphic Laminating)/ P-1 880,000
(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
2,000,000 Solon, OH, IDRB (Series 1995) Weekly VRDNs (Cleveland A+ 2,000,000
Twist Drill Company)/(Nationsbank of Georgia, N.A. LOC)
-------------------------------------------------------
2,000,000 Springdale, OH, BANS (Series 1995), 4.15%, 9/20/1996 NR 2,003,375
-------------------------------------------------------
1,400,000 Stark County, OH IDR Weekly VRDNs (Society National P-1 1,400,000
Bank, Cleveland, OH LOC)
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 2,345,000 Stark County, OH IDR, (Series 1994) Weekly VRDNs (Wilk P-1 $ 2,345,000
of Morris)/(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
2,685,000 Stark County, OH IDR, Sewer District Improvements Notes NR(3) 2,689,317
(Series 1995-1), 5.00% BANs, 4/3/1996
-------------------------------------------------------
2,000,000 Stark County, OH IDR, Various Purpose Notes (Series NR(3) 2,003,216
1995-1), 5.00% BANs, 4/3/1996
-------------------------------------------------------
1,350,000 Strongsville, OH, Adjustable Rate Demand IDRB (Series A-1 1,350,000
1994) Weekly VRDNs (Nutro Machinery Corp.,
Project)/(Huntington National Bank, Columbus, OH LOC)
-------------------------------------------------------
2,900,000 Summit County, OH IDR Weekly VRDNs (Maison Aine Limited P-1 2,900,000
Partnership)/(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
4,500,000 Summit County, OH IDR, (Series 1994) Weekly VRDNs P-1 4,500,000
(Harry London Candies, Inc.)/(Bank One, Akron, N.A.
LOC)
-------------------------------------------------------
1,245,000 Summit County, OH IDR, 4.00% TOBs (Matech Machine Tool P-1 1,245,000
Co.)/(Bank One, Akron, N.A. LOC), Optional Tender
5/1/1996
-------------------------------------------------------
385,000 Summit County, OH IDR, 4.05% TOBs (Keltec Industries)/ P-1 385,000
(Bank One, Akron, N.A. LOC), Optional Tender 3/1/1996
-------------------------------------------------------
795,000 Summit County, OH IDR, 4.05% TOBs (Universal Rack)/ P-1 795,000
(National City Bank, Cleveland, OH LOC), Optional
Tender 3/1/1996
-------------------------------------------------------
1,115,000 Summit County, OH IDR, 4.40% TOBs (Rogers Industrial P-1 1,115,000
Products, Inc.)/(Bank One, Akron, N.A. LOC), Optional
Tender 11/1/1995
-------------------------------------------------------
795,000 Summit County, OH IDR, 4.70% TOBs (Bechmer-Boyce P-1 795,000
Project)/(Society National Bank, Cleveland, OH LOC),
Optional Tender 1/15/1996
-------------------------------------------------------
910,000 Summit County, OH IDR, 4.85% TOBs (S.D. Meyers, Inc.)/ P-1 910,000
(Bank One, Akron, N.A. LOC), Optional Tender 2/15/1996
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 1,000,000 Summit County, OH IDR, Adjustable Rate Bonds (Series P-1 $ 1,000,000
1994) Weekly VRDNs (Austin Printing Co., Inc.)/ (Bank
One, Akron, N.A. LOC)
-------------------------------------------------------
1,000,000 Summit County, OH IDR, Adjustable Rate IDRB (Series P-1 1,000,000
1995) Weekly VRDNs (Cardtech Project (OH))/ (Society
National Bank, Cleveland, OH LOC)
-------------------------------------------------------
2,890,000 Summit County, OH IDR, Variable Rate Demand IDRB P-1 2,890,000
(Series 1994B) Weekly VRDNs (Harry London Candies,
Inc.)/(Bank One, Akron, N.A. LOC)
-------------------------------------------------------
2,000,000 Summit County, OH, GO Various Purpose Notes (Series NR(3) 2,002,317
1995A), 5.00% BANs, 3/7/1996
-------------------------------------------------------
1,000,000 Toledo-Lucas County, OH Port Authority, IDA Weekly AAA 1,000,000
VRDNs (Medusa Corp.)/(Bayerische Vereinsbank AG, Munich
LOC)
-------------------------------------------------------
2,700,000 Trumbull County, OH IDA, (Series 1989) Weekly VRDNs A-1 2,700,000
(McDonald Steel Corp.)/(PNC Bank, N.A. LOC)
-------------------------------------------------------
1,355,000 Trumbull County, OH IDA, Adjustable Rate IDR Refunding P-1 1,355,000
Bonds (Series 1994) Weekly VRDNs (Churchill Downs,
Inc.)/(Bank One, Columbus, N.A. LOC)
-------------------------------------------------------
3,000,000 Trumbull County, OH, Correctional Facilities BANs NR(4) 3,001,643
(Series 1995), 4.83%, 4/11/1996
-------------------------------------------------------
3,000,000 University of Cincinnati, OH, General Receipts SP-1 3,005,929
Anticipation Notes-Series T, 4.25% BANs, 8/28/1996
-------------------------------------------------------
4,100,000 Westlake, OH, IDR Weekly VRDNs (Kahal Limited P-1 4,100,000
Partnership)/(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
1,145,000 Willoughby City, OH, Variable Rate Demand IDR Refunding P-1 1,145,000
Bonds (Series 1995A) Weekly VRDNs (Pine Ridge Shopping
Center Company Project)/(Star Bank, NA, Cincinnati LOC)
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 1,245,000 Willoughby City, OH, Variable Rate Demand IDR Revenue P-1 $ 1,245,000
Bonds (Series 1995 B) Weekly VRDNs (Pine Ridge Shop-
ping Center Company Project)/(Star Bank, NA, Cincin-
nati LOC)
-------------------------------------------------------
1,600,000 Wood County, OH Weekly VRDNs (Principle Business P-1 1,600,000
Enterprises)/(National City Bank, Cleveland, OH LOC)
-------------------------------------------------------
2,200,000 Wood County, OH, EDRB Weekly VRDNs (Roe Inc. P-1 2,200,000
Project)/(Huntington National Bank, Columbus, OH LOC)
-------------------------------------------------------
5,300,000 (a) Youngstown City School District, OH, Municipal Install- A-1+ 5,300,000
ment Trust Receipts (Series 1994-A) Weekly VRDNs
(Internationale Nederlanden Bank N.V.
LIQ)/(Internationale Nederlanden Bank N.V. LOC)
------------
-------------------------------------------------------
$258,712,822
TOTAL INVESTMENTS (AT AMORTIZED COST)(B)
------------
-------------------------------------------------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 45.2% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. These securities have been determined to be
liquid under criteria established by the Board of Trustees. At the end of
the period, these securities amounted to $17,495,000 which represent 6.7% of
net assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($261,165,455) at October 31, 1995.
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
BANs --Bond Anticipation Notes
COL --Collateralized
CP --Commercial Paper
CSD --Central School District
EDRB --Economic Development Revenue Bonds
GNMA --Government National Mortgage Association
GO --General Obligation
HFA --Housing Finance Authority
IDA --Industrial Development Authority
IDR --Industrial Development Revenue
IDRB --Industrial Development Revenue Bonds
LIQ --Liquidity Agreement
LOC --Letter of Credit
PCR --Pollution Control Revenue
PLC --Public Limited Company
RANs --Revenue Anticipation Notes
SA --Support Agreement
TANs --Tax Anticipation Notes
TOBs --Tender Option Bonds
VRDNs --Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
OHIO MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $258,712,822
- -------------------------------------------------------------------------------
Cash 334,964
- -------------------------------------------------------------------------------
Income receivable 2,498,541
- -------------------------------------------------------------------------------
Receivable for shares sold 739
- -------------------------------------------------------------------------------
Deferred expenses 7,251
- ------------------------------------------------------------------------------- ------------
Total assets 261,554,317
- -------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------
Payable for shares redeemed $ 48,000
- --------------------------------------------------------------------
Income distribution payable 223,569
- --------------------------------------------------------------------
Accrued expenses 117,293
- -------------------------------------------------------------------- --------
Total liabilities 388,862
- ------------------------------------------------------------------------------- ------------
NET ASSETS for 261,165,455 shares outstanding $261,165,455
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- -------------------------------------------------------------------------------
$72,931,089 / 72,931,089 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
CASH II SHARES:
- -------------------------------------------------------------------------------
$188,234,366 / 188,234,366 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
OHIO MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest $9,872,940
- ------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------
Investment advisory fee $ 957,142
- ----------------------------------------------------------------------
Administrative personnel and services fee 181,139
- ----------------------------------------------------------------------
Custodian fees 67,328
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 95,590
- ----------------------------------------------------------------------
Directors'/Trustees' fees 1,888
- ----------------------------------------------------------------------
Auditing fees 14,191
- ----------------------------------------------------------------------
Legal fees 2,818
- ----------------------------------------------------------------------
Portfolio accounting fees 54,785
- ----------------------------------------------------------------------
Distribution services fee--Cash II Shares 493,611
- ----------------------------------------------------------------------
Shareholder services fee--Institutional Shares 186,871
- ----------------------------------------------------------------------
Shareholder services fee--Cash II Shares 411,342
- ----------------------------------------------------------------------
Share registration costs 49,625
- ----------------------------------------------------------------------
Printing and postage 18,607
- ----------------------------------------------------------------------
Insurance premiums 5,770
- ----------------------------------------------------------------------
Miscellaneous 15,305
- ---------------------------------------------------------------------- ----------
Total expenses 2,556,012
- ----------------------------------------------------------------------
Waivers--
- ----------------------------------------------------------
Waiver of investment advisory fee $ (95,512)
- ----------------------------------------------------------
Waiver of distribution services fee--Cash II Shares (411,342)
- ----------------------------------------------------------
Waiver of shareholder services fee--Institutional Shares (186,871)
- ---------------------------------------------------------- ---------
Total waivers (693,725)
- ---------------------------------------------------------------------- ----------
Net expenses 1,862,287
- ------------------------------------------------------------------------------------ ----------
Net investment income $8,010,653
- ------------------------------------------------------------------------------------ ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
OHIO MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
1995 1994
--------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------
Net investment income $ 8,010,653 $ 4,456,860
- -------------------------------------------------------------- --------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------
Distributions from net investment income
- --------------------------------------------------------------
Institutional Shares (2,660,655) (1,561,810)
- --------------------------------------------------------------
Cash II Shares (5,349,998) (2,895,050)
- -------------------------------------------------------------- --------------- -------------
Change in net assets resulting from distributions
to shareholders (8,010,653) (4,456,860)
- -------------------------------------------------------------- --------------- -------------
SHARE TRANSACTIONS--
- --------------------------------------------------------------
Proceeds from sale of Shares 1,275,288,208 809,574,268
- --------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 5,470,332 2,932,696
- --------------------------------------------------------------
Cost of Shares redeemed (1,238,142,557) (802,723,017)
- -------------------------------------------------------------- --------------- -------------
Change in net assets resulting from share transactions 42,615,983 9,783,947
- -------------------------------------------------------------- --------------- -------------
Change in net assets 42,615,983 9,783,947
- --------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------
Beginning of period 218,549,472 208,765,525
- -------------------------------------------------------------- --------------- -------------
End of period $ 261,165,455 $ 218,549,472
- -------------------------------------------------------------- --------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
OHIO MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Ohio Municipal Cash
Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund offers two classes of shares: Institutional Shares and Cash II Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
71.6% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or supported (backed) by a letter of credit for any one institution or
agency does not exceed 12.3% of total investments.
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. Many restricted securities may
be resold in the secondary market in transactions exempt from registration.
In some cases, the restricted securities may be resold without registration
upon exercise of a demand feature. Such restricted securities may be
determined to be liquid under criteria established by the Board of
Trustees. The Fund will not incur any registration costs upon such resales.
Restricted securities are valued at amortized cost in accordance with Rule
2a-7 under the Investment Company Act of 1940.
Additional information on each restricted security held at October 31, 1995
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
- ------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Cleveland OH City School District, Energy
Conservation Improvement Bonds (Series 1994)
Weekly VRDNs 10/02/95 $5,760,000
Ohio HFA, Single Family Mortgage (Series PT-8)
Weekly VRDNs 06/16/94 6,435,000
Youngstown City School District, OH, Municipal
Installment Trust Receipts (Series 1994-A)
Weekly VRDNs 08/02/95 5,300,000
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $261,165,455.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
INSTITUTIONAL SHARES 1995 1994
- ----------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 571,719,826 275,545,260
- -----------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 277,721 99,198
- -----------------------------------------------------------------
Shares redeemed (561,565,338) (294,893,757)
- ----------------------------------------------------------------- ------------ ------------
Net change resulting from Institutional Share transactions 10,432,209 (19,249,299)
- ----------------------------------------------------------------- ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
CASH II SHARES 1995 1994
- ----------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 703,568,382 534,029,008
- -----------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 5,192,611 2,833,498
- -----------------------------------------------------------------
Shares redeemed (676,577,219) (507,829,260)
- ----------------------------------------------------------------- ------------ ------------
Net change resulting from Cash II Share transactions 32,183,774 29,033,246
- ----------------------------------------------------------------- ------------ ------------
Net change resulting from Fund share transactions 42,615,983 9,783,947
- ----------------------------------------------------------------- ------------ ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee of the Fund. The Adviser can
modify or terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Services Corp. ("FSC"), the principal distributor, from the
net assets of the Fund to finance activities intended to result in the sale of
the Fund's Cash II Shares. The Plan provides that the Fund may incur
distribution expenses up to .30 of 1% of the average daily net assets of the
Cash II shares, annually, to compensate
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
FSC. FSC may voluntarily choose to waive a portion of its fee. FSC can modify or
terminate this voluntary waiver at any time at its sole discretion.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of daily average net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive its fee. FSS can modify or terminate this voluntary
waiver at any time at its sole discretion. For the fiscal year ended October 31,
1995, Institutional Shares fully waived its shareholder services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the Fund.
This fee is based on the size, type, and number of accounts and transactions
made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common Officers. These
transactions were made at current market value pursuant to Rule 17a-7 under the
Act amounting to $500,170,000 and $491,515,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Ohio Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of Ohio
Municipal Cash Trust (an investment portfolio of Federated Municipal Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of October 31, 1995, the related statement of operations for the year then
ended, and the statement of changes in net assets for each of the two years in
the period then ended and the financial highlights (see pages 2 and 16 of the
prospectus) for the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Ohio
Municipal Cash Trust (an investment portfolio of Federated Municipal Trust) as
of October 31, 1995, the results of its operations for the year then ended, and
the changes in its net assets for each of the two years in the period then ended
and the financial highlights for the periods presented, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Ohio Municipal Cash Trust
Cash II Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
- ---------------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- ---------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OHIO MUNICIPAL
CASH TRUST
CASH II SHARES
PROSPECTUS
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated December 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229840
1030105A-CII(12/95)
OHIO MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares of Ohio Municipal Cash Trust (the "Fund") offered by
this prospectus represent interests in a non-diversified portfolio of Federated
Municipal Trust (the "Trust"), an open-end management investment company (a
mutual fund). The Fund invests primarily in short-term Ohio municipal
securities, including securities of states, territories, and possessions of the
United States which are not issued by or on behalf of Ohio, or its political
subdivisions and financing authorities, but which provide income exempt from
federal regular income tax and the personal income taxes imposed by the State of
Ohio and Ohio municipalities consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Ohio Municipal Securities 6
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Institutional Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 9
- ------------------------------------------------------
HOW TO REDEEM SHARES 10
- ------------------------------------------------------
ACCOUNT AND SHARE INFORMATION 11
- ------------------------------------------------------
TAX INFORMATION 12
- ------------------------------------------------------
Federal Income Tax 12
State and Local Taxes 13
OTHER CLASSES OF SHARES 13
- ------------------------------------------------------
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
CASH II SHARES 15
- ------------------------------------------------------
FINANCIAL STATEMENTS 16
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 34
- ------------------------------------------------------
ADDRESSES 35
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)...................................................... 0.36%
12b-1 Fee............................................................................. None
Total Other Expenses.................................................................. 0.21%
Shareholder Services Fee (after waiver)(2)................................. 0.00%
Total Operating Expenses(3).................................................... 0.57%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.40%.
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 0.86% absent the voluntary
waivers of a portion of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Institutional Shares of the
Fund will bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Fund Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- --------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2)
redemption at the end of each time period........ $6 $18 $32 $ 71
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants, on page 34.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------
1995 1994 1993 1992 1991(A)
----- ----- ----- ----- -------
<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 0.04 0.02 0.02 0.03 0.02
- ---------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from net investment income (0.04) (0.02) (0.02) (0.03) (0.02)
- --------------------------------------------- ----- ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------- ----- ----- ----- ----- ------
TOTAL RETURN (B) 3.61% 2.41% 2.33% 3.21% 2.40%
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 0.57% 0.55% 0.48% 0.46% 0.35%*
- ---------------------------------------------
Net investment income 3.56% 2.36% 2.30% 3.10% 4.46%*
- ---------------------------------------------
Expense waiver/reimbursement (c) 0.29% 0.07% 0.19% 0.25% 0.32%*
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period (000 omitted) $72,931 $62,499 $81,748 $74,342 $44,771
- ---------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 22, 1991 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established two classes of shares known as Institutional Shares and Cash II
Shares. This prospectus relates only to Institutional Shares of the Fund, which
are designed primarily for financial institutions acting in a fiduciary or
agency capacity as a convenient means of accumulating an interest in a
professionally managed, non-diversified portfolio investing primarily in
short-term Ohio municipal securities. The Fund may not be a suitable investment
for retirement plans or for non-Ohio taxpayers because it invests in municipal
securities of that state. A minimum initial investment of $25,000 within 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
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INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the personal income taxes imposed by the State of Ohio
and Ohio municipalities consistent with stability of principal. This investment
objective cannot be changed without shareholder approval. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by complying with the various requirements of Rule 2a-7 under the
Investment Company Act of 1940 which regulates money market mutual funds and by
following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of Ohio
municipal securities (as defined below) maturing in 13 months or less. As a
matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be exempt from
federal regular income tax and Ohio state income taxes. (Federal regular income
tax does not include the federal individual alternative minimum tax or the
federal alternative minimum tax for corporations.) The average maturity of the
securities in the Fund's portfolio, computed on a dollar-weighted basis, will be
90 days or less. Unless indicated otherwise, the investment policies may be
changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued by
or on behalf of Ohio and its political subdivisions and financing authorities,
and obligations of other states, territories, and possessions of the United
States, including the District of Columbia, and any political subdivision or
financing authority of any of these, the income from which is, in the opinion of
qualified legal counsel, exempt from federal regular income tax and Ohio state
income tax imposed upon
non-corporate taxpayers ("Ohio Municipal Securities"). Examples of Ohio
Municipal Securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Ohio Municipal
Securities from financial institutions such as commercial and investment
banks, savings associations, and insurance companies. These interests may
take the form of participations, beneficial interests in a trust,
partnership interests or any other form of indirect ownership that allows
the Fund to treat the income from the investment as exempt from federal
income tax. The Fund invests in these participation interests in order to
obtain credit enhancement or demand features that would not be available
through direct ownership of the underlying Ohio Municipal Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality to other
securities in which the Fund invests, such as: obligations issued by or on
behalf of municipal or corporate issuers; obligations issued or guaranteed by
the U.S. government, its agencies, or instrumentalities; instruments issued by a
U.S. branch of a domestic bank or other deposit institution having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment; and repurchase agreements (arrangements in which the organization
selling the Fund a temporary investment agrees at the time of sale to repurchase
it at a mutually agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain Ohio Municipal
Securities is subject to the federal alternative minimum tax.
OHIO MUNICIPAL SECURITIES
Ohio Municipal Securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.
Ohio Municipal Securities include industrial development bonds issued by or on
behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Ohio Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Ohio Municipal Securities depend on a variety of factors, including:
the general conditions of the short-term municipal note market and of the
municipal bond market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue. The ability of the Fund to achieve its
investment objective also depends on the continuing ability of the issuers of
Ohio Municipal Securities and participation interests, or the credit enhancers
of either, to meet their obligations for the payment of interest and principal
when due. In addition, from time to time, the supply of Ohio Municipal
Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Ohio Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Ohio Municipal Securities could involve an increased risk to the Fund should any
of these related projects or facilities experience financial difficulties.
Obligations of issuers of Ohio Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for a percentage
of its cash value with an agreement to buy it back on a set date) or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 15% of the value of
its total assets to secure such borrowings. These investment limitations cannot
be changed without shareholder approval.
FUND INFORMATION
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MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .40 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for Institutional Shares
of the Fund. It is a Pennsylvania corporation organized on November 14, 1969,
and is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services Agreement
with Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to .25 of 1% of the average daily net asset
value of Institutional Shares, computed at an annual rate, to obtain certain
personal services for shareholders and provide maintenance of shareholder
accounts ("shareholder services"). From time to time and for such periods as
deemed appropriate, the amount stated above may be reduced voluntarily.
Under the Shareholder Services Agreement, Federated Shareholder Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- --------------------- -----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of Institutional Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
net asset value per share is determined by subtracting liabilities attributable
to shares from the value of Fund assets attributable to shares, 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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
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Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is open for business. Shares may be purchased either by wire or by
check. The Fund reserves the right to reject any purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone. The
minimum initial investment is $25,000. However, an account may be opened with a
smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
PURCHASING SHARES BY WIRE. Shares may be purchased by Federal Reserve wire by
calling the Fund before 1:00 p.m. (Eastern time) to place an order. The order is
considered received immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern time) that
day. Federal funds should be wired as follows: Federated Services Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE; For Credit
to: Ohio Municipal Cash Trust--Institutional Shares; Fund Number (this number
can be found on the account statement or by contacting the Fund); Group Number
or Order Number; Nominee or Institution Name; and ABA Number 011000028. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by mailing a check made
payable to Ohio Municipal Cash Trust--Institutional Shares to: Federated
Services Company, P.O. Box 8600, Boston, MA 02266-8600. Orders by mail are
considered received when payment by check is converted into federal funds. This
is normally the next business day after the check is received.
SUBACCOUNTING SERVICES. Financial institutions are encouraged to open single
master accounts. A subaccounting system is available through the transfer agent
to minimize internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Financial
institutions may charge or pass through subaccounting fees as part of or in
addition to normal trust or agency account fees. They may also charge fees for
other services provided which may be related to the ownership of Fund shares.
This prospectus should, therefore, be read together with any agreement between
the customer and the financial institution with regard to the services provided,
the fees charged for those services, and any restrictions and limitations
imposed. State securities laws may require certain financial institutions such
as depository institutions to register as dealers.
HOW TO REDEEM SHARES
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Shares are redeemed at their net asset value next determined after Federated
Services Company receives the redemption request. Redemptions will be made on
days on which the Fund computes its net asset value. Redemption requests must be
received in proper form and can be made as described below.
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 p.m. (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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement.
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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If shares certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
ACCOUNT AND SHARE INFORMATION
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DIVIDENDS. Dividends are declared daily and paid monthly. Dividends are
automatically reinvested on payment dates in additional shares of the Fund
unless cash payments are requested by writing to the Fund. Shares purchased by
wire before 3:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by check begin earning dividends the day after the check is converted
into federal funds.
CAPITAL GAINS. The Fund does not expect to realize any capital gains or losses.
If capital gains or losses were to occur, they could result in an increase or
decrease in dividends. The Fund will distribute in cash or additional shares any
realized net long-term capital gains at least once every 12 months.
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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$25,000 due to shareholder redemptions. Before shares are
redeemed to close an account, the shareholder is notified in writing and allowed
30 days to purchase additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has one vote in Trustee elections and other
matters submitted to shareholders for vote. All shares of all classes of each
portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting 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 December 4, 1995, Parcol & Co., Akron, OH, owned 34.39% of the voting
securities of the Fund's Institutional Shares and Gradison & Company Inc.,
Cincinnati, OH, owned 80.64% of the voting securities of the Fund's Cash II
Shares, 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.
TAX INFORMATION
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FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Fund may purchase all types of municipal bonds, including private activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than
Ohio. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
OHIO TAXES. Under existing Ohio laws, distributions made by the Fund will not be
subject to Ohio individual income taxes to the extent that such distributions
qualify as exempt-interest dividends under the Internal Revenue Code, and
represent (i) interest from obligations of Ohio or its subdivisions which is
exempt from federal income tax; or (ii) interest or dividends from obligations
issued by the United States and its territories or possessions or by any
authority, commission or instrumentality of the United States which are exempt
from state income tax under federal laws. Conversely, to the extent that
distributions made by the Fund are derived from other types of obligations, such
distributions will be subject to Ohio individual income taxes.
Distributions made by the Fund will not be subject to Ohio corporation franchise
tax to the extent that such distributions qualify as exempt-interest dividends
under the Internal Revenue Code, and represent (i) interest from obligations of
Ohio or its subdivisions which is exempt from federal income tax; or (ii) net
interest income from obligations issued by the United States and its territories
or possessions or by any authority, commission or instrumentality of the United
States, which is included in federal taxable income and which is exempt from
state income tax under federal laws.
Exempt-interest dividends that represent interest from obligations held by the
Fund which are issued by Ohio or its political subdivisions will be exempt from
any Ohio municipal income tax (even if the municipality is permitted under Ohio
law to levy a tax on intangible income).
OTHER CLASSES OF SHARES
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The Fund also offers another class of shares called Cash II Shares. Cash II
Shares are sold at net asset value primarily to retail customers of financial
institutions and are subject to a minimum initial investment of $25,000 over a
90-day period.
All classes are subject to certain of the same expenses.
Cash II Shares are distributed under a 12b-1 Plan adopted by the Fund and also
are subject to shareholder services fees.
Expense differences between classes may affect the performance of each class.
To obtain more information and a prospectus for any other class, investors may
call 1-800-235-4669.
PERFORMANCE INFORMATION
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From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the shares' tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH II SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 34.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------
1995 1994 1993 1992 1991(A)
----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.02
- -------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.02) (0.03) (0.02)
- ------------------------------------------- ----- ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------- ----- ----- ----- ----- ------
TOTAL RETURN (B) 3.30% 2.10% 2.02% 2.90% 2.27%
- -------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------
Expenses 0.87% 0.85% 0.78% 0.76% 0.63%*
- -------------------------------------------
Net investment income 3.25% 2.09% 2.01% 2.86% 4.18%*
- -------------------------------------------
Expense waiver/reimbursement (c) 0.29% 0.24% 0.19% 0.25% 0.34%*
- -------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------
Net assets, end of period (000 omitted) $188,234 $156,051 $127,017 $133,877 $94,081
- -------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 22, 1991 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
OHIO MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.1%
- -----------------------------------------------------------------------
OHIO--99.1%
-------------------------------------------------------
$ 2,000,000 Anthony Wayne School District, OH, 4.00% BANs, NR $ 2,000,691
12/14/1995
-------------------------------------------------------
5,875,000 Belmont County, OH Weekly VRDNs (Lesco, Inc.)/ (PNC A-1 5,875,000
Bank, N.A. LOC)
-------------------------------------------------------
1,000,000 Belmont County, OH, County Jail Improvement Notes NR 1,002,306
(Third Series), 4.34% BANs, 8/30/1996
-------------------------------------------------------
1,675,000 Berea, OH, BANS, 4.07%, 10/24/1996 NR(3) 1,677,671
-------------------------------------------------------
3,000,000 Brecksville-Broadview Heights CSD, OH, GO Unlimited Tax NR(3) 3,000,667
School Improvement, 5.71% BANs, 1/18/1996
-------------------------------------------------------
1,175,000 Butler County, OH, Limited GO's, 5.07% BANs, 3/15/1996 NR(3) 1,176,946
-------------------------------------------------------
2,000,000 Cincinnati City School District, OH, 5.80% TANs, NR(3) 2,001,209
12/29/1995
-------------------------------------------------------
5,760,000 (a) Cleveland, OH City School District, Energy Conservation A-1+ 5,760,000
Improvement Bonds (Series 1994) Weekly VRDNs
(Internationale Nederlanden Bank N.V. LIQ)/
(Internationale Nederlanden Bank N.V. LOC)
-------------------------------------------------------
2,000,000 Cleveland-Cuyahoga County, OH Port Authority, (Series A-1+ 2,000,000
1993) Weekly VRDNs (Rock & Roll Hall of Fame
Museum)/(Credit Local de France LOC)
-------------------------------------------------------
1,800,000 Clinton County, OH Hospital Authority Weekly VRDNs P-1 1,800,000
(Clinton Memorial Hospital)/(National City Bank,
Columbus, OH LOC)
-------------------------------------------------------
2,000,000 Columbiana County, OH, Adjustable Rate Industrial P-1 2,000,000
Development Revenue Bonds Weekly VRDNs
(C & S Land Company Project)/(Bank One, Youngstown, NA
LOC)
-------------------------------------------------------
1,800,000 Conneaut, OH, 4.45% BANs, 7/26/1996 NR 1,803,793
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 1,200,000 Cuyahoga County, OH Hospital Authority Daily VRDNs VMIG1 $ 1,200,000
(University Hospital of Cleveland)/(Dai-Ichi Kangyo
Bank Ltd., Tokyo LOC)
-------------------------------------------------------
800,000 Cuyahoga County, OH IDA Weekly VRDNs (Animal Protection VMIG1 800,000
League (Cuyahoga County))/(Society National Bank,
Cleveland, OH LOC)
-------------------------------------------------------
1,800,000 Cuyahoga County, OH IDA Weekly VRDNs (East Park P-1 1,800,000
Community, Inc.)/(Society National Bank, Cleveland, OH
LOC)
-------------------------------------------------------
655,000 Cuyahoga County, OH IDA Weekly VRDNs (Interstate Diesel P-1 655,000
Service, Inc.)/(Huntington National Bank, Columbus, OH
LOC)
-------------------------------------------------------
715,000 Cuyahoga County, OH IDA Weekly VRDNs (Parma-Commerce P-1 715,000
Parkway West)/(Society National Bank, Cleveland, OH
LOC)
-------------------------------------------------------
1,200,000 Cuyahoga County, OH IDA Weekly VRDNs (Premier P-1 1,200,000
Manufacturing Corp.)/(National City Bank, Kentucky LOC)
-------------------------------------------------------
2,000,000 Cuyahoga County, OH IDA, IDRB (Series 1995) Weekly P-1 2,000,000
VRDNs (Avalon Precision Casting Co. Project)/(Society
National Bank, Cleveland, OH LOC)
-------------------------------------------------------
3,000,000 Dayton, OH, Revenue Refunding Bonds (Series 1993E) VMIG1 3,000,000
Weekly VRDNs (Emery Air Freight Corp.)/(Mellon Bank NA,
Pittsburgh LOC)
-------------------------------------------------------
1,700,000 Delaware County, OH, IDRB (Series 1995) Weekly VRDNs P-1 1,700,000
(Air Waves, Inc. Project)/(Society National Bank,
Cleveland, OH LOC)
-------------------------------------------------------
1,240,000 Elyria, OH, General Limited Tax Various Purpose BANS, NR(3) 1,242,922
4.26%, 10/11/1996
-------------------------------------------------------
2,000,000 Euclid City School District, OH, 4.83% RANs, 12/15/1995 NR(3) 2,000,416
-------------------------------------------------------
1,000,000 Franklin County, OH Hospital Facility Authority Weekly VMIG1 1,000,000
VRDNs (Riverside United Methodist Hospital)/(National
City Bank, Cleveland, OH LOC)
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 4,500,000 Franklin County, OH IDA Weekly VRDNs P-1 $ 4,500,000
(Heekin Can, Inc.)/(PNC Bank, Ohio, N.A. LOC)
-------------------------------------------------------
3,160,000 Franklin County, OH IDA Weekly VRDNs (Unicorn Leasing P-1 3,160,000
Corp.)/(Fifth Third Bank, Cincinnati LOC)
-------------------------------------------------------
3,670,000 Franklin County, OH IDA, (Series 1995) Weekly VRDNs P-1 3,670,000
(Fabcon L.L.C. Project)/(Norwest Bank Minnesota,
Minneapolis LOC)
-------------------------------------------------------
2,000,000 Franklin County, OH IDA, IDRB Weekly VRDNs (Tigerpoly P-1 2,000,000
Manufacturing, Inc.)/(Mitsubishi Bank Ltd, Tokyo LOC)
-------------------------------------------------------
2,000,000 Franklin County, OH, Ltd. GO's (Series 8/95), 4.10% SP-1+ 2,003,106
BANs, 8/23/1996
-------------------------------------------------------
1,200,000 Gates Mills Village, OH, Water System Improvement BANS, NR 1,201,105
4.10%, 10/17/1996
-------------------------------------------------------
1,950,000 Hamilton County, OH Health System Weekly VRDNs (West VMIG1 1,950,000
Park Community)/(Fifth Third Bank, Cincinnati LOC)
-------------------------------------------------------
1,500,000 Hamilton County, OH Hospital Facilities Authority, A-1 1,500,000
Revenue Bonds (Series 1986A) Weekly VRDNs (Good
Samaritan Hospital)
-------------------------------------------------------
3,000,000 Hamilton, OH, Ltd. Tax GO's, 3.91% BANs, 1/18/1996 NR(3) 3,000,050
-------------------------------------------------------
2,200,000 Hamilton, OH, Real Estate Acquisition/Electric NR(3) 2,200,259
Improvement System BANs (Series A), 4.02%, 6/14/1996
-------------------------------------------------------
2,000,000 Holmes County, OH IDA Weekly VRDNs (Poultry A-1+ 2,000,000
Processing)/(Rabobank Nederland, Utrecht LOC)
-------------------------------------------------------
1,250,000 Huber Heights, OH, IDRB (Series 1994) Weekly VRDNs P-1 1,250,000
(Lasermike, Inc. Project)/(Society National Bank,
Cleveland, OH LOC)
-------------------------------------------------------
1,000,000 Huron City, OH, General Limited Tax Various Purpose, NR 1,001,336
4.49% BANs, 5/31/1996
-------------------------------------------------------
300,000 Kettering, OH IDA Weekly VRDNs (Center-Plex Venture)/ P-1 300,000
(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 1,680,000 Lake County, OH, General and SA Limited Tax Various NR(2) $ 1,681,816
BANS, 4.07%, 10/10/1996
-------------------------------------------------------
2,885,000 Lorain County, OH, Health Facilities Revenue Bonds P-1 2,885,000
(Series 1992A) Weekly VRDNs (Elyria United Methodist
Home)/(Fifth Third Bank, Cincinnati LOC)
-------------------------------------------------------
4,565,000 Lorain Port Authority, OH, (Series 1994) Weekly VRDNs P-1 4,565,000
(Spitzer Great Lakes Ltd., Inc.)/(Bank One, Cleveland,
N.A. LOC)
-------------------------------------------------------
1,600,000 Lucas County, OH IDA Weekly VRDNs (Kuhlman Corp.)/ P-1 1,600,000
(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
1,905,000 Lucas County, OH, Hospital Facility Improvement Revenue P-1 1,905,000
Bonds (Series 93) Weekly VRDNs (Lott Industries, Inc.)/
(National City Bank, Cleveland, OH LOC)
-------------------------------------------------------
300,000 Lucas County, OH, Hospital Improvement Revenue Weekly P-1 300,000
VRDNs (Sunshine Children's Home)/(National City Bank,
Cleveland, OH LOC)
-------------------------------------------------------
8,500,000 Lucas County, OH, Hospital Refunding Revenue Bonds P-1 8,500,000
Weekly VRDNs (Riverside Hospital, OH)/(Huntington
National Bank, Columbus, OH LOC)
-------------------------------------------------------
3,500,000 Lucas County, OH, Various Purpose Improvement Notes NR 3,501,985
(Series 1994), 5.75% BANs, 11/30/1995
-------------------------------------------------------
5,325,000 Mahoning County, OH Multifamily HFA Weekly VRDNs A-1 5,325,000
(International Towers, Inc.)/(PNC Bank, N.A. LOC)
-------------------------------------------------------
6,900,000 Mahoning County, OH, Housing Revenue Bonds (Series A-1 6,900,000
1995) Weekly VRDNs (Copeland Oaks Project)/ (Bank One,
Akron, N.A. LOC)
-------------------------------------------------------
40,000 Mahoning County, OH, IDR Weekly VRDNs P-1 40,000
(Tru-Cut Die Corp.)/(PNC Bank, Ohio, N.A. LOC)
-------------------------------------------------------
1,120,000 Mansfield, OH, IDR Weekly VRDNs (Designed Metal P-1 1,120,000
Products, Inc.)/(Bank One, Columbus, N.A. LOC)
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 2,000,000 Marysville Exempted Village School District, OH, NR $ 2,001,101
General Unlimited Tax School Improvement Bond
Anticipation Notes, 4.27% BANs, 12/20/1995
-------------------------------------------------------
460,000 Medina County, OH, IDR, 4.05% TOBs (Bopco)/(Bank One, P-1 460,000
Akron, N.A. LOC), Optional Tender 3/1/1996
-------------------------------------------------------
5,400,000 Medina County, OH, Solid Waste Disposal Revenue Bonds P-1 5,400,000
(Series 1995) Weekly VRDNs (Valley City
Steel Company Project)/(Society National Bank,
Cleveland, OH LOC)
-------------------------------------------------------
7,000,000 Montgomery County, OH, Ltd. Tax GO's Certificate of NR(2) 7,022,709
Indebtedness (1995 Series A), 5.00% BANs, 4/26/1996
-------------------------------------------------------
2,010,000 Montgomery, OH IDA Weekly VRDNs (Bethesda Two Limited A-1 2,010,000
Partnership)/(Huntington National Bank, Columbus, OH
LOC)
-------------------------------------------------------
3,600,000 Morrow County, OH, Detention Facilities Bond NR 3,601,564
Anticipation Notes (Series 1995), 4.25% BANs, 4/15/1996
-------------------------------------------------------
500,000 Muskingham County, OH Hospital Facilities Authority VMIG1 500,000
Weekly VRDNs (Bethesda Care System)/(National City
Bank, Columbus, OH LOC)
-------------------------------------------------------
370,000 North Olmsted, OH IDA Weekly VRDNs (Bryant & P-1 370,000
Stratton)/(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
730,000 North Olmsted, OH IDA, 4.00% TOBs (Therm-All)/ P-1 730,000
(National City Bank, Cleveland, OH LOC), Optional
Tender 2/1/1996
-------------------------------------------------------
4,000,000 North Olmsted, OH, Various Purpose Improvement Notes, NR(3) 4,010,198
(Series 1995), 4.67% BANs, 6/20/1996
-------------------------------------------------------
2,135,000 Ohio HFA Weekly VRDNs (Westchester Village)/(Society P-1 2,135,000
National Bank, Cleveland, OH LOC)
-------------------------------------------------------
7,405,000 Ohio HFA, 4.40% TOBs (Comerica, Inc.)/(Comerica, Inc. P-1 7,405,000
LOC), Optional Tender 11/1/1995
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 6,435,000 (a) Ohio HFA, Single Family Mortgage (Series PT-8) Weekly A-1+ $ 6,435,000
VRDNs (GNMA COL)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LIQ)
-------------------------------------------------------
2,000,000 Ohio State Air Quality Development Authority, (Series P-1 2,000,000
1998A) Weekly VRDNs (PPG Industries, Inc.)
-------------------------------------------------------
1,800,000 Ohio State Air Quality Development Authority, 3.75% CP AAA 1,800,000
(Cincinnati Gas and Electric Co.)/(Union Bank of
Switzerland, Zurich LOC), Mandatory Tender 11/7/1995
-------------------------------------------------------
3,000,000 Ohio State Air Quality Development Authority, 3.75% CP AAA 3,000,000
(Cincinnati Gas and Electric Co.)/(Union Bank of
Switzerland, Zurich LOC), Mandatory Tender 11/9/1995
-------------------------------------------------------
4,500,000 Ohio State Air Quality Development Authority, 3.80% CP A-1+ 4,500,000
(Cincinnati Gas and Electric Co.)/(J.P. Morgan
Delaware, Wilmington LOC), Mandatory Tender 12/8/1995
-------------------------------------------------------
1,000,000 Ohio State Water Development Authority Weekly VRDNs P-1 1,000,000
(PPG Industries, Inc.)
-------------------------------------------------------
2,500,000 Ohio State Water Development Authority, Multimodal A-1+ 2,500,000
Water Development (Series 1993) Weekly VRDNs (Timken
Co.)/(Wachovia Bank of Georgia NA, Atlanta LOC)
-------------------------------------------------------
5,000,000 Ohio State Water Development Authority, Ohio PCR Bonds A-1+ 5,000,000
(Series 1989) Weekly VRDNs (Duquesne Light Power
Co.)/(Barclays Bank PLC, London LOC)
-------------------------------------------------------
3,500,000 Ohio State Water Development Authority, Pollution AAA 3,515,335
Control Facilities Revenue Bonds, 4.75% TOBs (Union
Bank of Switzerland, Zurich LOC), Optional Tender
5/1/1996
-------------------------------------------------------
700,000 Ohio State Weekly VRDNs (John Carroll University, OH)/ P-1 700,000
(PNC Bank, N.A. LOC)
-------------------------------------------------------
1,420,000 Ohio State, IDR (Series 1991) Weekly VRDNs (Standby A-1+ 1,420,000
Screw, Inc.)/(National City Bank, Columbus, OH LOC)
-------------------------------------------------------
1,400,000 Ohio State, IDRB (Series 1994) Weekly VRDNs (Anomatic P-1 1,400,000
Corporation)/(National City Bank, Columbus, OH LOC)
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 1,350,000 Orrville, OH IDA Weekly VRDNs (O.S. Associates/ A-1 $ 1,350,000
Contours, Inc.)/(National City Bank, Cleveland, OH LOC)
-------------------------------------------------------
1,000,000 Pickaway County, OH IDA Weekly VRDNs P-1 1,000,000
(PPG Industries, Inc.)
-------------------------------------------------------
210,000 Portage County, OH IDA Weekly VRDNs P-1 210,000
(D & W Associates)/(Bank One, Akron, N.A. LOC)
-------------------------------------------------------
400,000 Portage County, OH IDA, 4.05% TOBs (Neidlinger)/ P-1 400,000
(Society National Bank, Cleveland, OH LOC), Optional
Tender 3/1/1996
-------------------------------------------------------
900,000 Portage County, OH IDA, Adjustable Rate Industrial P-1 900,000
Revenue Bonds Weekly VRDNs (Lovejoy Industries)/(Star
Bank, NA, Cincinnati LOC)
-------------------------------------------------------
5,000,000 Richland County, OH, Special Assessment Limited Tax NR 5,002,622
Sewer Improvement BANS (Series 1995), 4.25%, 12/14/1995
-------------------------------------------------------
1,000,000 Rickenbacker, OH Port Authority, (Series 1992) Weekly P-1 1,000,000
VRDNs (Rickenbacker Holdings, Inc.)/(Bank One,
Columbus, N.A. LOC)
-------------------------------------------------------
1,250,000 Ross County, OH, Hospital Facilities Revenue Bonds AA- 1,250,000
(Series 1995) Weekly VRDNs (Medical Center Hospital
Project)/(Fifth Third Bank, Cincinnati LOC)
-------------------------------------------------------
1,200,000 Sharonville, OH, IDR Weekly VRDNs (Xtek, Inc.)/(Fifth VMIG1 1,200,000
Third Bank, Cincinnati LOC)
-------------------------------------------------------
1,150,000 Shelby City, OH, General Ltd. Tax Water System NR 1,152,218
Improvement BANS (Series 1995), 4.50%, 8/22/1996
-------------------------------------------------------
880,000 Solon, OH, IDR Weekly VRDNs (Graphic Laminating)/ P-1 880,000
(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
2,000,000 Solon, OH, IDRB (Series 1995) Weekly VRDNs (Cleveland A+ 2,000,000
Twist Drill Company)/(Nationsbank of Georgia, N.A. LOC)
-------------------------------------------------------
2,000,000 Springdale, OH, BANS (Series 1995), 4.15%, 9/20/1996 NR 2,003,375
-------------------------------------------------------
1,400,000 Stark County, OH IDR Weekly VRDNs (Society National P-1 1,400,000
Bank, Cleveland, OH LOC)
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 2,345,000 Stark County, OH IDR, (Series 1994) Weekly VRDNs (Wilk P-1 $ 2,345,000
of Morris)/(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
2,685,000 Stark County, OH IDR, Sewer District Improvements Notes NR(3) 2,689,317
(Series 1995-1), 5.00% BANs, 4/3/1996
-------------------------------------------------------
2,000,000 Stark County, OH IDR, Various Purpose Notes (Series NR(3) 2,003,216
1995-1), 5.00% BANs, 4/3/1996
-------------------------------------------------------
1,350,000 Strongsville, OH, Adjustable Rate Demand IDRB (Series A-1 1,350,000
1994) Weekly VRDNs (Nutro Machinery Corp.,
Project)/(Huntington National Bank, Columbus, OH LOC)
-------------------------------------------------------
2,900,000 Summit County, OH IDR Weekly VRDNs (Maison Aine Limited P-1 2,900,000
Partnership)/(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
4,500,000 Summit County, OH IDR, (Series 1994) Weekly VRDNs P-1 4,500,000
(Harry London Candies, Inc.)/(Bank One, Akron, N.A.
LOC)
-------------------------------------------------------
1,245,000 Summit County, OH IDR, 4.00% TOBs (Matech Machine Tool P-1 1,245,000
Co.)/(Bank One, Akron, N.A. LOC), Optional Tender
5/1/1996
-------------------------------------------------------
385,000 Summit County, OH IDR, 4.05% TOBs (Keltec Industries)/ P-1 385,000
(Bank One, Akron, N.A. LOC), Optional Tender 3/1/1996
-------------------------------------------------------
795,000 Summit County, OH IDR, 4.05% TOBs (Universal Rack)/ P-1 795,000
(National City Bank, Cleveland, OH LOC), Optional
Tender 3/1/1996
-------------------------------------------------------
1,115,000 Summit County, OH IDR, 4.40% TOBs (Rogers Industrial P-1 1,115,000
Products, Inc.)/(Bank One, Akron, N.A. LOC), Optional
Tender 11/1/1995
-------------------------------------------------------
795,000 Summit County, OH IDR, 4.70% TOBs (Bechmer-Boyce P-1 795,000
Project)/(Society National Bank, Cleveland, OH LOC),
Optional Tender 1/15/1996
-------------------------------------------------------
910,000 Summit County, OH IDR, 4.85% TOBs (S.D. Meyers, Inc.)/ P-1 910,000
(Bank One, Akron, N.A. LOC), Optional Tender 2/15/1996
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 1,000,000 Summit County, OH IDR, Adjustable Rate Bonds (Series P-1 $ 1,000,000
1994) Weekly VRDNs (Austin Printing Co., Inc.)/ (Bank
One, Akron, N.A. LOC)
-------------------------------------------------------
1,000,000 Summit County, OH IDR, Adjustable Rate IDRB (Series P-1 1,000,000
1995) Weekly VRDNs (Cardtech Project (OH)/ (Society
National Bank, Cleveland, OH LOC)
-------------------------------------------------------
2,890,000 Summit County, OH IDR, Variable Rate Demand IDRB P-1 2,890,000
(Series 1994B) Weekly VRDNs (Harry London Candies,
Inc.)/(Bank One, Akron, N.A. LOC)
-------------------------------------------------------
2,000,000 Summit County, OH, GO Various Purpose Notes (Series NR(3) 2,002,317
1995A), 5.00% BANs, 3/7/1996
-------------------------------------------------------
1,000,000 Toledo-Lucas County, OH Port Authority, IDA Weekly AAA 1,000,000
VRDNs (Medusa Corp.)/(Bayerische Vereinsbank AG, Munich
LOC)
-------------------------------------------------------
2,700,000 Trumbull County, OH IDA, (Series 1989) Weekly VRDNs A-1 2,700,000
(McDonald Steel Corp.)/(PNC Bank, N.A. LOC)
-------------------------------------------------------
1,355,000 Trumbull County, OH IDA, Adjustable Rate IDR Refunding P-1 1,355,000
Bonds (Series 1994) Weekly VRDNs (Churchill Downs,
Inc.)/(Bank One, Columbus, N.A. LOC)
-------------------------------------------------------
3,000,000 Trumbull County, OH, Correctional Facilities BANs NR 3,001,643
(Series 1995), 4.83%, 4/11/1996
-------------------------------------------------------
3,000,000 University of Cincinnati, OH, General Receipts SP-1 3,005,929
Anticipation Notes-Series T, 4.25% BANs, 8/28/1996
-------------------------------------------------------
4,100,000 Westlake, OH, IDR Weekly VRDNs (Kahal Limited P-1 4,100,000
Partnership)/(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
1,145,000 Willoughby City, OH, Variable Rate Demand IDR Refunding P-1 1,145,000
Bonds (Series 1995A) Weekly VRDNs (Pine Ridge Shopping
Center Company Project)/(Star Bank, NA, Cincinnati LOC)
-------------------------------------------------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
OHIO--CONTINUED
-------------------------------------------------------
$ 1,245,000 Willoughby City, OH, Variable Rate Demand IDR Revenue P-1 $ 1,245,000
Bonds (Series 1995 B) Weekly VRDNs (Pine Ridge Shopping
Center Company Project)/(Star Bank, NA, Cincinnati LOC)
-------------------------------------------------------
1,600,000 Wood County, OH Weekly VRDNs (Principle Business P-1 1,600,000
Enterprises)/(National City Bank, Cleveland, OH LOC)
-------------------------------------------------------
2,200,000 Wood County, OH, EDRB Weekly VRDNs (Roe Inc. P-1 2,200,000
Project)/(Huntington National Bank, Columbus, OH LOC)
-------------------------------------------------------
5,300,000 (a) Youngstown City School District, OH, Municipal A-1+ 5,300,000
Installment Trust Receipts (Series 1994-A) Weekly VRDNs
(Internationale Nederlanden Bank N.V. LIQ)/
(Internationale Nederlanden Bank N.V. LOC)
------------
-------------------------------------------------------
$258,712,822
TOTAL INVESTMENTS (AT AMORTIZED COST)(B)
------------
-------------------------------------------------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 45.2% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. These securities have been determined to be
liquid under criteria established by the Board of Trustees. At the end of
the period, these securities amounted to $17,495,000 which represent 6.7% of
net assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($261,165,455) at October 31, 1995.
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
BANs --Bond Anticipation Notes
COL --Collateralized
CP --Commercial Paper
CSD --Central School District
EDRB --Economic Development Revenue Bonds
GNMA --Government National Mortgage Association
GO --General Obligation
HFA --Housing Finance Authority
IDA --Industrial Development Authority
IDR --Industrial Development Revenue
IDRB --Industrial Development Revenue Bonds
LIQ --Liquidity Agreement
LOC --Letter of Credit
PCR --Pollution Control Revenue
PLC --Public Limited Company
RANs --Revenue Anticipation Notes
SA --Support Agreement
TANs --Tax Anticipation Notes
TOBs --Tender Option Bonds
VRDNs --Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
OHIO MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $258,712,822
- -------------------------------------------------------------------------------
Cash 334,964
- -------------------------------------------------------------------------------
Income receivable 2,498,541
- -------------------------------------------------------------------------------
Receivable for shares sold 739
- -------------------------------------------------------------------------------
Deferred expenses 7,251
- ------------------------------------------------------------------------------- ------------
Total assets 261,554,317
- -------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------
Payable for shares redeemed $ 48,000
- --------------------------------------------------------------------
Income distribution payable 223,569
- --------------------------------------------------------------------
Accrued expenses 117,293
- -------------------------------------------------------------------- --------
Total liabilities 388,862
- ------------------------------------------------------------------------------- ------------
NET ASSETS for 261,165,455 shares outstanding $261,165,455
- ------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- -------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- -------------------------------------------------------------------------------
$72,931,089 / 72,931,089 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
CASH II SHARES:
- -------------------------------------------------------------------------------
$188,234,366 / 188,234,366 shares outstanding $1.00
- ------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
OHIO MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest $9,872,940
- ------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------
Investment advisory fee $ 957,142
- ----------------------------------------------------------------------
Administrative personnel and services fee 181,139
- ----------------------------------------------------------------------
Custodian fees 67,328
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 95,590
- ----------------------------------------------------------------------
Directors'/Trustees' fees 1,888
- ----------------------------------------------------------------------
Auditing fees 14,191
- ----------------------------------------------------------------------
Legal fees 2,818
- ----------------------------------------------------------------------
Portfolio accounting fees 54,785
- ----------------------------------------------------------------------
Distribution services fee--Cash II Shares 493,611
- ----------------------------------------------------------------------
Shareholder services fee--Institutional Shares 186,871
- ----------------------------------------------------------------------
Shareholder services fee--Cash II Shares 411,342
- ----------------------------------------------------------------------
Share registration costs 49,625
- ----------------------------------------------------------------------
Printing and postage 18,607
- ----------------------------------------------------------------------
Insurance premiums 5,770
- ----------------------------------------------------------------------
Miscellaneous 15,305
- ---------------------------------------------------------------------- ----------
Total expenses 2,556,012
- ----------------------------------------------------------------------
Waivers--
- ----------------------------------------------------------
Waiver of investment advisory fee $ (95,512)
- ----------------------------------------------------------
Waiver of distribution services fee--Cash II Shares (411,342)
- ----------------------------------------------------------
Waiver of shareholder services fee--Institutional Shares (186,871)
- ---------------------------------------------------------- ---------
Total waivers (693,725)
- ---------------------------------------------------------------------- ----------
Net expenses 1,862,287
- ------------------------------------------------------------------------------------ ----------
Net investment income $8,010,653
- ------------------------------------------------------------------------------------ ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
OHIO MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
1995 1994
--------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------
Net investment income $ 8,010,653 $ 4,456,860
- -------------------------------------------------------------- --------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------
Distributions from net investment income
- --------------------------------------------------------------
Institutional Shares (2,660,655) (1,561,810)
- --------------------------------------------------------------
Cash II Shares (5,349,998) (2,895,050)
- -------------------------------------------------------------- --------------- -------------
Change in net assets resulting from distributions
to shareholders (8,010,653) (4,456,860)
- -------------------------------------------------------------- --------------- -------------
SHARE TRANSACTIONS--
- --------------------------------------------------------------
Proceeds from sale of Shares 1,275,288,208 809,574,268
- --------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 5,470,332 2,932,696
- --------------------------------------------------------------
Cost of Shares redeemed (1,238,142,557) (802,723,017)
- -------------------------------------------------------------- --------------- -------------
Change in net assets resulting from share transactions 42,615,983 9,783,947
- -------------------------------------------------------------- --------------- -------------
Change in net assets 42,615,983 9,783,947
- --------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------
Beginning of period 218,549,472 208,765,525
- -------------------------------------------------------------- --------------- -------------
End of period $ 261,165,455 $ 218,549,472
- -------------------------------------------------------------- --------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
OHIO MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Ohio Municipal Cash
Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund offers two classes of shares: Institutional Shares and Cash II Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
71.6% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or supported (backed) by a letter of credit for any one institution or
agency does not exceed 12.3% of total investments.
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. Many restricted securities may
be resold in the secondary market in transactions exempt from registration.
In some cases, the restricted securities may be resold without registration
upon exercise of a demand feature. Such restricted securities may be
determined to be liquid under criteria established by the Board of
Trustees. The Fund will not incur any registration costs upon such resales.
Restricted securities are valued at amortized cost in accordance with Rule
2a-7 under the Investment Company Act of 1940.
Additional information on each restricted security held at October 31, 1995
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
-------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Cleveland OH City School District, Energy
Conservation Improvement Bonds (Series 1994)
Weekly VRDNs 10/02/95 $5,760,000
Ohio HFA, Single Family Mortgage (Series PT-8)
Weekly VRDNs 06/16/94 6,435,000
Youngstown City School District, OH, Municipal
Installment Trust Receipts (Series 1994-A)
Weekly VRDNs 08/02/95 5,300,000
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $261,165,455.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
INSTITUTIONAL SHARES 1995 1994
- ----------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 571,719,826 275,545,260
- -----------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 277,721 99,198
- -----------------------------------------------------------------
Shares redeemed (561,565,338) (294,893,757)
- ----------------------------------------------------------------- ------------ ------------
Net change resulting from Institutional share transactions 10,432,209 (19,249,299)
- ----------------------------------------------------------------- ------------ ------------
</TABLE>
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
CASH II SHARES 1995 1994
- ----------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 703,568,382 534,029,008
- -----------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 5,192,611 2,833,498
- -----------------------------------------------------------------
Shares redeemed (676,577,219) (507,829,260)
- ----------------------------------------------------------------- ------------ ------------
Net change resulting from Cash II share transactions 32,183,774 29,033,246
- ----------------------------------------------------------------- ------------ ------------
Net change resulting from Fund share transactions 42,615,983 9,783,947
- ----------------------------------------------------------------- ------------ ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee of the Fund. The Adviser can
modify or terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Services Corp. ("FSC"), the principal distributor, from the
net assets of the Fund to finance activities intended to result in the sale of
the Fund's Cash II Shares. The Plan provides that the Fund may incur
distribution expenses up to .30 of 1% of the average daily net assets of the
Cash II shares, annually, to compensate FSC. FSC may voluntarily choose to waive
a portion of its fee. FSC can modify or terminate this voluntary waiver at any
time at its sole discretion.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of daily average net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive its fee. FSS can modify or terminate this voluntary
waiver at any time at its sole discretion. For the fiscal year ended October 31,
1995, Institutional Shares fully waived its shareholder services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the Fund.
This fee is based on the size, type, and number of accounts and transactions
made by shareholders.
OHIO MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common Officers. These
transactions were made at current market value pursuant to Rule 17a-7 under the
Act amounting to $500,170,000 and $491,515,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Ohio Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of Ohio
Municipal Cash Trust (an investment portfolio of Federated Municipal Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of October 31, 1995, the related statement of operations for the year then
ended, and the statement of changes in net assets for each of the two years in
the period then ended and the financial highlights (see pages 2 and 15 of the
prospectus) for the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Ohio
Municipal Cash Trust (an investment portfolio of Federated Municipal Trust) as
of October 31, 1995, the results of its operations for the year then ended, and
the changes in its net assets for each of the two years in the period then ended
and the financial highlights for the periods presented, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Ohio Municipal Cash Trust
Institutional Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- -----------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- -----------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- -----------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
- -----------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- -----------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- -----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OHIO MUNICIPAL
CASH TRUST
INSTITUTIONAL SHARES
PROSPECTUS
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated December 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229857
1030105A-IS (12/95)
OHIO MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
CASH II SHARES
INSTITUTIONAL SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus(es) of Ohio Municipal Cash Trust (the "Fund"), a portfolio of
Federated Municipal Trust (the "Trust") dated December 31, 1995. This
Statement is not a prospectus. You may request a copy of a prospectus or a
paper copy of this Statement, if you have received it electronically, free
of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated December 31, 1995
FEDERATED SECURITIES
CORP.
Distributor
A subsidiary of Federated
Investors
INVESTMENT POLICIES 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
Ratings 2
When-Issued and Delayed Delivery
Transactions 3
Repurchase Agreements 3
Reverse Repurchase Agreements 3
Credit Enhancement 4
OHIO INVESTMENT RISKS 4
INVESTMENT LIMITATIONS 6
Regulatory Compliance 9
FEDERATED MUNICIPAL TRUST
MANAGEMENT 9
Share Ownership 10
Trustees Compensation 18
Trustee Liability 20
INVESTMENT ADVISORY SERVICES 20
Investment Adviser 20
Advisory Fees 20
BROKERAGE TRANSACTIONS 21
OTHER SERVICES 22
Fund Administration 22
Custodian and Portfolio
Recordkeeper 23
Transfer Agent 13
Independent Public Accountants 13
DISTRIBUTION PLAN AND SHAREHOLDER
SERVICES AGREEMENT 23
DETERMINING NET ASSET VALUE 25
REDEMPTION IN KIND 26
MASSACHUSETTS PARTNERSHIP LAW 26
THE FUND'S TAX STATUS 27
PERFORMANCE INFORMATION 15
Yield 27
Effective Yield 28
Tax-Equivalent Yield 28
Tax-Equivalency Table 28
Total Return 30
Performance Comparisons 30
ABOUT FEDERATED INVESTORS 31
Mutual Fund Market 32
Institutional Clients 32
Trust Organizations 32
Broker/Dealers and Bank
Broker/Dealer Subsidiaries 32
APPENDIX 19
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by the
Board of Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or any
guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation interests
frequently provide or secure from another financial institution irrevocable
letters of credit or guarantees and give the Fund the right to demand payment of
the principal amounts of the participation interests plus accrued interest on
short notice (usually within seven days). The municipal securities subject to
the participation interests are not limited to the Fund's maximum maturity
requirements so long as the participation interests include the right to demand
payment from the issuers of those interests. By purchasing these participation
interests, the Fund is buying a security meeting the maturity and quality
requirements of the Fund and also is receiving the tax-free benefits of the
underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments by
a governmental or nonprofit entity. The lease payments and other rights under
the lease provide for and secure payments on the certificates. Lease obligations
may be limited by municipal charter or the nature of the appropriation for the
lease. Furthermore, a lease may provide that the participants cannot accelerate
lease obligations upon default. The participants would only be able to enforce
lease payments as they became due. In the event of a default or failure of
appropriation, unless the participation interests are credit enhanced, it is
unlikely that the participants would be able to obtain an acceptable substitute
source of payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be terminated by
the lessee; the potential recovery, if any, from a sale of the leased property
upon termination of the lease; the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and prospects); the
likelihood that the lessee will discontinue appropriating funding for the leased
property because the property is no longer deemed essential to its operations
(e.g., the potential for an "event of non-appropriation"); and any credit
enhancement or legal recourse provided upon an event of non-appropriation or
other termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two highest
short-term rating categories by one or more nationally recognized statistical
rating organizations ("NRSROs") or be of comparable quality to securities having
such ratings. An NRSRO's two highest rating categories are determined without
regard for sub-categories and gradations. For example, securities rated SP-1+,
SP-1, or SP-2 by Standard & Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by
Moody's Investors Service, Inc. ("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch
Investors Service, Inc. ("Fitch") are all considered rated in one of the two
highest short-term rating categories. The Fund will follow applicable
regulations in determining whether a security rated by more than one NRSRO can
be treated as being in one of the two highest short-term rating categories;
currently, such securities must be rated by two NRSROs in one of their two
highest rating categories. See "Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund`s
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities to
the Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. The Fund or its custodian will take possession
of the securities subject to repurchase agreements, and these securities will be
marked to market daily. In the event that a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the Fund might
be delayed pending court action. The Fund believes that under the regular
procedures normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Fund and allow retention or disposition of such securities. The
Fund will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the Fund's
adviser to be creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument in return for a percentage of the
instrument's market value in cash and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but does
not ensure this result. When effecting reverse repurchase agreements, liquid
assets of the Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are: segregated on the Fund's records at the trade
date; marked to market daily; and maintained until the transaction is settled.
CREDIT ENHANCEMENT
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.
OHIO INVESTMENT RISKS
The Fund invests in obligations of Ohio (the "State") issuers which result in
the Fund's performance being subject to risks associated with the overall
conditions present within the State. The following information is a brief
summary of the prevailing economic conditions and general summary of the State's
financial condition. This information is based on official statements relating
to securities that are believed to be reliable but should not be considered as a
complete description of all relevant information.
The Ohio economy is largely composed of manufacturing which is concentrated in
the automobile sector and other durable goods. The exposure to these industries
particularly the auto sector leaves the State vulnerable to an economic slowdown
associated with business cycles. The State has diversified its economy somewhat
over the past decade with services and trade composing roughly 50% of the
economy. Unemployment in Ohio over the past two years has been below the
national average, but population growth as in many great lakes states has been
stagnant.
The State fully depleted the budget stabilization fund that exceeded $300
million, to achieve balanced budgets as a result of the most recent recession.
The State acted promptly in addressing the fall in revenue with an expansion of
the sales tax and cuts in appropriations. As a result of prudent financial
management, State restored $21 million to the budget stabilization fund in
fiscal 1993. Strong performance in fiscal 1994 and 1995 resulted in reserve
levels that are well above the levels of 1990. Ohio's budge stabilization fund
is now above $800 million.
The overall condition of the State is further demonstrated by its debt ratings.
Ohio, rated Aaa by Moody's Investors Service, Inc. in the 1970's, was downgraded
to Aa in 1979 and has maintained this rating since the downgrade. Standard &
Poor's Ratings Group first rated the State in 1984 at AA; that has remained
unchanged.
The Fund's concentration in securities issued by the State and its political
subdivisions provides a greater level of risk than a fund whose assets are
diversified across numerous states and municipal issuers. The ability of the
State or its municipalities to meet their obligations will depend on the
availability of tax and other revenues; economic, political, and demographic
conditions within the State; and the underlying fiscal condition of the State,
its counties, and its municipalities.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on margin
but may obtain such short-term credits as are necessary for the clearance of
transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow money
and engage in reverse repurchase agreements in amounts up to one-third of the
value of its total assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is deemed
to be inconvenient or disadvantageous. The Fund will not purchase any securities
while borrowings in excess of 5% of the value of its total assets are
outstanding. During the period any reverse repurchase agreements are
outstanding, the Fund will restrict the purchase of portfolio securities to
money market instruments maturing on or before the expiration date of the
reverse repurchase agreements, but only to the extent necessary to assure
completion of the reverse repurchase agreements.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may pledge assets having a market value
not exceeding the lesser of the dollar amounts borrowed or 15% of the value of
total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may acquire publicly or
nonpublicly issued Ohio municipal securities or temporary investments or enter
into repurchase agreements, in accordance with its investment objective,
policies, limitations, and its Declaration of Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its net assets in securities subject
to restrictions on resale under the Securities Act of 1933.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, or real estate limited
partnerships, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
sale of securities in accordance with its investment objective, policies, and
limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase, 25% or
more of the value of its total assets would be invested in any one industry or
in industrial development bonds or other securities, the interest upon which is
paid from revenues of similar types of projects. However, the Fund may invest as
temporary investments more than 25% of the value of its assets in cash or cash
items, securities issued or guaranteed by the U.S. government, its agencies, or
instrumentalities, or instruments secured by these money market instruments,
such as repurchase agreements.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies, except as
part of a merger, consolidation, or other acquisition.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers (including companies responsible for paying principal and
interest on industrial development bonds) which have records of less than three
years of continuous operations, including the operation of any predecessor.
INVESTING FOR CONTROL
The Fund will not invest in securities of a company for the purpose of
exercising control or management.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES
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 association having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items." Except with
respect to borrowing money, if a percentage limitation is adhered to at the time
of investment, a later increase or decrease in percentage resulting from any
change in value or net assets will not result in a violation of such limitation.
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.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in its
prospectus and this Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940. In particular, the Fund will comply
with the various requirements of Rule 2a-7, 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.
FEDERATED MUNICIPAL TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management Advisory
Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global 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 of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Services Company; Chairman, Treasurer, and Trustee, Federated Administrative
Services; Trustee or Director of some of the Funds; President, Executive Vice
President and Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors; Controller,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., and Passport Research, Ltd.; Senior Vice President, Federated
Shareholder Services; Vice President, Federated Administrative Services;
Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President, Secretary,
and Trustee, Federated Administrative Services; President and Trustee, Federated
Shareholder Services; Director, Federated Securities Corp.; Executive Vice
President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated ARMs
Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Master Trust; Federated Municipal Trust;
Federated Short-Term Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund: 3-5
Years; First Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Term Trust, Inc. - 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; 111 Corcoran Funds; Peachtree Funds;
The Planters Funds; RIMCO Monument Funds; The Shawmut Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust For Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; The
Virtus Funds; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.
As of December 4, 1995, the following shareholder(s) of record owned 5% or more
of the outstanding Institutional Shares of the Ohio Municipal Cash Trust: Key
Trust Co., Cleveland, OH, 8.17%; MAHCO, Youngstown, OH, 5.15%; PANABCO, Newark,
OH, 7.85%; Parcol & Co., Akron, OH, 34.39%; and SNBSO & Co., Springfield, OH,
6.10%.
As of December 4, 1995, the following shareholder(s) of record owned 5% or more
of the outstanding Cash II Shares of the Ohio Municipal Cash Trust: First
National Bank of Ohio, Akron, OH, 5,89%; and Gradison & Company Inc.,
Cincinnati, OH, 80.64%.
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 68 other investment companies in the Fund
Complex
Thomas G. Bigley $2,458 $20,688 for the Trust and
Trustee 49 other investment companies in the
Fund Complex
John T. Conroy, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the
Fund Complex
William J. Copeland $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the
Fund Complex
Glen R. Johnson $0 $0 for the Trust and
President and Trustee 14 other investment companies in the Fund
Complex
James E. Dowd $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D. $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the
Fund Complex
Peter E. Madden $2,757 $90,563 for the Trust and
Trustee 64 other investment companies in
the Fund Complex
Gregor F. Meyer $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in
the Fund Complex
John E. Murray, Jr., $1,762 $0 for the Trust and
Trustee 64 other investment companies in
the Fund Complex
Wesley W. Posvar $3,166 $106,460 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Marjorie P. Smuts $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in
the Fund Complex
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of
fifteen portfolios.
+The information is provided for the last calendar year.
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 the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the fiscal years ended October
31, 1995, 1994, and 1993, the adviser earned $957,142, $818,724, and $813,048,
respectively, of which $95,512, $133,035, and $392,961, respectively, were
waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses) exceed
2-1/2% per year of the first $30 million of average net assets, 2% per year
of the next $70 million of average net assets, and 1-1/2% per year of the
remaining average net assets, the adviser will reimburse the Fund for its
expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this limitation,
the investment advisory fee paid will be reduced by the amount of the
excess, subject to an annual adjustment. If the expense limitation is
exceeded, the amount to be reimbursed by the adviser will be limited, in
any single fiscal year, by the amount of the investment advisory fees.
This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.
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, 1995, 1994, 1993, 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.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Fund's Administrator.
(For purposes of this Statement of Additional Information, Federated
Administrative Services and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the "Administrators".) For the fiscal
year ended October 31, 1995, Federated Administrative Services earned $181,139.
For the fiscal year ended ended October 31, 1994, the Administrators
collectively earned $209,077. For the fiscal year ended ended October 31, 1993,
Federated Administrative Services, Inc., earned $325,056. 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 the size, type and number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT
With respect to Cash II Shares, the Fund has adopted a Distribution Plan
pursuant to Rule 12b-1 which was promulgated by the Securities and Exchange
Commission pursuant to the Investment Company Act of 1940. Additionally, the
Fund has adopted a Shareholder Service Agreement with respect to both Cash II
Shares and Institutional Shares.
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Trustees expect that the Fund will be
able to achieve a more predictable flow of cash for investment purposes and to
meet redemptions. This will facilitate more efficient portfolio management and
assist the Fund in pursuing its investment objectives. By identifying potential
investors whose needs are served by the Fund's objectives, and properly
servicing these accounts, it may be possible to curb sharp fluctuations in rates
of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; and (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
For the fiscal period ending October 31, 1995, payments in the amount of
$493,611 were made pursuant to the Distribution Plan on behalf of Cash II
Shares, of which $411,342 was waived. In addition, for this period, the Fund's
Cash II Shares and Institutional Shares paid shareholder services fees in the
amount of $411,342 and $186,871, respectively, of which $0 and $186,871,
respectively, were waivedi.
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.
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.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average portfolio
maturity; type of instruments in which the portfolio is invested; changes in
interest rates; changes in expenses; and the relative amount of cash flow. To
the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in shares of
the Fund, the performance will be reduced for those shareholders paying those
fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding capital
changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.
For the seven-day period ended October 31, 1995, the yields for Cash II Shares
and Institutional Shares were 3.29% and 3.59%, respectively.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
For the seven-day period ended October 31, 1995, the effective yields for Cash
II Shares and Institutional Shares were 3.34% and 3.65%, respectively.
TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Fund is calculated similarly to the yield but is
adjusted to reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming a 39.6% tax rate (the maximum effective federal
rate for individuals) and assuming that income is 100% exempt.
For the seven-day period ended October 31, 1995, the tax-equivalent yields for
Cash II Shares and Institutional Shares were 6.22% and 6.79%, respectively.
TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature. The
interest earned by the municipal securities in the Fund's portfolio generally
remains free from federal regular income tax,* and is often free from state and
local taxes as well. As the table below indicates, a "tax-free" investment can
be an attractive choice for investors, particularly in times of narrow spreads
between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
State of Ohio
FEDERAL TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND STATE TAX BRACKET:
19.457% 33.201% 37.900% 43.500% 47.100%
SINGLE $1- $23,351- $56,551- $117,951- OVER
RETURN 23,350 56,550 117,950 256,500 256,500
Tax-Exempt
Yield Taxable Yield Equivalent
1.50% 1.86% 2.25% 2.42% 2.65% 2.84%
2.00% 2.48% 2.99% 3.22% 3.54% 3.78%
2.50% 3.10% 3.74% 4.03% 4.42% 4.73%
3.00% 3.72% 4.49% 4.83% 5.31% 5.67%
3.50% 4.35% 5.24% 5.64% 6.19% 6.62%
4.00% 4.97% 5.99% 6.44% 7.08% 7.56%
4.50% 5.59% 6.74% 7.25% 7.96% 8.51%
5.00% 6.21% 7.49% 8.05% 8.85% 9.45%
5.50% 6.83% 8.23% 8.86% 9.73% 10.40%
6.00% 7.45% 8.98% 9.66% 10.62% 11.34%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state and
local taxes paid on comparable taxable investments were not used to
increase federal deductions.
The chart above is for illustrative purposes only. It is not an indicator
of past or future performance of 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.
For for the one-year period ended October 31, 1995, and for the period from
April 22, 1991 (date of initial public investment) through October 31, 1995, the
average annual total returns for Cash II Shares were 3.30% and 2.79%,
respectively, and average annual total returns for Institutional Shares were
3.61% and 3.09%, respectively.
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
O LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports monthly
and 12-month-to-date investment results for the same money funds.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making-structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of competitive
investment products that have gained the confidence of thousands of clients and
their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the mutual
fund industry in 1974 with the creation of the first institutional money market
fund. Simultaneously, the company pioneered the use of the amortized cost method
of accounting for valuing shares of money market funds, a principal means used
by money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1994, Federated Investors managed more than $31 billion in assets across
approximately 43 money market funds, including 17 government, 8 prime and 18
municipal with assets approximating $17 billion, $7.4 billion and $6.6 billion,
respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
*Source: Investment Company Institute
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Mark R. Gensheimer, Executive
Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the long-
term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
LONG-TERM DEBT RATINGS
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity.
In this case, two ratings are usually assigned, (for example, Aaa/VMIG-1); the
first representing an evaluation of the degree of risk associated with scheduled
principal and interest payments, and the second representing an evaluation of
the degree of risk associated with the demand feature. The VMIG rating can be
assigned a 1 or 2 designation using the same definitions described above for the
MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1 Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short- term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries,
high rates of return on funds employed, conservative
capitalization structure with moderate reliance on debt and ample asset
protection, broad margins in earning coverage of fixed financial charges and
high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity
P-2 Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short- term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternate liquidity is maintained.
LONG-TERM DEBT RATINGS
AAA Bonds which are rated AAA are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes is can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
AA Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "Aaa" by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "Aa" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.
Cusip 314229840
Cusip 314229857
VIRGINIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares of Virginia Municipal Cash Trust (the "Fund")
offered by this prospectus represent interests in a non-diversified portfolio of
Federated Municipal Trust (the "Trust"), an open-end management investment
company (a mutual fund). The Fund invests primarily in short-term Virginia
municipal securities, including securities of states, territories, and
possessions of the United States which are not issued by or on behalf of
Virginia, or its political subdivisions and financing authorities, but which
provide income exempt from federal regular income tax and the income tax imposed
by the Commonwealth of Virginia consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SUMMARY OF FUND EXPENSES 1
- --------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SERVICE SHARES 2
- --------------------------------------------------
GENERAL INFORMATION 3
- --------------------------------------------------
INVESTMENT INFORMATION 3
- --------------------------------------------------
Investment Objective 3
Investment Policies 3
Virginia Municipal Securities 6
Investment Risks 6
Non-Diversification 7
Investment Limitations 7
FUND INFORMATION 7
- --------------------------------------------------
Management of the Fund 7
Distribution of Institutional Service
Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- --------------------------------------------------
HOW TO PURCHASE SHARES 10
- --------------------------------------------------
Special Purchase Features 10
HOW TO REDEEM SHARES 11
- --------------------------------------------------
Special Redemption Features 12
ACCOUNT AND SHARE INFORMATION 12
- --------------------------------------------------
TAX INFORMATION 13
- --------------------------------------------------
Federal Income Tax 13
State and Local Taxes 14
OTHER CLASSES OF SHARES 14
- --------------------------------------------------
PERFORMANCE INFORMATION 14
- --------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SHARES 15
- --------------------------------------------------
FINANCIAL STATEMENTS 16
- --------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 28
- --------------------------------------------------
ADDRESSES 29
- --------------------------------------------------
</TABLE>
I
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Charge 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
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver) (1)................................................................ 0.23%
12b-1 Fee........................................................................................ None
Total Other Expenses............................................................................. 0.36%
Shareholder Services Fee (after waiver) (2)......................................... 0.10%
Total Operating Expenses (3)............................................................. 0.59%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.40%.
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 0.91% absent the voluntary
waivers of a portion of the management fee and a portion of the shareholder
services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Institutional Service
Shares of the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Fund 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.
1
VIRGINIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 28.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------
1995 1994 1993(a)
- ------------------------------------------------ --------- --------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------
Net investment income 0.03 0.02 0.003
- ------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.003)
- ------------------------------------------------ --------- --------- --------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------ --------- --------- --------
--------- --------- --------
TOTAL RETURN (b) 3.46% 2.44% 0.34%
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------
Expenses 0.59% 0.40% 0.19%*
- ------------------------------------------------
Net investment income 3.38% 2.42% 2.67%*
- ------------------------------------------------
Expense waiver/reimbursement (c) 0.32% 0.37% 1.04%*
- ------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------
Net assets, end of period (000 omitted) $127,083 $100,084 $45,648
- ------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 16, 1993 (date of initial
public investment) to October 31, 1993.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
2
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established two classes of shares known as Institutional Service Shares and
Institutional Shares. This prospectus relates only to Institutional Service
Shares of the Fund, which are designed primarily for financial institutions
acting in an agency capacity as a convenient means of accumulating an interest
in a professionally managed, non-diversified portfolio investing primarily in
short-term Virginia municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Virginia taxpayers because it invests
in municipal securities of that state. A minimum initial investment of $25,000
within a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares aew
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the income tax imposed by the Commonwealth of Virginia
consistent with stability of principal. This investment objective cannot be
changed without shareholder approval. While there is no assurance that the Fund
will achieve its investment objective, it endeavors to do so by complying with
the various requirements of Rule 2a-7 under the Investment Company Act of 1940
which regulates money market funds and by following the investment policies
described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Virginia municipal securities (as defined below) maturing in 13 months or less.
As a matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be exempt from
federal regular income tax and the income tax imposed by the Commonwealth of
Virginia or at least 80% of its net assets will be invested in obligations, the
interest income from which is exempt from federal regular and Virginia state
income tax (Federal regular income tax does not include the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations.) The average maturity of the securities in the Fund's portfolio,
computed on a dollar-weighted basis, will be 90 days or less. Unless indicated
otherwise, the investment policies may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of Virginia and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
3
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and the income tax imposed by the Commonwealth of Virginia ("Virginia Municipal
Securities"). Examples of Virginia Municipal Securities include, but are not
limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and pre-refunded
bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par.
The interest rate may float or be adjusted at regular intervals (ranging
from daily to annually), and is normally based on a published interest rate
or interest rate index. Most variable rate demand notes allow the Fund to
demand the repurchase of the security on not more than seven days prior
notice. Other notes only permit the Fund to tender the security at the time
of each interest rate adjustment or at other fixed intervals. See "Demand
Features." The Fund treats variable rate demand notes as maturing on the
later of the date of the next interest rate adjustment or the date on which
the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Virginia
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Virginia Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment and
facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. These obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
4
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any
bankruptcy, receivership, or default of the party providing the credit
enhancement will adversely affect the quality and marketability of the
underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; obligations issued or guaranteed by
the U.S. government, its agencies, or instrumentalities; instruments issued by a
U.S. branch of a domestic
5
bank or other deposit institution having capital, surplus, and undivided profits
in excess of $100,000,000 at the time of investment; and repurchase agreements
(arrangements in which the organization selling the Fund a temporary investment
agrees at the time of sale to repurchase it at a mutually agreed upon time and
price).
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain Virginia
Municipal Securities is subject to the federal alternative minimum tax.
VIRGINIA MUNICIPAL SECURITIES
Virginia Municipal Securities are generally issued to finance public works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
Virginia Municipal Securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Virginia Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Virginia Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of Virginia Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of Virginia
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Virginia Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Virginia Municipal Securities could involve an increased risk to the Fund should
any of these related projects or facilities experience financial difficulties.
Obligations of issuers of Virginia Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints
6
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. These investment limitations cannot be
changed without shareholder approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .40 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other
7
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. With over $72 billion invested across more than 260 funds
under management and/or administration by its subsidiaries, as of December 31,
1994, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 1,750 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,000 financial institutions nationwide. More
than 100,000 investment professionals have selected Federated funds for their
clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Board of Trustees,
and could result in severe penalties.
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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to .25 of 1% of the average
daily net asset value of the Institutional Service Shares, computed at an annual
rate, to provide personal services for shareholders and to provide the
maintenance of shareholder accounts (shareholder services). From time to time,
and for such periods as deemed appropriate, the amount stated above may be
reduced voluntarily. Under the Shareholder Services Agreement, Federated
Shareholder Services will either perform shareholder services directly or will
select financial institutions to perform shareholder services. Financial
institutions will receive
8
fees based upon shares owned by their clients or customers. The schedules of
such fees and the basis upon which such fees will be paid will be determined
from time to time by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. With respect to Institutional
Service Shares, in addition to payments made pursuant to the Shareholder
Services Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions supplemental
fees for the performance of substantial sales services, distribution-related
support services, or shareholder services. The support may include sponsoring
sales, educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's investment
adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
-------------------- ------------------------------------
<C> <S>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Institutional Service
Shares at $1.00 by valuing the portfolio securities using the amortized cost
method. The net asset value per share is determined by subtracting liabilities
attributable to shares from the value of Fund assets attributable to shares, 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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
9
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 which the New York Stock Exchange
is 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 within a
90-day period. 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 of State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: Virginia Municipal Cash Trust,
Institutional Service Shares; Fund Number (This number can be found on the
account statement or by contacting the Fund.); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to Virginia Municipal Cash Trust -- Institutional Service
Shares. 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.
10
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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. 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 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event
11
more than seven days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. The check writing service allows
shareholders to receive the daily dividend declared on the shares to be redeemed
until the check is presented to UMB Bank, N.A., the bank responsible for
administering the check writing program, for payment. However, checks should
never be made payable or sent to UMB Bank, N.A. or the Fund to redeem shares,
and a check may not be written to close an account.
DEBIT CARD. Upon request, a debit account will be established. This account
allows shareholders to redeem shares by using a debit card. A fee will be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of at
least $25,000, a systematic withdrawal program may be established whereby
automatic redemptions are made from the account and transferred electronically
to any commercial bank, savings bank, or credit union that is an ACH member.
Shareholders may apply for participation in this program through their financial
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account
12
balance falls below a required minimum value of $25,000 due to shareholder
redemptions. Before shares are redeemed to close an account, the shareholder is
notified in writing and allowed 30 days to purchase additional shares to meet
the minimum requirement.
VOTING RIGHTS. Each shareholder has one vote in Trustee elections and other
matters submitted to shareholders for vote. All shares of all classes of each
portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 election of Trustees under certain
circumstances.
As of December 4, 1995, HAMAC & Co., Richmond, VA, owned 31.48% of the voting
securities of the Fund's Institutional Shares, 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.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
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.
13
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than
Virginia. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
VIRGINIA TAXES. Under existing Virginia laws, distributions made by the Fund
will not be subject to Virginia income taxes to the extent that such
distributions qualify as exempt-interest dividends under the Internal Revenue
Code, and represent (i) interest from obligations issued by or on behalf of the
Commonwealth of Virginia or any political subdivision thereof; or (ii) interest
from obligations issued by a territory or possession of the United States or any
political subdivision thereof which federal law exempts from state income taxes.
Conversely, to the extent that distributions made by the Fund are attributable
to other types of obligations, such distributions will be subject to Virginia
income taxes.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called Institutional Shares that
are sold primarily to financial institutions acting in a fiduciary capacity.
Institutional Shares are sold at net asset value and are subject to a
Shareholder Services Agreement. Investments in Institutional Shares are subject
to a minimum initial investment of $25,000 within a 90-day period.
Institutional Service Shares and Institutional Shares are subject to certain of
the same expenses. Expense differences, however, between Institutional Service
Shares and Institutional Shares may affect the performance of each class.
To obtain more information and a prospectus for Institutional Shares, investors
may call 1-800-235-4669.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the shares' tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
14
VIRGINIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 28.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
1995 1994 1993(a)
- ------------------------------------------------ -------- -------- ---------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------
Net investment income 0.04 0.03 0.003
- ------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------
Distributions from net investment income (0.04) (0.03) (0.003)
- ------------------------------------------------ -------- -------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------ -------- -------- ---------
-------- -------- ---------
TOTAL RETURN (b) 3.56% 2.57% 0.35%
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------
Expenses 0.49% 0.33% 0.09%*
- ------------------------------------------------
Net investment income 3.50% 2.56% 2.68%*
- ------------------------------------------------
Expense waiver/reimbursement (c) 0.42% 0.37% 1.04%*
- ------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------
Net assets, end of period (000 omitted) $22,642 $20,360 $ 7,210
- ------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 16, 1993 (date of initial
public investment) to October 31, 1993.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
15
VIRGINIA MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS--99.3%
- ---------------------------------------------------------------------------
VIRGINIA--95.9%
------------------------------------------------------------
$ 1,000,000 Alexandria, VA IDA Weekly VRDNs (American Red Cross)/ (Sanwa
Bank Ltd., Osaka LOC) A-1+ $ 1,000,000
------------------------------------------------------------
6,500,000 Alexandria, VA Redevelopment and Housing Authority Weekly
VRDNs (Crystal City Apartments)/(Safeco Insurance Co. of
America INS)/(Sumitomo Bank Ltd., Osaka LIQ) A-1 6,500,000
------------------------------------------------------------
2,200,000 Amelia County, VA IDA, (Series 1991) Weekly VRDNs (Chambers
Waste System)/(Nationsbank, N.A. (Carolinas) LOC) VMIG1 2,200,000
------------------------------------------------------------
2,600,000 Arlington County, VA Weekly VRDNs (Ballston Public
Parking)/(Citibank NA, New York LOC) A-1 2,600,000
------------------------------------------------------------
3,200,000 Botetourt County, VA IDA, IDRB (Series 1995) Weekly VRDNs
(Emkay Holdings, L.L.C. Project)/(State Street Bank and
Trust Co. LOC) VMIG1 3,200,000
------------------------------------------------------------
500,000 Campbell County, VA IDA, Solid Waste Disposal Facilities
Revenue ACES Weekly VRDNs (Georgia-Pacific Corp.)/
(Industrial Bank of Japan Ltd., Tokyo LOC) A-1 500,000
------------------------------------------------------------
4,625,000 Carroll County, VA IDA, Adjustable Rate IDRB (Series 1995)
Weekly VRDNs (Kentucky Derby Hosiery Co., Inc. Project)/
(Liberty National Bank & Trust Co. LOC) A-1+ 4,625,000
------------------------------------------------------------
1,900,000 Chesapeake, VA IDA, (Series 1986) Weekly VRDNs (Volvo Auto
Receivables 1992-B)/(Union Bank of Switzerland, Zurich LOC) P-1 1,900,000
------------------------------------------------------------
6,000,000 Chesapeake, VA IDA, IDRB (Series 1988) Weekly VRDNs
(Sumitomo Machinery Corp. of America Corp.)/(Sumitomo Bank
Ltd., Osaka LOC) VMIG1 6,000,000
------------------------------------------------------------
3,000,000 Commonwealth of Virginia, (Series 1995), 3.85% CP, Mandatory
Tender 1/16/1996 A-1+ 3,000,000
------------------------------------------------------------
</TABLE>
16
VIRGINIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ---------------------------------------------------------------------------
VIRGINIA--CONTINUED
------------------------------------------------------------
$ 1,886,500 Dinwiddie County, VA IDA, IDRB (Series 1989) Weekly VRDNs
(Tindall Concrete VA, Inc.)/(First Union National Bank,
Charlotte, NC LOC) P-1 $ 1,886,500
------------------------------------------------------------
3,515,000 Dinwiddie County, VA IDA, IDRB (Series 1991) Weekly VRDNs
(Maclin-Zimmer-Mcgill Tobacco Co., Inc.)/(Wachovia Bank of
NC, NA, Winston-Salem LOC) P-1 3,515,000
------------------------------------------------------------
1,050,000 Fairfax County, VA EDA Weekly VRDNs (William Byrd
Press)/(Nationsbank of Virginia, N.A. LOC) VMIG1 1,050,000
------------------------------------------------------------
1,000,000 Fairfax County, VA Housing Authority Weekly VRDNs (Chase
Commons Associates)/(Bankers Trust Co., New York LOC) P-1 1,000,000
------------------------------------------------------------
1,900,000 Fairfax County, VA IDA Weekly VRDNs (Fairfax Hospital
System)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LOC) A-1 1,900,000
------------------------------------------------------------
3,000,000 Fairfax County, VA IDA, (Series 1993B), 3.80% CP (Inova
Health System), Mandatory Tender 1/23/1996 A-1 3,000,000
------------------------------------------------------------
4,000,000 Fairfax County, VA IDA, (Series 1993B), 3.80% CP (Inova
Health System), Mandatory Tender 11/21/1995 A-1 4,000,000
------------------------------------------------------------
1,250,000 Fairfax County, VA, UT GO Refunding Bonds (Series B), 6.60%
Bonds, 11/1/1996 (@101) Aaa 1,296,216
------------------------------------------------------------
6,100,000 Falls Church, VA IDA, (Series 1985), 4.10% TOBs (Kaiser
Permanente Medical Care Program), Optional Tender 11/1/1995 A-1+ 6,100,000
------------------------------------------------------------
600,000 Fauquier County, VA IDA, Various Rate Demand Refunding
Revenue Bonds Weekly VRDNs (Warrenton Development Co.)/
(Nationsbank of Maryland, N.A. LOC) P-1 600,000
------------------------------------------------------------
7,113,000 Fluvanna County, VA IDA, (Series 1986) Weekly VRDNs
(Thomasville Furniture Industries)/(Union Bank of
Switzerland, Zurich LOC) P-1 7,113,000
------------------------------------------------------------
4,500,000 Front Royal & Warren County, VA IDA, IDRB (Series 1995)
Weekly VRDNs (Pen-Tab Industries, Inc. Project)/(Bank of
America Illinois LOC) P-1 4,500,000
------------------------------------------------------------
</TABLE>
17
VIRGINIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ---------------------------------------------------------------------------
VIRGINIA--CONTINUED
------------------------------------------------------------
$ 1,070,000 Grayson County, VA IDA, (Series 1987) Weekly VRDNs
(Robertshaw Controls Company Project)/(Nationsbank of
Virginia, N.A. LOC) P-1 $ 1,070,000
------------------------------------------------------------
4,000,000 Halifax, VA IDA, MMMs, PCR, 3.90% CP (Virginia Electric
Power Co.), Mandatory Tender 12/8/1995 A-1 4,000,000
------------------------------------------------------------
7,500,000 Halifax, VA IDA, MMMs, PCR, 4.00% CP (Virginia Electric
Power Co.), Mandatory Tender 1/12/1996 A-1 7,500,000
------------------------------------------------------------
2,582,000 Harrisonburg, VA Redevelopment & Housing Authority, (1989
Series) Weekly VRDNs (Potomac Hills Apartments
Project)/(Nationsbank of Virginia, N.A. LOC) P-1 2,582,000
------------------------------------------------------------
3,745,000 Henrico County, VA IDA, IDRB (Series 1994) Weekly VRDNs
(Gravure Packaging Project)/(First Union National Bank,
Charlotte, NC LOC) P-1 3,745,000
------------------------------------------------------------
2,495,000 Norfolk, VA, 7.10% Bonds (United States Treasury PRF),
6/1/1996 (@102) Aaa 2,591,131
------------------------------------------------------------
4,015,000 Prince William County, VA, (Series C), 3.60% BONDs, 8/1/1996 AA 4,015,513
------------------------------------------------------------
400,000 Prince William County, VA, Lease Participation Certificates
(Series 1995), 4.00% Bonds (MBIA Insurance Corporation INS),
12/1/1995 Aaa 400,089
------------------------------------------------------------
1,500,000 Pulaski County, VA IDA, (Series 1995) Weekly VRDNs (Balogh
Real Estate Ltd. Partnership Mar-Bal, Inc. Project)/ (Bank
One, Cleveland, N.A. LOC) P-1 1,500,000
------------------------------------------------------------
1,010,000 Richmond, VA IDA, Industrial Development Revenue Refunding
Bonds (Series 1987-B), 4.10% TOBs (Crow-Klein-Macfarlane
Project)/(First Union National Bank of Virginia LOC),
Optional Tender 11/15/1995 P-1 1,010,000
------------------------------------------------------------
6,000,000 Richmond, VA Redevelopment & Housing Authority, (Series
1989) Weekly VRDNs (Belmont Apartment)/ (Nationsbank, N.A.
(Carolinas) LOC) P-1 6,000,000
------------------------------------------------------------
</TABLE>
18
VIRGINIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ---------------------------------------------------------------------------
VIRGINIA--CONTINUED
------------------------------------------------------------
$ 1,500,000 Richmond, VA Redevelopment & Housing Authority, (Series B-3)
Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Westdeutsche
Landesbank Girozentrale LOC) VMIG1 $ 1,500,000
------------------------------------------------------------
3,160,000 Richmond, VA Redevelopment & Housing Authority, (Series B-5)
Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Westdeutsche
Landesbank Girozentrale LOC) VMIG1 3,160,000
------------------------------------------------------------
2,900,000 South Hill, VA IDA, IDRB (Series 1987) Weekly VRDNs (South
Hill Veneers, Inc. Project)/(Bank One, Columbus, N.A. LOC) P-1 2,900,000
------------------------------------------------------------
2,495,000 Tazewell County, VA IDA, (Series 1993) Weekly VRDNs (Seville
Properties Bluefield)/(Huntington National Bank, Columbus,
OH LOC) P-1 2,495,000
------------------------------------------------------------
9,000,000 Virginia Education Loan Authority, (Series 1995-A), 4.00%
TOBs (Westdeutsche Landesbank Girozentrale LOC), Mandatory
Tender 5/1/1996 VMIG1 9,000,000
------------------------------------------------------------
2,000,000 Virginia Education Loan Authority, (Series E), 5.00% Bonds,
9/1/1996 Aaa 2,018,863
------------------------------------------------------------
2,400,000 Virginia Peninsula Port Authority Daily VRDNs (Kinyo
Virginia, Inc.)/(Industrial Bank of Japan Ltd., Tokyo LOC) A-1 2,400,000
------------------------------------------------------------
2,200,000 Virginia Peninsula Port Authority, Coal Terminal Revenue
Refunding Bonds (Series 1987A), 3.75% CP (Dominion Terminal
Associates)/(National Westminster Bank, PLC, London LOC),
Mandatory Tender 1/10/1996 P-1 2,200,000
------------------------------------------------------------
4,000,000 Virginia Peninsula Port Authority, Facility Revenue
Refunding Bonds (Series 1992), 3.75% CP (CSX Corp.)/(Bank of
Nova Scotia, Toronto LOC), Mandatory Tender 12/15/1995 AA- 4,000,000
------------------------------------------------------------
1,500,000 Virginia Peninsula Port Authority, Facility Revenue
Refunding Bonds (Series 1992), 3.80% CP (CSX Corp.)/(Bank of
Nova Scotia, Toronto LOC), Mandatory Tender 1/12/1996 AA- 1,500,000
------------------------------------------------------------
5,044,000 Virginia Peninsula Port Authority, IDRB (Series 1986) Weekly
VRDNs (Eeco Project)/(Nationsbank of Virginia, N.A. LOC) P-1 5,044,000
------------------------------------------------------------
</TABLE>
19
VIRGINIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ---------------------------------------------------------------------------
VIRGINIA--CONTINUED
------------------------------------------------------------
$ 1,500,000 Virginia State Housing Development Authority, (Series 1987A)
Weekly VRDNs (AHC Service Center)/ (Mitsubishi Bank Ltd.,
Tokyo LOC) P-1 $ 1,500,000
------------------------------------------------------------
1,000,000 Virginia State Transportation Board, 6.70% Bonds (United
States Treasury COL), 3/1/1996 Aaa 1,009,747
------------------------------------------------------------
1,507,000 Williamsburg, VA IDA, (Series 1988) Weekly VRDNs (Colonial
Williamsburg Foundation Museum)/(Sanwa Bank Ltd., Osaka LOC) P-1 1,507,000
------------------------------------------------------------
1,575,000 Winchester, VA IDA, (Series 1995) Weekly VRDNs (Midwesco
Filter Resources, Inc. Project)/(Harris Trust & Savings
Bank, Chicago LOC) AA- 1,575,000
------------------------------------------------------------ ------------
Total 143,709,059
------------------------------------------------------------ ------------
PUERTO RICO--1.7%
------------------------------------------------------------
500,000 Puerto Rico Government Development Bank Weekly VRDNs (Credit
Suisse, Zurich LOC) A-1+ 500,000
------------------------------------------------------------
2,000,000 Puerto Rico Government Development Bank, 3.80% CP, Mandatory
Tender 12/8/1995 A-1+ 2,000,000
------------------------------------------------------------ ------------
Total 2,500,000
------------------------------------------------------------ ------------
VIRGIN ISLANDS--1.7%
------------------------------------------------------------
2,500,000 Virgin Islands HFA, Single Family Mortgage Revenue Refunding
Bonds (1995 Series B), 4.375% TOBs (FGIC INS), Optional
Tender 2/1/1996 A-1+ 2,500,000
------------------------------------------------------------ ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(a) $148,709,059
------------------------------------------------------------ ------------
------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 52.2% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($149,724,411) at October 31, 1995.
20
VIRGINIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
ACES --Adjustable Convertible Extendable Securities
COL --Collateralized
CP --Commercial Paper
EDA --Economic Development Authority
FGIC --Financial Guaranty Insurance Company
GO --General Obligation
HFA --Housing Finance Authority
IDA --Industrial Development Authority
IDRB --Industrial Development Revenue Bond
INS --Insured
LIQ --Liquidity Agreement
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance
MMMs --Money Market Municipals
PCR --Pollution Control Revenue
PLC --Public Limited Company
PRF --Prerefunded
TOBs --Tender Option Bonds
UT --Unlimited Tax
VRDNs --Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
21
VIRGINIA MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------
Total investments in securities, at amortized cost and value $148,709,059
- ------------------------------------------------------------------
Cash 246,460
- ------------------------------------------------------------------
Income receivable 899,894
- ------------------------------------------------------------------
Receivable for shares sold 2,000
- ------------------------------------------------------------------
Deferred expenses 26,331
- ------------------------------------------------------------------ ------------
Total assets 149,883,744
- ------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------
Income distribution payable $133,993
- --------------------------------------------------------
Accrued expenses 25,340
- -------------------------------------------------------- --------
Total liabilities 159,333
- ------------------------------------------------------------------ ------------
NET ASSETS for 149,724,411 shares outstanding $149,724,411
- ------------------------------------------------------------------ ------------
------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------
INSTITUTIONAL SHARES:
- ------------------------------------------------------------------
$22,641,829 DIVIDED BY 22,641,829 shares outstanding $ 1.00
- ------------------------------------------------------------------ ------------
------------
INSTITUTIONAL SERVICE SHARES:
- ------------------------------------------------------------------
$127,082,582 DIVIDED BY 127,082,582 shares outstanding $ 1.00
- ------------------------------------------------------------------ ------------
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
22
VIRGINIA MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------
Interest $5,122,922
- --------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------
Investment advisory fee $ 514,947
- --------------------------------------------------------
Administrative personnel and services fee 155,000
- --------------------------------------------------------
Custodian fees 42,137
- --------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 32,992
- --------------------------------------------------------
Directors'/Trustees' fees 1,476
- --------------------------------------------------------
Auditing fees 14,657
- --------------------------------------------------------
Legal fees 1,787
- --------------------------------------------------------
Portfolio accounting fees 28,545
- --------------------------------------------------------
Shareholder services fee--Institutional Shares 59,585
- --------------------------------------------------------
Shareholder services fee--Institutional Service Shares 262,256
- --------------------------------------------------------
Share registration costs 44,278
- --------------------------------------------------------
Printing and postage 10,499
- --------------------------------------------------------
Insurance premiums 5,455
- --------------------------------------------------------
Miscellaneous 5,757
- -------------------------------------------------------- ----------
Total expenses 1,179,371
- --------------------------------------------------------
Waivers--
- ---------------------------------------------
Waiver of investment advisory fee $(224,073)
- ---------------------------------------------
Waiver of shareholder services
fee--Institutional Shares (59,585)
- ---------------------------------------------
Waiver of shareholder services
fee--Institutional Service Shares (157,354)
- --------------------------------------------- ---------
Total waivers (441,012)
- -------------------------------------------------------- ----------
Net expenses 738,359
- -------------------------------------------------------------------- ----------
Net investment income $4,384,563
- -------------------------------------------------------------------- ----------
----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
23
VIRGINIA MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------
1995 1994
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------
OPERATIONS--
- --------------------------------------------
Net investment income $ 4,384,563 $ 2,874,102
- -------------------------------------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------
Distributions from net investment income
- --------------------------------------------
Institutional Shares (834,541) (394,677)
- --------------------------------------------
Institutional Service Shares (3,550,022) (2,479,425)
- -------------------------------------------- ---------------- ----------------
Change in net assets resulting from
distributions to shareholders (4,384,563) (2,874,102)
- -------------------------------------------- ---------------- ----------------
SHARE TRANSACTIONS--
- --------------------------------------------
Proceeds from sale of shares 1,020,240,888 1,227,739,774
- --------------------------------------------
Net asset value of shares issued to
shareholders in payment of distributions
declared 2,822,568 2,081,737
- --------------------------------------------
Cost of shares redeemed (993,783,278) (1,162,235,549)
- -------------------------------------------- ---------------- ----------------
Change in net assets resulting from
share transactions 29,280,178 67,585,962
- -------------------------------------------- ---------------- ----------------
Change in net assets 29,280,178 67,585,962
- --------------------------------------------
NET ASSETS:
- --------------------------------------------
Beginning of period 120,444,233 52,858,271
- -------------------------------------------- ---------------- ----------------
End of period $ 149,724,411 $ 120,444,233
- -------------------------------------------- ---------------- ----------------
---------------- ----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
24
VIRGINIA MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Virginia Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund offers two classes of shares: Institutional Shares and Institutional
Service Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
75.2% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured
25
VIRGINIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
by or supported (backed) by a letter of credit for any one institution or
agency does not exceed 9.2% of total investments.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $149,724,411.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
INSTITUTIONAL SHARES 1995 1994
- ---------------------------------------- ------------ --------------
<S> <C> <C>
Shares sold 87,290,291 66,227,881
- ----------------------------------------
Shares issued to shareholders in payment
of distributions declared 15,666 28,365
- ----------------------------------------
Shares redeemed (85,024,334) (53,106,542)
- ---------------------------------------- ------------ --------------
Net change resulting from
Institutional Share transactions 2,281,623 13,149,704
- ---------------------------------------- ------------ --------------
------------ --------------
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
INSTITUTIONAL SERVICE SHARES 1995 1994
- ---------------------------------------- ------------ --------------
<S> <C> <C>
Shares sold 932,950,597 1,161,511,893
- ----------------------------------------
Shares issued to shareholders in payment
of distributions declared 2,806,902 2,053,372
- ----------------------------------------
Shares redeemed (908,758,944) (1,109,129,007)
- ---------------------------------------- ------------ --------------
Net change resulting from
Institutional Service Share
transactions 26,998,555 54,436,258
- ---------------------------------------- ------------ --------------
------------ --------------
Net change resulting from Fund share
transactions 29,280,178 67,585,962
- ---------------------------------------- ------------ --------------
------------ --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment
adviser, (the "Adviser"), receives for its services an annual investment
advisory fee equal to .40 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive a portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
26
VIRGINIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
ADMINISTRATIVE FEE--Federated Administrative Services, under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. This fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors
for the period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay FSS
up to .25 of 1% of average daily net assets of each class of shares for the
period. This fee is to obtain certain services for shareholders and to
maintain shareholder accounts. FSS may voluntarily choose to waive a portion
of its fee. FSS can modify or terminate this voluntary waiver at any time at
its sole discretion. For the fiscal year ended October 31, 1995,
Institutional Shares fully waived its shareholder services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the
Fund. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of the
Fund's average daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $33,493 were borne
initially by the Adviser. The Fund has agreed to reimburse the Adviser for
the organizational expenses during the five year period following effective
date. For the period ended October 31, 1995, the Fund paid $6,699 pursuant
to this agreement.
INTERFUND TRANSACTIONS--During the year ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common officers. These
transactions were made at current market value pursuant to Rule 17a-7 under
the Act amounting to $133,100,000 and $139,755,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
27
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Virginia Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of Virginia
Municipal Cash Trust (an investment portfolio of Federated Municipal Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of October 31, 1995, the related statement of operations for the year then
ended, and the statement of changes in net assets for each of the two years in
the period then ended and the financial highlights (see pages 2 and 15 of the
prospectus) for the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Virginia Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations for the year then
ended, and the changes in its net assets for each of the two years in the period
then ended and the financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
December 15, 1995
28
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Virginia Municipal Cash Trust
Institutional Service Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
- --------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- --------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
</TABLE>
29
- --------------------------------------------------------------------------------
VIRGINIA MUNICIPAL
CASH TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated December 31, 1995
[FEDERATED SECURITIES CORP. LOGO]
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229824
3080501A-SS (12/95) [RECYCLED PAPER LOGO]
RECYCLED
PAPER
- --------------------------------------------------------------------------------
VIRGINIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares of Virginia Municipal Cash Trust (the "Fund") offered
by this prospectus represent interests in a non-diversified portfolio of
Federated Municipal Trust (the "Trust"), an open-end management investment
company (a mutual fund). The Fund invests primarily in short-term Virginia
municipal securities, including securities of states, territories, and
possessions of the United States which are not issued by or on behalf of
Virginia, or its political subdivisions and financing authorities, but which
provide income exempt from federal regular income and the income tax imposed by
the Commonwealth of Virginia consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SUMMARY OF FUND EXPENSES 1
- --------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SHARES 2
- --------------------------------------------------
GENERAL INFORMATION 3
- --------------------------------------------------
INVESTMENT INFORMATION 3
- --------------------------------------------------
Investment Objective 3
Investment Policies 3
Virginia Municipal Securities 6
Investment Risks 6
Non-Diversification 7
Investment Limitations 7
FUND INFORMATION 7
- --------------------------------------------------
Management of the Fund 7
Distribution of Institutional Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- --------------------------------------------------
HOW TO PURCHASE SHARES 9
- --------------------------------------------------
HOW TO REDEEM SHARES 10
- --------------------------------------------------
ACCOUNT AND SHARE INFORMATION 11
- --------------------------------------------------
TAX INFORMATION 12
- --------------------------------------------------
Federal Income Tax 12
State and Local Taxes 13
OTHER CLASSES OF SHARES 13
- --------------------------------------------------
PERFORMANCE INFORMATION 13
- --------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SERVICE SHARES 15
- --------------------------------------------------
FINANCIAL STATEMENTS 16
- --------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 28
- --------------------------------------------------
ADDRESSES 29
- --------------------------------------------------
</TABLE>
I
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Charge 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
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver) (1)................................................................ 0.23%
12b-1 Fee........................................................................................ None
Total Other Expenses............................................................................. 0.26%
Shareholder Services Fee (after waiver) (2)......................................... 0.00%
Total Operating Expenses (3)............................................................. 0.49%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.40%.
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 0.91% absent the voluntary
waivers of a portion of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Institutional Shares of the
Fund will bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Fund Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period................................................. $5 $16 $27 $62
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1
<PAGE>
VIRGINIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 28.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------
1995 1994 1993(a)
- ----------------------------------------------------------- ------------ ------------ -----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------
Net investment income 0.04 0.03 0.003
- -----------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------
Distributions from net investment income (0.04) (0.03) (0.003)
- ----------------------------------------------------------- ------ ------ -----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------- ------ ------ -----------
------ ------ -----------
TOTAL RETURN (b) 3.56% 2.57% 0.35%
- -----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------
Expenses 0.49% 0.33% 0.09%*
- -----------------------------------------------------------
Net investment income 3.50% 2.56% 2.68%*
- -----------------------------------------------------------
Expense waiver/reimbursement (c) 0.42% 0.37% 1.04%*
- -----------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------
Net assets, end of period (000 omitted) $22,642 $20,360 $ 7,210
- -----------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 16, 1993 (date of initial
public investment) to October 31, 1993.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
2
<PAGE>
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established two classes of shares known as Institutional Shares and
Institutional Service Shares. This prospectus relates only to Institutional
Shares of the Fund, which are designed primarily for financial institutions
acting in a fiduciary capacity as a convenient means of accumulating an interest
in a professionally managed, non-diversified portfolio investing primarily in
short-term Virginia municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Virginia taxpayers because it invests
in municipal securities of that state. A minimum initial investment of $25,000
within a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the income tax imposed by the Commonwealth of Virginia
consistent with stability of principal. This investment objective cannot be
changed without shareholder approval. While there is no assurance that the Fund
will achieve its investment objective, it endeavors to do so by complying with
the various requirements of Rule 2a-7 under the Investment Company Act of 1940
which regulates money market mutual funds and by following the investment
policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Virginia municipal securities (as defined below) maturing in 13 months or less.
As a matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be exempt from
federal regular income tax and Virginia state income tax or at least 80% of its
net assets will be invested in obligations, the interest income from which is
exempt from federal regular and Virginia state income tax. (Federal regular
income tax does not include the federal individual alternative minimum tax or
the federal alternative minimum tax for corporations.) The average maturity of
the securities in the Fund's portfolio, computed on a dollar-weighted basis,
will be 90 days or less. Unless indicated otherwise, the investment policies may
be changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of Virginia and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
3
<PAGE>
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and the income tax imposed by the Commonwealth of Virginia ("Virginia Municipal
Securities"). Examples of Virginia Municipal Securities include, but are not
limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and pre-refunded
bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par.
The interest rate may float or be adjusted at regular intervals (ranging
from daily to annually), and is normally based on a published interest rate
or interest rate index. Most variable rate demand notes allow the Fund to
demand the repurchase of the security on not more than seven days prior
notice. Other notes only permit the Fund to tender the security at the time
of each interest rate adjustment or at other fixed intervals. See "Demand
Features." The Fund treats variable rate demand notes as maturing on the
later of the date of the next interest rate adjustment or the date on which
the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Virginia
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Virginia Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment and
facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
4
<PAGE>
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; 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
5
<PAGE>
$100,000,000 at the time of investment; and repurchase agreements (arrangements
in which the organization selling the Fund a temporary investment agrees at the
time of sale to repurchase it at a mutually agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain Virginia
Municipal Securities is subject to the federal alternative minimum tax.
VIRGINIA MUNICIPAL SECURITIES
Virginia Municipal Securities are generally issued to finance public works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
Virginia Municipal Securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Virginia Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Virginia Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of Virginia Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of Virginia
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Virginia Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Virginia Municipal Securities could involve an increased risk to the Fund should
any of these related projects or facilities experience financial difficulties.
Obligations of issuers of Virginia Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes.
6
<PAGE>
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
its total assets to secure such borrowings. These investment limitations cannot
be changed without shareholder approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .40 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other
7
<PAGE>
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. With over $72 billion invested across more
than 260 funds under management and/or administration by its subsidiaries,
as of December 31, 1994, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 1,750
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,000
financial institutions nationwide. More than 100,000 investment
professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for Institutional Shares
of the Fund. It is a Pennsylvania corporation organized on November 14, 1969,
and is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to .25 of 1% of the average
daily net asset value of Institutional Shares, computed at an annual rate, to
obtain certain personal services for shareholders and provide maintenance of
shareholder accounts ("shareholder services"). From time to time and for such
periods as deemed appropriate, the amount stated above may be reduced
voluntarily.
Under the Shareholder Services Agreement, Federated Shareholder Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon shares owned by their clients or customers. The
8
<PAGE>
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
-------------------- ------------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Institutional Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
net asset value per share is determined by subtracting liabilities attributable
to shares from the value of Fund assets attributable to shares, 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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is open for business. Shares may be purchased either by wire or by
check. The Fund reserves the right to reject any purchase request.
9
<PAGE>
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone. The
minimum initial investment is $25,000. However, an account may be opened with a
smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
PURCHASING SHARES BY WIRE. Shares may be purchased by Federal Reserve wire by
calling the Fund before 1:00 p.m. (Eastern time) to place an order. The order is
considered received immediately. Payment by federal funds must be received
before 3:00 p.m. (Eastern time) that day. Federal funds should be wired as
follows: Federated Services Company, c/o State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: Virginia Municipal Cash
Trust-Institutional Shares; Fund Number (this number can be found on the account
statement or by contacting the Fund); Group Number or Order Number; Nominee or
Institution Name; and ABA Number 011000028. Shares cannot be purchased by wire
on holidays when wire transfers are restricted. Questions on wire purchases
should be directed to your shareholder services representative at the telephone
number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by mailing a check made
payable to Virginia Municipal Cash Trust-Institutional Shares to: Federated
Services Company, P.O. Box P.O. Box 8600, Boston, MA 02266-8600. Orders by mail
are considered received when payment by check is converted into federal funds.
This is normally the next business day after the check is received.
SUBACCOUNTING SERVICES. Financial institutions are encouraged to open single
master accounts. A subaccounting system is available through the transfer agent
to minimize internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Financial
institutions may charge or pass through subaccounting fees as part of or in
addition to normal trust or agency account fees. They may also charge fees for
other services provided which may be related to the ownership of Fund shares.
This prospectus should, therefore, be read together with any agreement between
the customer and the financial institution with regard to the services provided,
the fees charged for those services, and any restrictions and limitations
imposed. State securities laws may require certain financial institutions such
as depository institutions to register as dealers.
HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Federated
Services Company receives the redemption request. Redemptions will be made on
days on which the Fund computes its net asset value. Redemption requests must be
received in proper form and can be made as described below.
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 p.m. (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
10
<PAGE>
redemption requests received after that time include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement.
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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered mail or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
ACCOUNT AND SHARE 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. Shares purchased by
wire before 1:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by check begin earning dividends the day after the check is converted
into federal funds.
CAPITAL GAINS. The Fund does not expect to realize any capital gains or losses.
If capital gains or losses were to occur, they could result in an increase or
decrease in dividends. The Fund will distribute in cash or additional shares any
realized net long-term capital gains at least once every 12 months.
11
<PAGE>
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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$25,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has one vote in Trustee elections and other
matters submitted to shareholders for vote. All shares of all classes of each
portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting 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 December 4, 1995, HAMAC & Co., Richmond, VA, owned 7,973,156 shares 31.48%
of the voting securities of the Fund's Institutional Shares, 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.
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.
12
<PAGE>
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than
Virginia. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
VIRGINIA TAXES. Under existing Virginia laws, distributions made by the Fund
will not be subject to Virginia income taxes to the extent that such
distributions qualify as exempt-interest dividends under the Internal Revenue
Code, and represent (i) interest from obligations issued by or on behalf of the
Commonwealth of Virginia or any political subdivision thereof; or (ii) interest
from obligations issued by a territory or possession of the United States or any
political subdivision thereof which federal law exempts from state income taxes.
Conversely, to the extent that distributions made by the Fund are attributable
to other types of obligations, such distributions will be subject to Virginia
income taxes.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called Institutional Service
Shares. Institutional Service Shares are sold at net asset value primarily to
financial institutions acting in an agency capacity and are subject to a minimum
initial investment of $25,000 over a 90-day period.
All classes are subject to certain of the same expenses.
Institutional Service Shares are distributed with no 12b-1 Plan but are subject
to shareholder services fees.
Expense differences between classes may affect the performance of each class.
To obtain more information and a prospectus for any other class, investors may
call 1-800-235-4669.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher
13
<PAGE>
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 shares'
tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
14
<PAGE>
VIRGINIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 28.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------
1995 1994 1993(a)
- ------------------------------------------------ --------- --------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------
Net investment income 0.03 0.02 0.003
- ------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.003)
- ------------------------------------------------ --------- --------- --------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------ --------- --------- --------
--------- --------- --------
TOTAL RETURN (b) 3.46% 2.44% 0.34%
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------
Expenses 0.59% 0.40% 0.19%*
- ------------------------------------------------
Net investment income 3.38% 2.42% 2.67%*
- ------------------------------------------------
Expense waiver/reimbursement (c) 0.32% 0.37% 1.04%*
- ------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------
Net assets, end of period (000 omitted) $127,083 $100,084 $45,648
- ------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 16, 1993 (date of initial
public investment) to October 31, 1993.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
15
<PAGE>
VIRGINIA MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS--99.3%
- ---------------------------------------------------------------------------
VIRGINIA--95.9%
------------------------------------------------------------
$ 1,000,000 Alexandria, VA IDA Weekly VRDNs (American Red Cross)/ (Sanwa
Bank Ltd., Osaka LOC) A-1+ $ 1,000,000
------------------------------------------------------------
6,500,000 Alexandria, VA Redevelopment and Housing Authority Weekly
VRDNs (Crystal City Apartments)/(Safeco Insurance Co. of
America INS)/(Sumitomo Bank Ltd., Osaka LIQ) A-1 6,500,000
------------------------------------------------------------
2,200,000 Amelia County, VA IDA, (Series 1991) Weekly VRDNs (Chambers
Waste System)/(Nationsbank, N.A. (Carolinas) LOC) VMIG1 2,200,000
------------------------------------------------------------
2,600,000 Arlington County, VA Weekly VRDNs (Ballston Public
Parking)/(Citibank NA, New York LOC) A-1 2,600,000
------------------------------------------------------------
3,200,000 Botetourt County, VA IDA, IDRB (Series 1995) Weekly VRDNs
(Emkay Holdings, L.L.C. Project)/(State Street Bank and
Trust Co. LOC) VMIG1 3,200,000
------------------------------------------------------------
500,000 Campbell County, VA IDA, Solid Waste Disposal Facilities
Revenue ACES Weekly VRDNs (Georgia-Pacific Corp.)/
(Industrial Bank of Japan Ltd., Tokyo LOC) A-1 500,000
------------------------------------------------------------
4,625,000 Carroll County, VA IDA, Adjustable Rate IDRB (Series 1995)
Weekly VRDNs (Kentucky Derby Hosiery Co., Inc. Project)/
(Liberty National Bank & Trust Co. LOC) A-1+ 4,625,000
------------------------------------------------------------
1,900,000 Chesapeake, VA IDA, (Series 1986) Weekly VRDNs (Volvo Auto
Receivables 1992-B)/(Union Bank of Switzerland, Zurich LOC) P-1 1,900,000
------------------------------------------------------------
6,000,000 Chesapeake, VA IDA, IDRB (Series 1988) Weekly VRDNs
(Sumitomo Machinery Corp. of America Corp.)/(Sumitomo Bank
Ltd., Osaka LOC) VMIG1 6,000,000
------------------------------------------------------------
3,000,000 Commonwealth of Virginia, (Series 1995), 3.85% CP, Mandatory
Tender 1/16/1996 A-1+ 3,000,000
------------------------------------------------------------
</TABLE>
16
<PAGE>
VIRGINIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ---------------------------------------------------------------------------
VIRGINIA--CONTINUED
------------------------------------------------------------
$ 1,886,500 Dinwiddie County, VA IDA, IDRB (Series 1989) Weekly VRDNs
(Tindall Concrete VA, Inc.)/(First Union National Bank,
Charlotte, NC LOC) P-1 $ 1,886,500
------------------------------------------------------------
3,515,000 Dinwiddie County, VA IDA, IDRB (Series 1991) Weekly VRDNs
(Maclin-Zimmer-Mcgill Tobacco Co., Inc.)/(Wachovia Bank of
NC, NA, Winston-Salem LOC) P-1 3,515,000
------------------------------------------------------------
1,050,000 Fairfax County, VA EDA Weekly VRDNs (William Byrd
Press)/(Nationsbank of Virginia, N.A. LOC) VMIG1 1,050,000
------------------------------------------------------------
1,000,000 Fairfax County, VA Housing Authority Weekly VRDNs (Chase
Commons Associates)/(Bankers Trust Co., New York LOC) P-1 1,000,000
------------------------------------------------------------
1,900,000 Fairfax County, VA IDA Weekly VRDNs (Fairfax Hospital
System)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LOC) A-1 1,900,000
------------------------------------------------------------
3,000,000 Fairfax County, VA IDA, (Series 1993B), 3.80% CP (Inova
Health System), Mandatory Tender 1/23/1996 A-1 3,000,000
------------------------------------------------------------
4,000,000 Fairfax County, VA IDA, (Series 1993B), 3.80% CP (Inova
Health System), Mandatory Tender 11/21/1995 A-1 4,000,000
------------------------------------------------------------
1,250,000 Fairfax County, VA, UT GO Refunding Bonds (Series B), 6.60%
Bonds, 11/1/1996 (@101) Aaa 1,296,216
------------------------------------------------------------
6,100,000 Falls Church, VA IDA, (Series 1985), 4.10% TOBs (Kaiser
Permanente Medical Care Program), Optional Tender 11/1/1995 A-1+ 6,100,000
------------------------------------------------------------
600,000 Fauquier County, VA IDA, Various Rate Demand Refunding
Revenue Bonds Weekly VRDNs (Warrenton Development Co.)/
(Nationsbank of Maryland, N.A. LOC) P-1 600,000
------------------------------------------------------------
7,113,000 Fluvanna County, VA IDA, (Series 1986) Weekly VRDNs
(Thomasville Furniture Industries)/(Union Bank of
Switzerland, Zurich LOC) P-1 7,113,000
------------------------------------------------------------
4,500,000 Front Royal & Warren County, VA IDA, IDRB (Series 1995)
Weekly VRDNs (Pen-Tab Industries, Inc. Project)/(Bank of
America Illinois LOC) P-1 4,500,000
------------------------------------------------------------
</TABLE>
17
<PAGE>
VIRGINIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ---------------------------------------------------------------------------
VIRGINIA--CONTINUED
------------------------------------------------------------
$ 1,070,000 Grayson County, VA IDA, (Series 1987) Weekly VRDNs
(Robertshaw Controls Company Project)/(Nationsbank of
Virginia, N.A. LOC) P-1 $ 1,070,000
------------------------------------------------------------
4,000,000 Halifax, VA IDA, MMMs, PCR, 3.90% CP (Virginia Electric
Power Co.), Mandatory Tender 12/8/1995 A-1 4,000,000
------------------------------------------------------------
7,500,000 Halifax, VA IDA, MMMs, PCR, 4.00% CP (Virginia Electric
Power Co.), Mandatory Tender 1/12/1996 A-1 7,500,000
------------------------------------------------------------
2,582,000 Harrisonburg, VA Redevelopment & Housing Authority, (1989
Series) Weekly VRDNs (Potomac Hills Apartments
Project)/(Nationsbank of Virginia, N.A. LOC) P-1 2,582,000
------------------------------------------------------------
3,745,000 Henrico County, VA IDA, IDRB (Series 1994) Weekly VRDNs
(Gravure Packaging Project)/(First Union National Bank,
Charlotte, NC LOC) P-1 3,745,000
------------------------------------------------------------
2,495,000 Norfolk, VA, 7.10% Bonds (United States Treasury PRF),
6/1/1996 (@102) Aaa 2,591,131
------------------------------------------------------------
4,015,000 Prince William County, VA, (Series C), 3.60% BONDs, 8/1/1996 AA 4,015,513
------------------------------------------------------------
400,000 Prince William County, VA, Lease Participation Certificates
(Series 1995), 4.00% Bonds (MBIA Insurance Corporation INS),
12/1/1995 Aaa 400,089
------------------------------------------------------------
1,500,000 Pulaski County, VA IDA, (Series 1995) Weekly VRDNs (Balogh
Real Estate Ltd. Partnership Mar-Bal, Inc. Project)/ (Bank
One, Cleveland, N.A. LOC) P-1 1,500,000
------------------------------------------------------------
1,010,000 Richmond, VA IDA, Industrial Development Revenue Refunding
Bonds (Series 1987-B), 4.10% TOBs (Crow-Klein-Macfarlane
Project)/(First Union National Bank of Virginia LOC),
Optional Tender 11/15/1995 P-1 1,010,000
------------------------------------------------------------
6,000,000 Richmond, VA Redevelopment & Housing Authority, (Series
1989) Weekly VRDNs (Belmont Apartment)/ (Nationsbank, N.A.
(Carolinas) LOC) P-1 6,000,000
------------------------------------------------------------
</TABLE>
18
<PAGE>
VIRGINIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ---------------------------------------------------------------------------
VIRGINIA--CONTINUED
------------------------------------------------------------
$ 1,500,000 Richmond, VA Redevelopment & Housing Authority, (Series B-3)
Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Westdeutsche
Landesbank Girozentrale LOC) VMIG1 $ 1,500,000
------------------------------------------------------------
3,160,000 Richmond, VA Redevelopment & Housing Authority, (Series B-5)
Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Westdeutsche
Landesbank Girozentrale LOC) VMIG1 3,160,000
------------------------------------------------------------
2,900,000 South Hill, VA IDA, IDRB (Series 1987) Weekly VRDNs (South
Hill Veneers, Inc. Project)/(Bank One, Columbus, N.A. LOC) P-1 2,900,000
------------------------------------------------------------
2,495,000 Tazewell County, VA IDA, (Series 1993) Weekly VRDNs (Seville
Properties Bluefield)/(Huntington National Bank, Columbus,
OH LOC) P-1 2,495,000
------------------------------------------------------------
9,000,000 Virginia Education Loan Authority, (Series 1995-A), 4.00%
TOBs (Westdeutsche Landesbank Girozentrale LOC), Mandatory
Tender 5/1/1996 VMIG1 9,000,000
------------------------------------------------------------
2,000,000 Virginia Education Loan Authority, (Series E), 5.00% Bonds,
9/1/1996 Aaa 2,018,863
------------------------------------------------------------
2,400,000 Virginia Peninsula Port Authority Daily VRDNs (Kinyo
Virginia, Inc.)/(Industrial Bank of Japan Ltd., Tokyo LOC) A-1 2,400,000
------------------------------------------------------------
2,200,000 Virginia Peninsula Port Authority, Coal Terminal Revenue
Refunding Bonds (Series 1987A), 3.75% CP (Dominion Terminal
Associates)/(National Westminster Bank, PLC, London LOC),
Mandatory Tender 1/10/1996 P-1 2,200,000
------------------------------------------------------------
4,000,000 Virginia Peninsula Port Authority, Facility Revenue
Refunding Bonds (Series 1992), 3.75% CP (CSX Corp.)/(Bank of
Nova Scotia, Toronto LOC), Mandatory Tender 12/15/1995 AA- 4,000,000
------------------------------------------------------------
1,500,000 Virginia Peninsula Port Authority, Facility Revenue
Refunding Bonds (Series 1992), 3.80% CP (CSX Corp.)/(Bank of
Nova Scotia, Toronto LOC), Mandatory Tender 1/12/1996 AA- 1,500,000
------------------------------------------------------------
5,044,000 Virginia Peninsula Port Authority, IDRB (Series 1986) Weekly
VRDNs (Eeco Project)/(Nationsbank of Virginia, N.A. LOC) P-1 5,044,000
------------------------------------------------------------
</TABLE>
19
<PAGE>
VIRGINIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ---------------------------------------------------------------------------
VIRGINIA--CONTINUED
------------------------------------------------------------
$ 1,500,000 Virginia State Housing Development Authority, (Series 1987A)
Weekly VRDNs (AHC Service Center)/ (Mitsubishi Bank Ltd.,
Tokyo LOC) P-1 $ 1,500,000
------------------------------------------------------------
1,000,000 Virginia State Transportation Board, 6.70% Bonds (United
States Treasury COL), 3/1/1996 Aaa 1,009,747
------------------------------------------------------------
1,507,000 Williamsburg, VA IDA, (Series 1988) Weekly VRDNs (Colonial
Williamsburg Foundation Museum)/(Sanwa Bank Ltd., Osaka LOC) P-1 1,507,000
------------------------------------------------------------
1,575,000 Winchester, VA IDA, (Series 1995) Weekly VRDNs (Midwesco
Filter Resources, Inc. Project)/(Harris Trust & Savings
Bank, Chicago LOC) AA- 1,575,000
------------------------------------------------------------ ------------
Total 143,709,059
------------------------------------------------------------ ------------
PUERTO RICO--1.7%
------------------------------------------------------------
500,000 Puerto Rico Government Development Bank Weekly VRDNs (Credit
Suisse, Zurich LOC) A-1+ 500,000
------------------------------------------------------------
2,000,000 Puerto Rico Government Development Bank, 3.80% CP, Mandatory
Tender 12/8/1995 A-1+ 2,000,000
------------------------------------------------------------ ------------
Total 2,500,000
------------------------------------------------------------ ------------
VIRGIN ISLANDS--1.7%
------------------------------------------------------------
2,500,000 Virgin Islands HFA, Single Family Mortgage Revenue Refunding
Bonds (1995 Series B), 4.375% TOBs (FGIC INS), Optional
Tender 2/1/1996 A-1+ 2,500,000
------------------------------------------------------------ ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(a) $148,709,059
------------------------------------------------------------ ------------
------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 52.2% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($149,724,411) at October 31, 1995.
20
<PAGE>
VIRGINIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
ACES --Adjustable Convertible Extendable Securities
COL --Collateralized
CP --Commercial Paper
EDA --Economic Development Authority
FGIC --Financial Guaranty Insurance Company
GO --General Obligation
HFA --Housing Finance Authority
IDA --Industrial Development Authority
IDRB --Industrial Development Revenue Bond
INS --Insured
LIQ --Liquidity Agreement
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance
MMMs --Money Market Municipals
PCR --Pollution Control Revenue
PLC --Public Limited Company
PRF --Prerefunded
TOBs --Tender Option Bonds
UT --Unlimited Tax
VRDNs --Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
21
<PAGE>
VIRGINIA MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------
Total investments in securities, at amortized cost and value $148,709,059
- ------------------------------------------------------------------
Cash 246,460
- ------------------------------------------------------------------
Income receivable 899,894
- ------------------------------------------------------------------
Receivable for shares sold 2,000
- ------------------------------------------------------------------
Deferred expenses 26,331
- ------------------------------------------------------------------ ------------
Total assets 149,883,744
- ------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------
Income distribution payable $133,993
- --------------------------------------------------------
Accrued expenses 25,340
- -------------------------------------------------------- --------
Total liabilities 159,333
- ------------------------------------------------------------------ ------------
NET ASSETS for 149,724,411 shares outstanding $149,724,411
- ------------------------------------------------------------------ ------------
------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------
INSTITUTIONAL SHARES:
- ------------------------------------------------------------------
$22,641,829 DIVIDED BY 22,641,829 shares outstanding $ 1.00
- ------------------------------------------------------------------ ------------
------------
INSTITUTIONAL SERVICE SHARES:
- ------------------------------------------------------------------
$127,082,582 DIVIDED BY 127,082,582 shares outstanding $ 1.00
- ------------------------------------------------------------------ ------------
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
22
<PAGE>
VIRGINIA MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------
Interest $5,122,922
- --------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------
Investment advisory fee $ 514,947
- --------------------------------------------------------
Administrative personnel and services fee 155,000
- --------------------------------------------------------
Custodian fees 42,137
- --------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 32,992
- --------------------------------------------------------
Directors'/Trustees' fees 1,476
- --------------------------------------------------------
Auditing fees 14,657
- --------------------------------------------------------
Legal fees 1,787
- --------------------------------------------------------
Portfolio accounting fees 28,545
- --------------------------------------------------------
Shareholder services fee--Institutional Shares 59,585
- --------------------------------------------------------
Shareholder services fee--Institutional Service Shares 262,256
- --------------------------------------------------------
Share registration costs 44,278
- --------------------------------------------------------
Printing and postage 10,499
- --------------------------------------------------------
Insurance premiums 5,455
- --------------------------------------------------------
Miscellaneous 5,757
- -------------------------------------------------------- ----------
Total expenses 1,179,371
- --------------------------------------------------------
Waivers--
- ---------------------------------------------
Waiver of investment advisory fee $(224,073)
- ---------------------------------------------
Waiver of shareholder services
fee--Institutional Shares (59,585)
- ---------------------------------------------
Waiver of shareholder services
fee--Institutional Service Shares (157,354)
- --------------------------------------------- ---------
Total waivers (441,012)
- -------------------------------------------------------- ----------
Net expenses 738,359
- -------------------------------------------------------------------- ----------
Net investment income $4,384,563
- -------------------------------------------------------------------- ----------
----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
23
<PAGE>
VIRGINIA MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------
1995 1994
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------
OPERATIONS--
- --------------------------------------------
Net investment income $ 4,384,563 $ 2,874,102
- -------------------------------------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------
Distributions from net investment income
- --------------------------------------------
Institutional Shares (834,541) (394,677)
- --------------------------------------------
Institutional Service Shares (3,550,022) (2,479,425)
- -------------------------------------------- ---------------- ----------------
Change in net assets resulting from
distributions to shareholders (4,384,563) (2,874,102)
- -------------------------------------------- ---------------- ----------------
SHARE TRANSACTIONS--
- --------------------------------------------
Proceeds from sale of shares 1,020,240,888 1,227,739,774
- --------------------------------------------
Net asset value of shares issued to
shareholders in payment of distributions
declared 2,822,568 2,081,737
- --------------------------------------------
Cost of shares redeemed (993,783,278) (1,162,235,549)
- -------------------------------------------- ---------------- ----------------
Change in net assets resulting from
share transactions 29,280,178 67,585,962
- -------------------------------------------- ---------------- ----------------
Change in net assets 29,280,178 67,585,962
- --------------------------------------------
NET ASSETS:
- --------------------------------------------
Beginning of period 120,444,233 52,858,271
- -------------------------------------------- ---------------- ----------------
End of period $ 149,724,411 $ 120,444,233
- -------------------------------------------- ---------------- ----------------
---------------- ----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
24
<PAGE>
VIRGINIA MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Virginia Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund offers two classes of shares: Institutional Shares and Institutional
Service Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
75.2% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured
25
<PAGE>
VIRGINIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
by or supported (backed) by a letter of credit for any one institution or
agency does not exceed 9.2% of total investments.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $149,724,411.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
INSTITUTIONAL SHARES 1995 1994
- ---------------------------------------- ------------ --------------
<S> <C> <C>
Shares sold 87,290,291 66,227,881
- ----------------------------------------
Shares issued to shareholders in payment
of distributions declared 15,666 28,365
- ----------------------------------------
Shares redeemed (85,024,334) (53,106,542)
- ---------------------------------------- ------------ --------------
Net change resulting from
Institutional Share transactions 2,281,623 13,149,704
- ---------------------------------------- ------------ --------------
------------ --------------
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------
INSTITUTIONAL SERVICE SHARES 1995 1994
- ---------------------------------------- ------------ --------------
<S> <C> <C>
Shares sold 932,950,597 1,161,511,893
- ----------------------------------------
Shares issued to shareholders in payment
of distributions declared 2,806,902 2,053,372
- ----------------------------------------
Shares redeemed (908,758,944) (1,109,129,007)
- ---------------------------------------- ------------ --------------
Net change resulting from
Institutional Service Share
transactions 26,998,555 54,436,258
- ---------------------------------------- ------------ --------------
------------ --------------
Net change resulting from Fund share
transactions 29,280,178 67,585,962
- ---------------------------------------- ------------ --------------
------------ --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment
adviser, (the "Adviser"), receives for its services an annual investment
advisory fee equal to .40 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive a portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
26
<PAGE>
VIRGINIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
ADMINISTRATIVE FEE--Federated Administrative Services, under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. This fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors
for the period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay FSS
up to .25 of 1% of average daily net assets of each class of shares for the
period. This fee is to obtain certain services for shareholders and to
maintain shareholder accounts. FSS may voluntarily choose to waive a portion
of its fee. FSS can modify or terminate this voluntary waiver at any time at
its sole discretion. For the fiscal year ended October 31, 1995,
Institutional Shares fully waived its shareholder services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the
Fund. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of the
Fund's average daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $33,493 were borne
initially by the Adviser. The Fund has agreed to reimburse the Adviser for
the organizational expenses during the five year period following effective
date. For the period ended October 31, 1995, the Fund paid $6,699 pursuant
to this agreement.
INTERFUND TRANSACTIONS--During the year ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common officers. These
transactions were made at current market value pursuant to Rule 17a-7 under
the Act amounting to $133,100,000 and $139,755,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
27
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Virginia Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of Virginia
Municipal Cash Trust (an investment portfolio of Federated Municipal Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of October 31, 1995, the related statement of operations for the year then
ended, and the statement of changes in net assets for each of the two years in
the period then ended and the financial highlights (see pages 2 and 15 of the
prospectus) for the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Virginia Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations for the year then
ended, and the changes in its net assets for each of the two years in the period
then ended and the financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
December 15, 1995
28
<PAGE>
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Virginia Municipal Cash Trust
Institutional Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
- --------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- --------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
VIRGINIA MUNICIPAL
CASH TRUST
INSTITUTIONAL SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated December 31, 1995
</TABLE>
[FEDERATED SECURITIES CORP. LOGO]
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 314229816
3080501A-IS (12/95) [RECYCLED PAPER LOGO]
RECYCLED
PAPER
VIRGINIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectuses of Virginia Municipal Cash Trust (the "Fund"), a portfolio of
Federated Municipal Trust ( the "Trust") dated December 31, 1995. This
Statement is not a prospectus. You may request a copy of a prospectus or
a paper copy of this Statement, if you have received it electronically,
free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated December 31, 1995.
INVESTMENT POLICIES 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
Ratings 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Credit Enhancement 2
VIRGINIA INVESTMENT RISKS 2
INVESTMENT LIMITATIONS 3
FEDERATED MUNICIPAL TRUST
MANAGEMENT 5
The Funds 9
Share Ownership 9
Trustees Compensation 10
Trustee Liability 10
INVESTMENT ADVISORY SERVICES 11
Investment Adviser 11
Advisory Fees 11
BROKERAGE TRANSACTIONS 11
OTHER SERVICES 12
Fund Administration 12
Custodian and
Portfolio Recordkeeper 12
Transfer Agent 12
Independent Public Accountants 12
SHAREHOLDER SERVICES AGREEMENT 12
DETERMINING NET ASSET VALUE 12
REDEMPTION IN KIND 13
MASSACHUSETTS PARTNERSHIP LAW 13
THE FUND'S TAX STATUS 13
PERFORMANCE INFORMATION 13
Yield 13
Effective Yield 13
Tax-Equivalent Yield 14
Tax-Equivalency Table 14
Total Return 14
Performance Comparisons 15
ABOUT FEDERATED INVESTORS 15
Mutual Fund Market 15
Institutional Clients 15
Trust Organizations 16
Broker/Dealers and Bank
Broker/Dealer Subsidiaries 16
APPENDIX 17
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by
the Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or any
guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation interests
include the right to demand payment from the issuers of those interests. By
purchasing participation interests having a seven day demand feature, the
Fund is buying a security meeting the maturity and quality requirements of
the Fund and also is receiving the tax-free benefits of the underlying
securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments
by a governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the
appropriation for the lease. Furthermore, a lease may provide that the
participants cannot accelerate lease obligations upon default. The
participants would only be able to enforce lease payments as they became due.
In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Board of Trustees, will base
its determination on the following factors: whether the lease can be
terminated by the lessee; the potential recovery, if any, from a sale of the
leased property upon termination of the lease; the lessee's general credit
strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the potential
for an "event of non-appropriation"); and any credit enhancement or legal
recourse provided upon an event of non-appropriation or other termination of
the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations ("NRSROs") or be of comparable quality to
securities having such ratings. An NRSRO's two highest rating categories are
determined without regard for sub-categories and gradations. For example,
securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Ratings Group
("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or
FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all
considered rated in one of the two highest short-term rating categories. The
Fund will follow applicable regulations in determining whether a security
rated by more than one NRSRO can be treated as being in one of the two
highest short-term rating categories; currently, such securities must be
rated by two NRSROs in one of their two highest rating categories. See
"Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund`s records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20%
of the total value of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
brokers/dealers, and other recognized financial institutions sell securities
to the Fund and agree at the time of sale to repurchase them at a mutually
agreed upon time and price. To the extent that the seller does not repurchase
the securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. The Fund or its custodian will take
possession of the securities subject to repurchase agreements, and these
securities will be marked to market daily. In the event that a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of
the Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument in return
for a percentage of the instrument's market value in cash and agrees that on
a stipulated date in the future the Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an agreed
upon rate. The use of reverse repurchase agreements may enable the Fund to
avoid selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but does not ensure this result. When effecting reverse
repurchase agreements, liquid assets of the Fund, in a dollar amount
sufficient to make payment for the obligations to be purchased, are:
segregated on the Fund's records at the trade date; marked to market daily;
and maintained until the transaction is settled.
CREDIT ENHANCEMENT
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.
VIRGINIA INVESTMENT RISKS
The Commonwealth of Virginia's credit strength is derived from a diversified
economy, above median wealth levels, relatively low unemployment rates,
conservative financial management, and a low debt burden. The Commonwealth
benefits from its proximity to the nations capital and its employment base
remains substantially tied to government and defense-related industries (25%
of the Commonwealth's earnings are derived from government vs. a 16% average
for the U.S.). Although defense cutbacks and base closings have left
Virginia relatively unscathed in recent years, the potential for future
closings and cutbacks remains alive; consequently, Virginia's legislators
have been budgeting conservative growth in the future and have implemented
spending restraints. Additionally, the Commonwealth has recently implemented
policies that substantially lengthen prison sentences, and these changes will
necessitate building a large number of correctional facilities in the next
few years. Consequently, the need for financial discipline remains. To
counter the contracting defense/government related declines, the Commonwealth
is actively seeking economic diversification, focusing particularly on high
technology, trade, and tourism. These efforts have met with recent success:
Motorola and an IBM/Toshiba joint venture have committed to build large
factories in Virginia which together are expected to create over 6,000 new
jobs.
Virginia remains a conservative debt issuer and maintains debt levels that
are low in relation to its substantial resources. The Commonwealth actively
manages its debt position and continually demonstrates its ability and
willingness to adjust financial planning and budgeting to preserve financial
balance. In 1991, the Commonwealth established a Debt Capacity Advisory
Committee which annually estimates the amount of tax-supported debt that the
Commonwealth can prudently authorize, issue, and support. The Commonwealth
and the Committee have decided that the ratio of debt service to revenues
should be maintained below 5%. Such conservative policies have had the
effect of turning a modest deficit in 1992 to a modest surplus in both 1993
and 1994. Similar results are expected in fiscal year 1995.
The Fund's concentration in securities issued by the Commonwealth and its
political subdivisions provide a greater level of risk than a fund which is
diversified across a number of states and municipal entities. The ability of
the Commonwealth or its municipalities to meet their obligations will depend
on the availability of tax and other revenues; economic, political, and
demographic conditions within the Commonwealth; and the underlying fiscal
condition of the Commonwealth, its counties, and its municipalities.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for the
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements in amounts up to one-
third of the value of its net assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of its total assets are
outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having a
market value not exceeding the lesser of the dollar amounts borrowed or 15%
of the value of its total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may acquire publicly
or nonpublicly issued Virginia municipal securities or temporary investments
or enter into repurchase agreements, in accordance with its investment
objective, policies, limitations and its Declaration of Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate or real estate limited
partnerships, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are
secured by real estate or interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase, 25%
or more of the value of its total assets would be invested in any one
industry or in industrial development bonds or other securities, the interest
upon which is paid from revenues of similar types of projects. However, the
Fund may invest as temporary investments more than 25% of the value of its
assets in cash or cash items, securities issued or guaranteed by the U.S.
government, its agencies, or instrumentalities, or instruments secured by
these money market instruments, such as repurchase agreements.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under federal securities law.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies, except
as part of a merger, consolidation, or other acquisition.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers (including companies responsible for paying principal
and interest on industrial development bonds) which have records of less than
three years of continuous operations, including the operation of any
predecessor.
INVESTING FOR CONTROL
The Fund will not invest in securities of a company for the purpose of
exercising control or management.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
Officers and Trustees of the Trust or its investment adviser, owning
individually more than .50 of 1% of the issuer's securities, together own
more than 5% of the issuer's securities.
INVESTING IN OPTIONS
The Fund will not invest in puts, calls, straddles, spreads, or any
combination of them.
INVESTING IN MINERALS
The Fund will not purchase or sell interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase the
securities of issuers which invest in or sponsor such programs.
For purposes of the above limitations, the Fund considers instruments issued
by a U.S. branch of a domestic bank or savings and loan having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items." Except with respect to borrowing money, if a
percentage limitation is adhered to at the time of investment, a later
increase or decrease in percentage resulting from any change in value or net
assets will not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the
value of its net assets during the last fiscal year and has no present intent
to do so during the coming fiscal year.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940. In particular, the Fund
will comply with the various requirements of Rule 2a-7, 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 ability to participate in volume
transactions will be to the benefit of the Fund.
FEDERATED MUNICIPAL TRUST MANAGEMENT
OFFICERS AND TRUSTEES ARE LISTED WITH THEIR ADDRESSES, BIRTHDATES, PRESENT
POSITIONS WITH FEDERATED MUNICIPAL TRUST, AND PRINCIPAL OCCUPATIONS.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive
Vice President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative
Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management
Center; Director, Trustee, or Managing General Partner of the Funds;
President Emeritus, University of Pittsburgh; founding Chairman, National
Advisory Council for Environmental Policy and Technology and Federal
Emergency Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global 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 of
the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Services Company; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice
President, Federated Shareholder Services; Vice President, Federated
Administrative Services; Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; President and
Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
THE FUNDS
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated
U.S. Government Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 3-5 Years; Federated U.S. Government Securities Fund: 5-10
Years; First Priority Funds; Fixed Income Securities, Inc.; Fortress
Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund,
Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash Trust; Insurance
Management Series; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity Income
Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities
Fund, Inc.; Liberty U.S. Government Money Market Trust; Liberty Term Trust,
Inc. - 1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; 111 Corcoran
Funds; Peachtree Funds; The Planters Funds; RIMCO Monument Funds; Star Funds;
The Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.;
Targeted Duration Trust; Tax-Free Instruments Trust; Trust for Financial
Institutions; Trust For Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; The Virtus Funds;
World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees own less than 1% of the Trust`s outstanding shares.
As of December 4, 1995, the following shareholder(s) of record owned 5% or
more of the outstanding Institutional Shares of the Fund: Firstblue &
Company, Bluefield, West Virginia, owned approximately 1,795,852 shares
(7.09%); VATCO, Richland, Virginia, owned approximately 3,960,284 shares
(15.64%); Nabaf & Company, Fredericksburg, Virginia, owned approximately
2,036,578 shares (8.04%); Planta & Co., Staunton, Virginia, owned
approximately 1,538,550 shares (6.07%); Hamac & Co., Richmond, Virginia,
owned approximately 7,973,155 shares (31.48%); Comfort & Co., Hampton,
Virginia, owned approximately 3,915,657 shares (15.46%); and Chesnat,
Kilmarnock, Virginia, owned approximately 1,363,036 shares(5.89%).
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION*# FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Fund and
Chairman and Director 68 other investment companies in the Fund
Complex
Thomas G. Bigley,$2,458 $20,688 for the Fund and
Director 49 other investment companies in the Fund Complex
John T. Conroy, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
William J. Copeland, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
James E. Dowd, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D., $3,266 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Edward L. Flaherty, Jr., $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Peter E. Madden, $2,757 $90,563 for the Fund and
Director 64 other investment companies in the Fund Complex
Gregor F. Meyer, $3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
John E. Murray, Jr., $1,762 $0 for the Fund and
Director 64 other investment companies in the Fund Complex
Wesley W. Posvar,$3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Marjorie P. Smuts, $3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of
15 portfolios.
+The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
INVESTMENT ADVISER
The Fund's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife and his
son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder of the
Fund for any losses that may be sustained in the purchase, holding, or sale
of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus.
For the fiscal years ended October 31, 1995 and 1994, the adviser earned
$514,947 and $470,783, respectively, of which $224,073 and $435,418,
respectively, was voluntarily waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1-1/2%
per year of the remaining average net assets, the adviser will reimburse
the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the adviser will generally use
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. The
adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to guidelines established by the Board of Trustees. The
adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by
the adviser or its affiliates in advising the Trust and other accounts. To
the extent that receipt of these services may supplant services for which the
adviser or its affiliates might otherwise have paid, it would tend to reduce
their expenses. The adviser and its affiliates exercise reasonable business
judgment in selecting brokers who offer brokerage and research services to
execute securities transactions. They determine in good faith that
commissions charged by such persons are reasonable in relationship to the
value of the brokerage and research services provided. For the fiscal years
ended October 31, 1995 and 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.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated Administrative
Services, Inc., also a subsidiary of Federated Investors, served as the
Fund's Administrator. (For purposes of this Statement of Additional
Information, Federated Administrative Services and Federated Administrative
Services, Inc. may hereinafter collectively be referred to as the
"Administrators".) For the fiscal year ended October 31, 1995, the
Administrators collectively earned $155,000. For the fiscal year ended
October 31, 1994, Federated Administrative Services, Inc. earned $145,109.
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.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
SHAREHOLDER SERVICES AGREEMENT
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 Trustees expect 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 ended October 31, 1995, the Fund paid shareholder service fees
in the amount of $59,585 and $262,256, respectively, on behalf of
Institutional Shares and Institutional Service Shares, respectively, of which
$59,585 and $157,354, respectively, was voluntarily waived.
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.
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.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its net
income earned during the year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for those
shareholders paying those fees.
YIELD
The Fund calculates its yield based upon the seven days ending on the day of
the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares; dividing the net change in
the account's value by the value of the account at the beginning of the base
period to determine the base period return; and multiplying the base period
return by 365/7.
For the seven-day period ended October 31, 1995, the yields for Institutional
Shares and Institutional Service Shares were 3.52% and 3.42%, respectively.
EFFECTIVE YIELD
The Fund calculates its effective yield by compounding the unannualized base
period return by: adding 1 to the base period return; raising the sum to the
365/7th power; and subtracting 1 from the result.
For the seven-day period ended October 31, 1995, the effective yields for
Institutional Shares and Institutional Service Shares were 3.58% and 3.48%,
respectively.
TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Fund is calculated similarly to the yield but
is adjusted to reflect the taxable yield that the Fund would have had to earn
to equal its actual yield, assuming a 39.6% tax rate (the maximum effective
federal rate for individuals) and assuming that income is 100% exempt.
For the seven-day period ended October 31, 1995 , the tax-equivalent yields
for Institutional Shares and Institutional Service Shares were 6.44% and
6.26%, respectively.
TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature. The
interest earned by the municipal securities in the Fund's portfolio generally
remains free from federal regular income tax,* and is often free from state
and local taxes as well. As the table below indicates, a "tax-free"
investment can be an attractive choice for investors, particularly in times
of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF VIRGINIA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
20.75% 33.75% 36.75% 41.75% 45.35%
JOINT $1- $39,001- $94,251- $143,601- OVER
RETURN 39,000 94,250 143,600 256,000 $256,500
SINGLE $1- $23,351- $56,551- $117,951- OVER
RETURN 23,350 56,550 117,950 256,500 $256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
3.50% 4.42% 5.28% 5.53% 6.01% 6.40%
4.00% 5.05% 6.04% 6.32% 6.87% 7.32%
4.50% 5.68% 6.79% 7.11% 7.73% 8.23%
5.00% 6.31% 7.55% 7.91% 8.58% 9.15%
5.50% 6.94% 8.30% 8.70% 9.44% 10.06%
6.00% 7.57% 9.06% 9.49% 10.30% 10.98%
6.50% 8.20% 9.81% 10.28% 11.16% 11.89%
7.00% 8.83% 10.57% 11.07% 12.02% 12.81%
7.50% 9.46% 11.32% 11.86% 12.88% 13.72%
8.00% 10.09% 12.08% 12.65% 13.73% 14.64%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE TAXABLE YIELD EQUIVALENT. FURTHERMORE, ADDITIONAL STATE
AND LOCAL TAXES PAID ON COMPARABLE TAXABLE INVESTMENTS WERE NOT USED TO
INCREASE FEDERAL DEDUCTIONS. IF YOU ITEMIZE DEDUCTIONS, YOUR TAXABLE
YIELD EQUIVALENT WILL BE LOWER.
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is computed
by multiplying the number of shares owned at the end of the period by the net
asset value per share at the end of the period. The number of shares owned at
the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends and
distributions.
For the one-year period ended October 31, 1995, and for the period from
September 16, 1993 (date of initial public investment) through October 31,
1995, the average annual total returns were 3.56% and 3.05%, respectively,
for Institutional Shares, and were 3.46% and 2.93%, respectively, for
Institutional Service Shares.
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:
O LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports
monthly and 12-month-to-date investment results for the same money
funds.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected
in its investment decision making-structured, straightforward, and
consistent. This has resulted in a history of competitive performance with a
range of competitive investment products that have gained the confidence of
thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market funds,
a principal means used by money managers today to value money market fund
shares. Other innovations include the first institutional tax-free money
market fund. As of December 31, 1994, Federated Investors managed more than
$31 billion in assets across approximately 43 money market funds, including
17 government, 8 prime and 18 municipal with assets approximating $17
billion, $7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors's
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors's domestic fixed
income management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors's international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $2 trillion to the more than 5,500 funds
available.*
Federated Investors Investors, through its subsidiaries, distributes mutual
funds for a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional
clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated Investors funds in their
clients' portfolios. The marketing effort to trust clients is headed by Mark
R. Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Investors mutual funds are available to consumers through major
brokerage firms nationwide--including 200 New York Stock Exchange firms--
supported by more wholesalers than any other mutual fund distributor. The
marketing effort to these firms is headed by James F. Getz, President,
Broker/Dealer Division.
*Source: Investment Company Institute
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a variable rate demand feature. The first rating (long-term
rating) addresses the likelihood of repayment of principal and interest when
due, and the second rating (short-term rating) describes the demand
characteristics. Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The
definitions for the long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
LONG-TERM DEBT RATINGS
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the
relative investment qualities of short-term obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the
use of the VMIG symbol to reflect such characteristics as payment upon
periodic demand rather than fixed maturity dates and payment relying on
external liquidity. In this case, two ratings are usually assigned, (for
example, AAA/VMIG-1); the first representing an evaluation of the degree of
risk associated with scheduled principal and interest payments, and the
second representing an evaluation of the degree of risk associated with the
demand feature. The VMIG rating can be assigned a 1 or 2 designation using
the same definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1 Issuers rated PRIME-1 (or related supporting institutions)
have a superior capacity for repayment of short-term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by
the following characteristics: leading market positions in well
established industries, high rates of return on funds employed,
conservative capitalization structure with moderate reliance on debt and
ample asset protection, broad margins in earning coverage of fixed
financial charges and high internal cash generation, well-established
access to a range of financial markets and assured sources of alternate
liquidity
P-2 Issuers rated PRIME-2 (or related supporting institutions)
have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is
maintained.
LONG-TERM DEBT RATINGS
AAA Bonds which are rated AAA are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
is can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
AA Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in AAA
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term
indebtedness. However, management considers them to be of comparable
quality to securities rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "AAA" by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "AA" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.
314229824
314229816
- --------------------------------------------------------------------------------
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 primarily in short-term Alabama municipal
securities, including securities of states, territories, and possessions of the
United States which are not issued by or on behalf of Alabama, or its political
subdivisions and financing authorities, but which provide income exempt from
federal regular income tax and the income tax 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 December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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
FUND INFORMATION 7
- --------------------------------------------------
Management of the Fund 7
Distribution of Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- --------------------------------------------------
HOW TO PURCHASE SHARES 9
- --------------------------------------------------
Special Purchase Features 10
HOW TO REDEEM SHARES 10
- --------------------------------------------------
Special Redemption Features 12
ACCOUNT AND SHARE INFORMATION 12
- --------------------------------------------------
TAX INFORMATION 13
- --------------------------------------------------
Federal Income Tax 13
State and Local Taxes 13
PERFORMANCE INFORMATION 14
- --------------------------------------------------
FINANCIAL STATEMENTS 15
- --------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 29
- --------------------------------------------------
ADDRESSES 30
- --------------------------------------------------
</TABLE>
I
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Charge 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
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver) (1)................................................................ 0.13%
12b-1 Fee........................................................................................ None
Total Other Expenses............................................................................. 0.46%
Shareholder Services Fee (after waiver) (2)......................................... 0.18%
Total 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 operating expenses in the table above are based on expenses
expected during the fiscal year ending October 31, 1996. The total
operating expenses were 0.48% for the fiscal year ended October 31, 1995
and would have been 0.92% absent the voluntary waivers of a portion of the
management fee and a portion of the shareholder services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Fund 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.
1
ALABAMA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 29.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------
1995 1994(a)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
- --------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------
Net investment income 0.04 0.02
- --------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------
Distributions from net investment income (0.04) (0.02)
- -------------------------------------------------- ------------ ------------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
- -------------------------------------------------- ------------ ------------
------------ ------------
TOTAL RETURN (b) 3.66% 2.31%
- --------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------
Expenses 0.48% 0.36%*
- --------------------------------------------------
Net investment income 3.59% 2.67%*
- --------------------------------------------------
Expense waiver/reimbursement (c) 0.44% 0.62%*
- --------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------
Net assets, end of period (000 omitted) $209,490 $142,804
- --------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) 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.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
2
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 that state. A minimum initial investment of $10,000
within 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 complying with the various
requirements of Rule 2a-7 under the Investment Company Act of 1940 which
regulates money market mutual funds and 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 so that at least 80%
of its net assets is 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
3
qualified legal counsel, exempt from federal regular income tax and Alabama
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 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.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party
4
providing the credit enhancement will adversely affect the quality and
marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; 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
5
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
6
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 net assets and pledge assets not exceeding 15% of
the value of its total assets to secure such borrowings. These investment
limitations cannot be changed without shareholder approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .50 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
7
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. With over $72 billion invested across more
than 260 funds under management and/or administration by its subsidiaries,
as of December 31, 1994, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 1,750
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,000
financial institutions nationwide. More than 100,000 investment
professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to .25 of 1% of the average
daily net asset value of shares, computed at an annual rate, to obtain certain
personal services for shareholders and provide the maintenance of shareholder
accounts ("shareholder services"). From time to time and for such periods as
deemed appropriate, the amount stated above may be reduced voluntarily. Under
the Shareholder Services Agreement, Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon shares owned by their clients or customers. The schedules of such fees and
the basis upon
8
which such fees will be paid will be determined from time to time by the Fund
and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
-------------------- ------------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is 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 or more
9
within a 90-day period. 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. Questions on wire purchases should be directed to your
shareholder services representative at the telephone number listed on your
account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to Alabama Municipal Cash Trust. Please include an
account number on the check. 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
10
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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name; the account name as registered
with the Fund; the account number; and the number of shares to be redeemed or
the dollar amount requested. All owners of the account must sign the request
exactly as the shares are registered. Normally, a check for the proceeds is
mailed within one business day, but in no event more than seven days, after the
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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor
11
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. Shareholder accounts will continue to
receive the daily dividend declared on the shares to be redeemed until the check
is presented to UMB Bank, N.A., the bank responsible for administering the
checkwriting program, for payment. However, checks should never be made payable
or sent to UMB Bank, N.A. or the Fund to redeem shares, and a check may not be
written to close an account.
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
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$10,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has 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. The
Trust is not required to hold annual shareholder meetings. Shareholder approval
will be sought only
12
for certain changes in the Trust's or the Fund's operation and for election of
Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
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
13
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 total return, 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.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
14
ALABAMA MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- -------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.2%
- -----------------------------------------------------------------
ALABAMA--95.9%
--------------------------------------------------
$ 5,400,000 Alabama HFA, SFM Revenue Bonds/Collateralized Home
Mortgage Revenue Bond Program (1995 Series C)
Weekly VRDNs (Bayerische Landesbank Girozentrale
GIC) Aaa $ 5,400,000
--------------------------------------------------
865,000 Alabama Industrial Access Road and Bridge Corp.,
Capital Improvement Bonds (Series 1995), 3.70%,
6/1/1996 A-1 865,000
--------------------------------------------------
3,000,000 Alabama State IDA Weekly VRDNs (Columbus Mills
Inc. Project)/(Trust Company Bank, Atlanta LOC) P-1 3,000,000
--------------------------------------------------
6,750,000 Alabama State IDA Weekly VRDNs (Pine City Fiber
Co.)/ (Barclays Bank PLC, London LOC) VMIG1 6,750,000
--------------------------------------------------
3,985,000 Alabama State IDA, IDRB (Series 1994) Weekly VRDNs
(Decatur Aluminum Corp.)/(Star Bank, NA,
Cincinnati LOC) P-1 3,985,000
--------------------------------------------------
1,800,000 Alabama State IDA, IDRB Weekly VRDNs (Monarch
Tile, Inc. Project)/(Nationsbank of Texas, N.A.
LOC) P-1 1,800,000
--------------------------------------------------
4,200,000 Alabama State IDA, Revenue Bonds Weekly VRDNs
(Southern Bag Corporation, Ltd.)/(SouthTrust Bank
of Alabama, Birmingham LOC) P-1 4,200,000
--------------------------------------------------
3,350,000 Alabama State IDA, Var/Fixed Rate Industrial
Revenue Bonds Weekly VRDNs (Kappler USA, Inc.
Project)/(National Bank of Canada, Montreal LOC) P-1 3,350,000
--------------------------------------------------
2,485,000 Alabama State Public School & College Authority,
6.50% (United States Treasury PRF), 11/1/1995
(@101.5) Aaa 2,522,275
--------------------------------------------------
1,000,000 Alabama State Public School & College Authority,
6.70% (United States Treasury PRF), 11/1/1995
(@101.5) Aaa 1,015,000
--------------------------------------------------
500,000 Alabama State Public School & College Authority,
6.75% (United States Treasury PRF), 11/1/1995
(@101.5) Aaa 507,500
--------------------------------------------------
1,000,000 Alabama State Public School & College Authority,
6.75% (United States Treasury PRF), 11/1/1995
(@101.5) Aaa 1,015,000
--------------------------------------------------
</TABLE>
15
ALABAMA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- -------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------
ALABAMA--CONTINUED
--------------------------------------------------
$ 620,000 Alabama State, Corrections Institution Finance
Authority Revenue Bonds (Series B), 3.80% (MBIA
Insurance Corporation INS), 4/1/1996 Aaa $ 620,000
--------------------------------------------------
4,000,000 Alabama State, UT GO Refunding Bonds, 5.35%,
9/1/1996 AA 4,047,035
--------------------------------------------------
3,650,000 Arab, AL IDB, (Series 1989) Weekly VRDNs (SCI
Manufacturing, Inc.)/(Bank of Tokyo Ltd., Tokyo
LOC) A-1 3,650,000
--------------------------------------------------
1,100,000 Arab, AL IDB, Revenue Refunding Bonds (Series
1989) Weekly VRDNs (SCI Manufacturing, Inc.)/(Bank
of Tokyo Ltd., Tokyo LOC) A-1 1,100,000
--------------------------------------------------
2,000,000 Birmingham, AL IDA Weekly VRDNs (Altec Industries,
Inc.)/(Wachovia Bank of Georgia NA, Atlanta LOC) P-1 2,000,000
--------------------------------------------------
1,810,000 Birmingham, AL IDA Weekly VRDNs (Glasforms,
Inc.)/(First Alabama Bank, Birmingham LOC) P-1 1,810,000
--------------------------------------------------
3,600,000 Birmingham, AL Medical Clinic Board Daily VRDNs
(University of Alabama Health System)/(Morgan
Guaranty Trust Co., New York LOC) A-1+ 3,600,000
--------------------------------------------------
6,000,000 Birmingham, AL, GO (Series 1995-A), 5.625% BANs,
1/5/1996 NR(2) 6,002,212
--------------------------------------------------
1,880,000 Calhoun County, AL Economic Development Council
Weekly VRDNs (Food Ingredients Tech.
Co.)/(Nationsbank, N.A. (Carolinas) LOC) P-1 1,880,000
--------------------------------------------------
4,310,000 Chatom, AL, (National Rural Utilities Series
1984M), 3.80% TOBs (Alabama Electric Co-op,
Inc.)/(National Rural Utilities Cooperative
Finance Corp. GTD), Optional Tender 2/15/1996 A-1 4,310,000
--------------------------------------------------
4,000,000 Chatom, AL, IDB PCR, 3.85% CP (Alabama Electric
Co-op, Inc.)/(National Rural Utilities Cooperative
Finance Corp. GTD), Mandatory Tender 1/12/1996 AA- 4,000,000
--------------------------------------------------
3,500,000 Cherokee, AL IDB, IDR Refunding Bonds (Series
1993) Weekly VRDNs (BOC Group, Inc.)/(Wachovia
Bank of Georgia NA, Atlanta LOC) Aa2 3,500,000
--------------------------------------------------
</TABLE>
16
ALABAMA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- -------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------
ALABAMA--CONTINUED
--------------------------------------------------
$ 3,000,000 Decatur, AL IDB, Revenue Refunding Bonds (Series
1993) Weekly VRDNs (Allied-Signal, Inc.) A-1 $ 3,000,000
--------------------------------------------------
6,550,000 Eutaw, AL IDB Weekly VRDNs (Mississippi Power
Co.)/ (Mississippi Power Co. GTD) VMIG1 6,550,000
--------------------------------------------------
1,730,000 Fort Payne, AL IDB, IDRB Weekly VRDNs
(Ovalstrapping, Inc.)/(U.S. Bank of Washington NA
LOC) P-1 1,730,000
--------------------------------------------------
2,495,000 Homewood, AL IDA Weekly VRDNs (Mountain Brook Inn
(Homewood AL))/(SouthTrust Bank of Alabama,
Birmingham LOC) P-1 2,495,000
--------------------------------------------------
4,315,000 Hoover, AL IDA Weekly VRDNs (Bud's Best Cookies,
Inc.)/ (SouthTrust Bank of Alabama, Birmingham
LOC) P-1 4,315,000
--------------------------------------------------
7,500,000 Huntsville, AL Health Care Authority/Health Care
Facilities, (Series 1994A) Weekly VRDNs (MBIA
Insurance Corporation INS)/(Amsouth Bank N.A.,
Birmingham LIQ) A-1 7,500,000
--------------------------------------------------
300,000 Huntsville, AL IDA Weekly VRDNs (Parkway Project
(Huntsville, Al))/(First Alabama Bank, Birmingham
LOC) A-1+ 300,000
--------------------------------------------------
6,870,000 Huntsville, AL, G.O. Warrants (Series 1995-A),
5.25%, 2/1/1996 AA 6,895,726
--------------------------------------------------
1,015,000 Huntsville, AL, G.O. Warrants (Series 1995-B),
5.00%, 2/1/1996 AA 1,018,173
--------------------------------------------------
850,000 I.D.B. Sylacuaga, AL Monthly VRDNs (SouthTrust
Bank of Alabama, Birmingham LOC) P-1 850,000
--------------------------------------------------
1,715,000 Ider, AL IDB, Industrial Development Bonds Weekly
VRDNs (Galbreath, Inc. Proj.)/(National Bank of
Canada, Montreal LOC) P-1 1,715,000
--------------------------------------------------
3,681,000 Irondale, AL IDB, Variable Fixed Rate Revenue
Bonds (Series 1989) Weekly VRDNs (Collateral
Mortgage, Ltd.)/ (SouthTrust Bank of Alabama,
Birmingham LOC) P-1 3,681,000
--------------------------------------------------
3,900,000 Limestone County, AL Water Authority, Water
Revenue Bonds, 7.875% (United States Treasury
PRF), 5/15/1996 (@103) Aaa 4,098,291
--------------------------------------------------
</TABLE>
17
ALABAMA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- -------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------
ALABAMA--CONTINUED
--------------------------------------------------
$ 3,900,000 Madison, AL IDA, (Series A) Weekly VRDNs
(Executive Inn)/(Amsouth Bank N.A., Birmingham
LOC) A-1 $ 3,900,000
--------------------------------------------------
1,425,000 Marshall County, AL, Special Obligation School
Refunding Warrant (Series 1994) Weekly VRDNs
(Marshall County, AL Board of Education)/(First
Alabama Bank, Birmingham LOC) A-1+ 1,425,000
--------------------------------------------------
2,700,000 McIntosh, AL IDB Weekly VRDNs (Ciba Geigy Corp.)/
(Union Bank of Switzerland, Zurich LOC) A-1+ 2,700,000
--------------------------------------------------
2,595,000 Mobile, AL Downtown Redevelopment Authority,
(Series 1992), 4.15% TOBs (Mitchell
Project)/(Trust Company Bank, Atlanta LOC),
Mandatory Tender 7/31/1996 P-1 2,595,000
--------------------------------------------------
2,500,000 Mobile, AL IDA Weekly VRDNs (McRae's Industries,
Inc.)/ (Nationsbank, N.A. (Carolinas) LOC) A-1 2,500,000
--------------------------------------------------
12,000,000 Mobile, AL IDB, 3.90% TOBs (International Paper
Co.), Optional Tender 4/15/1996 A- 12,000,000
--------------------------------------------------
2,160,000 Mobile, AL IDB, IDRB (Series 1989) Weekly VRDNs
(Newark Group Industries, Inc.)/(First Fidelity
Bank, NA, New Jersey LOC) VMIG1 2,160,000
--------------------------------------------------
2,000,000 Mobile, AL IDB, PCR (Series 1993A) Weekly VRDNs
(Alabama Power Co.)/(Alabama Power Co. GTD) A-1 2,000,000
--------------------------------------------------
4,000,000 Mobile, AL IDB, PCR (Series 1993B) Weekly VRDNs
(Alabama Power Co.)/(Alabama Power Co. GTD) A-1 4,000,000
--------------------------------------------------
1,000,000 Mobile, AL IDB, Pollution Control Refunding
Revenue Bonds, (Series 1992) Weekly VRDNs (Air
Products & Chemicals, Inc.) NR(3) 1,000,000
--------------------------------------------------
3,075,000 Mobile, AL Port City Medical Clinic Board, Revenue
Bonds (Series 1992-A), 3.50% CP (Mobile, AL
Infirmiary Association)/(Fuji Bank, Ltd., Tokyo
LOC), Mandatory Tender 11/29/1995 A+ 3,075,000
--------------------------------------------------
</TABLE>
18
ALABAMA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- -------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------
ALABAMA--CONTINUED
--------------------------------------------------
$ 2,000,000 Mobile, AL Port City Medical Clinic Board, Revenue
Bonds (Series 1992-A), 3.80% CP (Mobile, AL
Infirmiary Association)/(Fuji Bank, Ltd., Tokyo
LOC), Mandatory Tender 12/18/1995 A+ $ 2,000,000
--------------------------------------------------
1,000,000 Montgomery, AL IDB, (Series 1988A) Weekly VRDNs
(Smith Industries)/(Trust Company Bank, Atlanta
LOC) A-1 1,000,000
--------------------------------------------------
2,765,000 Montgomery, AL IDB, (Series 1990-A) Weekly VRDNs
(Industrial Partners)/(Wachovia Bank of Georgia
NA, Atlanta LOC) Aa2 2,765,000
--------------------------------------------------
4,030,000 Montgomery, AL IDB, Pollution Control & Solid
Disposal Revenue, 3.70% CP (General Electric Co.),
Mandatory Tender 1/12/1996 A-1+ 4,030,000
--------------------------------------------------
5,500,000 Pelham, AL Governmental Utility Services Corp.,
Wastewater Treatment and Collection Revenue Bonds
(Series 1985), 9.25% (Parsons Pelham Associates
Project)/ (FGIC INS), 6/1/1996 (@102) Aaa 5,777,456
--------------------------------------------------
3,800,000 Phoenix City, AL IDB, (Series 1988), 3.70% CP
(Mead Coated Board)/(ABN AMRO Bank N.V., Amsterdam
LOC), Mandatory Tender 11/21/1995 Aa1 3,800,000
--------------------------------------------------
3,000,000 Phoenix City, AL IDB, (Series 1988), 3.80% CP
(Mead Coated Board)/(ABN AMRO Bank N.V., Amsterdam
LOC), Mandatory Tender 1/11/1996 Aa1 3,000,000
--------------------------------------------------
3,000,000 Phoenix City, AL IDB, (Series 1988), 3.80% CP
(Mead Coated Board)/(ABN AMRO Bank N.V., Amsterdam
LOC), Mandatory Tender 11/28/1995 Aa1 3,000,000
--------------------------------------------------
3,500,000 Phoenix City, AL IDB, (Series 1988), 3.80% CP
(Mead Coated Board)/(ABN AMRO Bank N.V., Amsterdam
LOC), Mandatory Tender 2/8/1996 Aa1 3,500,000
--------------------------------------------------
930,000 Piedmont, AL IDB Weekly VRDNs (Industrial
Partners)/ (Wachovia Bank of Georgia NA, Atlanta
LOC) P-1 930,000
--------------------------------------------------
</TABLE>
19
ALABAMA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- -------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------
ALABAMA--CONTINUED
--------------------------------------------------
$ 4,050,000 Scottsboro, AL IDB, (Series 1994) Weekly VRDNs
(Maples Industries, Inc.)/(Amsouth Bank N.A.,
Birmingham LOC) P-1 $ 4,050,000
--------------------------------------------------
1,750,000 Scottsboro, AL IDB, IDRB (Series 1991) Weekly
VRDNs (Maples Industries, Inc.)/(Amsouth Bank
N.A., Birmingham LOC) P-1 1,750,000
--------------------------------------------------
1,300,000 Sumter County, AL IDA, Industrial Revenue Bonds
(Series 1995A) Weekly VRDNs (Fulghum Fibres
Project (AL))/(First Alabama Bank, Birmingham LOC) P-1 1,300,000
--------------------------------------------------
1,300,000 Sumter County, AL IDA, Industrial Revenue Bonds
(Series 1995B) Weekly VRDNs (Canal Chip
Project)/(First Alabama Bank, Birmingham LOC) P-1 1,300,000
--------------------------------------------------
2,000,000 Tuskegee, AL IDB, IDRB (Series 1995) Weekly VRDNs
(Concrete Company (The))/(Columbus Bank and Trust
Co., GA LOC) P-1 2,000,000
--------------------------------------------------
5,755,000 Vincent, AL IDB Weekly VRDNs (Headquarters
Partnership Project)/(National Australia Bank,
Ltd., Melbourne LOC) P-1 5,755,000
--------------------------------------------------
2,550,000 Vincent, AL IDB, (Series 1993) Weekly VRDNs (Ebsco
Industries, Inc.)/(National Australia Bank, Ltd.,
Melbourne LOC) A-1+ 2,550,000
-------------------------------------------------- ------------
Total 200,939,668
-------------------------------------------------- ------------
PUERTO RICO--3.3%
--------------------------------------------------
850,000 Puerto Rico Government Development Bank Weekly
VRDNs (Credit Suisse, Zurich LOC) A-1+ 850,000
--------------------------------------------------
</TABLE>
20
ALABAMA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- -------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------
PUERTO RICO--CONTINUED
--------------------------------------------------
$ 5,000,000 Puerto Rico Government Development Bank, 3.80% CP,
Mandatory Tender 12/8/1995 A-1+ $ 5,000,000
--------------------------------------------------
1,000,000 Puerto Rico Industrial, Medical & Environmental
PCA, (Series 1983A), 3.75% TOBs (Reynolds Metals
Co.)/(ABN AMRO Bank N.V., Amsterdam LOC), Optional
Tender 9/1/1996 A-1+ 1,000,000
-------------------------------------------------- ------------
Total 6,850,000
-------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(a) $207,789,668
-------------------------------------------------- ------------
------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 38.6% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($209,490,429) at October 31, 1995.
21
ALABAMA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The following acronyms are used throughout this portfolio:
BANs --Bond Anticipation Notes
CP --Commercial Paper
FGIC --Financial Guaranty Insurance Company
GIC --Guaranteed Investment Contract
GO --General Obligation
GTD --Guaranty
HFA --Housing Finance Authority
IDA --Industrial Development Authority
IDB --Industrial Development Bond
IDR --Industrial Development Revenue
IDRB --Industrial Development Revenue Bonds
INS --Insured
LIQ --Liquidity Agreement
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance
PCA --Pollution Control Authority
PCR --Pollution Control Revenue
PLC --Public Limited Company
PRF --Prerefunded
SFM --Single Family Mortgage
TOBs --Tender Option Bonds
UT --Unlimited Tax
VRDNs --Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
22
ALABAMA MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------
Total investments in securities, at amortized cost and
value $207,789,668
- -----------------------------------------------------------------
Cash 271,129
- -----------------------------------------------------------------
Income receivable 1,783,964
- -----------------------------------------------------------------
Deferred expenses 36,789
- ----------------------------------------------------------------- ------------
Total assets 209,881,550
- -----------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------
Payable for shares redeemed $ 59,073
- ------------------------------------------------------
Income distribution payable 274,600
- ------------------------------------------------------
Accrued expenses 57,448
- ------------------------------------------------------ --------
Total liabilities 391,121
- ----------------------------------------------------------------- ------------
Net Assets for 209,490,429 shares outstanding $209,490,429
- ----------------------------------------------------------------- ------------
------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
- -----------------------------------------------------------------
$209,490,429 DIVIDED BY 209,490,429 shares
outstanding $ 1.00
- ----------------------------------------------------------------- ------------
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
23
ALABAMA MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------
Interest $6,685,731
- -------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------
Investment advisory fee $ 820,528
- ------------------------------------------------------
Administrative personnel and services fee 131,658
- ------------------------------------------------------
Custodian fees 20,644
- ------------------------------------------------------
Transfer and dividend disbursing agent
fees and expenses 16,241
- ------------------------------------------------------
Directors'/Trustees' fees 2,050
- ------------------------------------------------------
Auditing fees 9,750
- ------------------------------------------------------
Legal fees 1,774
- ------------------------------------------------------
Portfolio accounting fees 33,124
- ------------------------------------------------------
Shareholder services fee 410,264
- ------------------------------------------------------
Share registration costs 32,059
- ------------------------------------------------------
Printing and postage 14,718
- ------------------------------------------------------
Insurance premiums 5,531
- ------------------------------------------------------
Miscellaneous 11,471
- ------------------------------------------------------ ----------
Total expenses 1,509,812
- ------------------------------------------------------
Waivers--
- ------------------------------------------
Waiver of investment advisory fee $(606,516)
- ------------------------------------------
Waiver of shareholder services fee (110,893)
- ------------------------------------------ ---------
Total waivers (717,409)
- ------------------------------------------------------ ----------
Net expenses 792,403
- ------------------------------------------------------------------- ----------
Net investment income $5,893,328
- ------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
24
ALABAMA MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994(a)
----------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------
OPERATIONS--
- ----------------------------------------
Net investment income $ 5,893,328 $ 1,301,466
- ---------------------------------------- ----------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------
Distributions from net investment income (5,893,328) (1,301,466)
- ---------------------------------------- ----------------- -------------------
SHARE TRANSACTIONS--
- ----------------------------------------
Proceeds from sale of shares 826,956,278 478,251,901
- ----------------------------------------
Net asset value of shares issued to
shareholders in payment of distributions
declared 2,071,166 606,720
- ----------------------------------------
Cost of shares redeemed (762,340,876) (336,054,760)
- ---------------------------------------- ----------------- -------------------
Change in net assets resulting from
share transactions 66,686,568 142,803,861
- ---------------------------------------- ----------------- -------------------
Change in net assets 66,686,568 142,803,861
- ----------------------------------------
NET ASSETS:
- ----------------------------------------
Beginning of period 142,803,861 --
- ---------------------------------------- ----------------- -------------------
End of period $ 209,490,429 $ 142,803,861
- ---------------------------------------- ----------------- -------------------
----------------- -------------------
</TABLE>
(a) For the period from November 29, 1993 (start of business) to October 31,
1994.
(See Notes which are an integral part of the Financial Statements)
25
ALABAMA MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Alabama Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
78.9% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or supported (backed) by a letter of credit for any one institution or
agency does not exceed 7.5% of total investments.
26
ALABAMA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
October 31, 1995, capital paid-in aggregated $209,490,429.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31
--------------------------
1995 1994 (a)
- ---------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 826,956,278 478,251,901
- ----------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 2,071,166 606,720
- ----------------------------------------------------
Shares redeemed (762,340,876) (336,054,760)
- ---------------------------------------------------- ------------ ------------
Net change resulting from share transactions 66,686,568 142,803,861
- ---------------------------------------------------- ------------ ------------
------------ ------------
</TABLE>
(a) For the period from November 29, 1993 (start of business) to October 31,
1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment
adviser, (the "Adviser"), receives for its services an annual investment
advisory fee equal to .50 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. This fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors
for the period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay FSS
up to .25 of 1% of average daily net assets of the Fund for the period. This
fee is to obtain certain services for shareholders and to
27
ALABAMA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
maintain shareholder accounts. FSS may voluntarily choose to waive a portion
of its fee. FSS can modify or terminate this voluntarily waiver at any time
at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the
Fund. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $26,461 and start-up
administrative service expenses of $31,250 were borne initially by the
Adviser. The Fund has agreed to reimburse the Adviser for the organizational
and start-up administrative expenses during the five year period following
effective date. For the period ended October 31, 1995, the Fund paid $3,381
and $3,993, respectively, pursuant to this agreement.
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common officers. These
transactions were made at current market value pursuant to rule 17a-7 under
the Act amounting to $514,285,000 and $499,300,000 respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Alabama Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of Alabama
Municipal Cash Trust (an investment portfolio of Federated Municipal Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of October 31, 1995, the related statement of operations for the year then
ended, and the statement of changes in net assets and the financial highlights
(see page 2 of the prospectus) for the periods presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Alabama Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
December 15, 1995
29
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <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 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- -------------------------------------------------------------------------------------------
</TABLE>
30
- --------------------------------------------------------------------------------
ALABAMA MUNICIPAL
CASH TRUST
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated December 31, 1995
[FEDERATED SECURITIES CORP. LOGO]
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-377912436
Cusip 314229790
3090802A (12/95) [RECYCLED PAPER LOGO]
RECYCLED
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"), a portfolio of Federated
Municipal Trust (the "Trust") dated December 31, 1995. This Statement is
not a prospectus. You may request a copy of the prospectus or a paper copy
of this Statement, if you have received it electronically, free of charge
by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated December 31, 1995
FEDERATED SECURITIES
CORP.
Distributor
A subsidiary of Federated
Investors
INVESTMENT POLICIES 1 OTHER SERVICES 22
Acceptable Investments 1 Fund Administration 22
Participation Interests 1 Custodian and Portfolio Recordkeeper
Municipal Leases 1 23
Ratings 2 Transfer Agent 23
When-Issued and Delayed Independent Public Accountants 23
Delivery Transactions 3 SHAREHOLDER SERVICES AGREEMENT 23
Repurchase Agreements 3
DETERMINING NET ASSET VALUE 24
Reverse Repurchase Agreements 3
Credit Enhancement 4 REDEMPTION IN KIND 25
ALABAMA INVESTMENT RISKS 4
MASSACHUSETTS PARTNERSHIP LAW 25
INVESTMENT LIMITATIONS 6
THE FUND'S TAX STATUS 26
Regulatory Compliance 9
PERFORMANCE INFORMATION 26
FEDERATED MUNICIPAL TRUST MANAGEMENT
9 Yield 26
Effective Yield 27
Share Ownership 18
Tax-Equivalent Yield 27
Trustees Compensation 18
Tax-Equivalency Table 27
Trustee Liability 20
Total Return 29
INVESTMENT ADVISORY SERVICES 20
Performance Comparisons 29
Investment Adviser 20 ABOUT FEDERATED INVESTORS 30
Advisory Fees 20
APPENDIX 32
BROKERAGE TRANSACTIONS 21
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by the
Board of Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or any
guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation interests
frequently provide or secure from another financial institution irrevocable
letters of credit or guarantees and give the Fund the right to demand payment of
the principal amounts of the participation interests plus accrued interest on
short notice (usually within seven days). The municipal securities subject to
the participation interests are not limited to the Fund's maximum maturity
requirements so long as the participation interests include the right to demand
payment from the issuers of those interests. By purchasing these participation
interests, the Fund is buying a security meeting the maturity and quality
requirements of the Fund and also is receiving the tax-free benefits of the
underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments by
a governmental or nonprofit entity. The lease payments and other rights under
the lease provide for and secure payments on the certificates. Lease obligations
may be limited by municipal charter or the nature of the appropriation for the
lease. Furthermore, a lease may provide that the participants cannot accelerate
lease obligations upon default. The participants would only be able to enforce
lease payments as they became due. In the event of a default or failure of
appropriation, unless the participation interests are credit enhanced, it is
unlikely that the participants would be able to obtain an acceptable substitute
source of payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be terminated by
the lessee; the potential recovery, if any, from a sale of the leased property
upon termination of the lease; the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and prospects); the
likelihood that the lessee will discontinue appropriating funding for the leased
property because the property is no longer deemed essential to its operations
(e.g., the potential for an "event of non-appropriation"); and any credit
enhancement or legal recourse provided upon an event of non-appropriation or
other termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two highest
short-term rating categories by one or more nationally recognized statistical
rating organizations ("NRSROs") or be of comparable quality to securities having
such ratings. An NRSRO's two highest rating categories are determined without
regard for sub-categories and gradations. For example, securities rated SP-1+,
SP-1, or SP-2 by Standard & Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by
Moody's Investors Service, Inc. ("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch
Investors Service, Inc. ("Fitch") are all considered rated in one of the two
highest short-term rating categories. The Fund will follow applicable
regulations in determining whether a security rated by more than one NRSRO can
be treated as being in one of the two highest short-term rating categories;
currently, such securities must be rated by two NRSROs in one of their two
highest rating categories. See "Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund`s
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities to
the Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. The Fund or its custodian will take possession
of the securities subject to repurchase agreements, and these securities will be
marked to market daily. In the event that a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the Fund might
be delayed pending court action. The Fund believes that under the regular
procedures normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Fund and allow retention or disposition of such securities. The
Fund will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the Fund's
adviser to be creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument in return for a percentage of the
instrument's market value in cash and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but does not ensure
this result. When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the obligations to be
purchased, are: segregated on the Fund's records at the trade date; marked to
market daily; and maintained until the transaction is settled.
CREDIT ENHANCEMENT
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.
ALABAMA INVESTMENT RISKS
The State of Alabama has experienced some diversification of its economy
primarily centered around its metropolitan areas. Agriculture, dominant prior to
World War II has given way to the manufacturing of textiles, chemicals, paper,
and metals. Manufacturing comprises roughly 23% of Alabama's non-agricultural
employment, slightly above the rest of the US., and continues to remain strong
as evidenced by Mercedes-Benz's decision to locate a plant in Alabama. Other
major non-agricultural sectors include government (20%); wholesale and retail
trade (22%); and services, including finance, insurance, and real estate (24%).
Over the last decade, the economy has further diversified with the addition of
high-tech firms to the Huntsville area and healthcare services to the Birmingham
area. During the 1982 recession Alabama's unemployment rate climbed into double
digits. The recent recession, however, has not been as severe to the Alabama
economy. The state's unemployment rate has reflected national trends (5.5% as of
April 1995). However the North American Free Trade Agreement leaves Alabama
exposed to potential job losses in some traditional industries as Mexico offers
a lower-cost environment.
Alabama's overall debt structure is more complex than most states, due to its
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 4.8%, which is above average for the nation.
However, since 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. This proration ability has been challenged in court, and the
outcome may adversely affect the mechanism by which the budget is balanced.
Furthermore, Alabama's school funding has been challenged; resolution of this
matter may affect the state budget.
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 upon 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 municipalities.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on margin
but may obtain such short-term credits as may be necessary for clearance of
transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow money
directly or through reverse repurchase agreements in amounts up to one-third of
the value of its net assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is deemed
to be inconvenient or disadvantageous. The Fund will not purchase any securities
while borrowings in excess of 5% of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except 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, and its Declaration of Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate or real estate limited
partnerships, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
sale of securities in accordance with its investment objective, policies, and
limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities, if, as a result of such purchase, 25% or
more of the value of its total assets would be invested in any one industry or
in industrial development bonds or other securities, the interest upon which is
paid from revenues of similar types of projects. However, the Fund may invest as
temporary investments more than 25% of the value of its assets in cash or cash
items, securities issued or guaranteed by the U.S. government, its agencies, or
instrumentalities, or instruments secured by these money market instruments,
such as repurchase agreements.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities subject
to restrictions on resale under federal securities law, except for restricted
securities determined to be liquid under criteria established by the Trustees.
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
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 association having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items." Except with
respect to borrowing money, if a percentage limitation is adhered to at the time
of investment, a later increase or decrease in percentage resulting from any
change in value or net assets will not result in a violation of such limitation.
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.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940. In particular, the Fund will comply
with the various requirements of Rule 2a-7, 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.
FEDERATED MUNICIPAL TRUST MANAGEMENT
OFFICERS AND TRUSTEES ARE LISTED WITH THEIR ADDRESSES, BIRTHDATES, PRESENT
POSITIONS WITH FEDERATED MUNICIPAL TRUST, AND PRINCIPAL OCCUPATIONS.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management Advisory
Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global 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 of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Services Company; Chairman, Treasurer, and Trustee, Federated Administrative
Services; Trustee or Director of some of the Funds; President, Executive Vice
President and Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors; Controller,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., and Passport Research, Ltd.; Senior Vice President, Federated Shareholder
Services; Vice President, Federated Administrative Services; Treasurer of some
of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President, Secretary,
and Trustee, Federated Administrative Services; President and Trustee, Federated
Shareholder Services; Director, Federated Securities Corp.; Executive Vice
President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between meetings
of the Board.
As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies: American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; Automated Government Money Trust; Blanchard Funds;
Blanchard Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series, Inc.;
DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Master Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 3-5 Years; First Priority Funds;
Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund,
Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund
for U.S. Government Securities, Inc.; Government Income Securities, Inc.; High
Yield Cash Trust; Insurance Management Series; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty Municipal Securities Fund, Inc.; Liberty U.S. Government Money Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; 111 Corcoran Funds; Peachtree Funds; The Planters Funds; RIMCO
Monument Funds; The Shawmut Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for Financial
Institutions; Trust For Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; The Virtus Funds;
World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.
As of December 4, 1995, the following shareholders of record owned 5% or more of
the outstanding shares of the Alabama Municipal Cash Trust: EBSCO Industries,
Inc., Birmingham, AL, 13.69%; Lynspen & Co., Birmingham, AL, 18.13%; and HUBCO,
Birmingham, AL, 20.73%.
TRUSTEES COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
<S> <C> <C>
John F. Donahue $0 $0 for the Trust and
Chairman and Trustee
68 other investment companies in the Fund Complex
Thomas G. Bigley $2,458 $20,688 for the Trust and
Trustee 49 other investment companies in the Fund Complex
John T. Conroy, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
William J. Copeland $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Glen R. Johnson $0 $0 for the Trust and
President and Trustee
14 other investment companies in the Fund Complex
James E. Dowd $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $3,166
$106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Edward L. Flaherty, Jr. $3,520
$117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Peter E. Madden $2,757 $90,563 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Gregor F. Meyer $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
John E. Murray, Jr., $1,762
$0 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Wesley W. Posvar $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Marjorie P. Smuts $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
</TABLE>
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of 15
portfolios.
+The information is provided for the last calendar year.
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 the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the fiscal year ended October
31, 1995, and for the period from November 29, 1993 (start of business), to
October 31, 1994, the adviser earned $820,528, and $243,579, respectively, of
which $606,516 and $0, respectively, were waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses) exceed
2-1/2% per year of the first $30 million of average net assets, 2% per year
of the next $70 million of average net assets, and 1-1/2% per year of the
remaining average net assets, the adviser will reimburse the Fund for its
expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this limitation,
the investment advisory fee paid will be reduced by the amount of the
excess, subject to an annual adjustment. If the expense limitation is
exceeded, the amount to be reimbursed by the adviser will be limited, in
any single fiscal year, by the amount of the investment advisory fees.
This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Board of Trustees. The adviser may select brokers
and dealers who offer brokerage and research services. These services may be
furnished directly to the Fund or to the adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the adviser or its affiliates in advising the 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
year ended October 31, 1995, and for 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.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Fund's Administrator.
(For purposes of this Statement of Additional Information, Federated
Administrative Services and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the "Administrators.") For the fiscal
year ended October 31, 1995, and for the period from November 29, 1993 (start of
business), to October 31, 1994, the Administrators earned $131,658 and $52,411,
respectively. Dr. Henry J. Gailliot, an officer of Federated Management, the
adviser to the Fund, holds approximately 20% of the outstanding common stock and
serves as a director of Commercial Data Services, Inc., a company which provides
computer processing services to Federated Administrative Services.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Fund. It also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments.
TRANSFER AGENT
As transfer agent, Federated Services Company maintains all necessary
shareholder records. For its services, the transfer agent receives a fee based
on size, type, and number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
SHAREHOLDER SERVICES AGREEMENT
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 Agreement, 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 year ending October 31, 1995, the Fund paid Shareholder Services fees
in the amount of $410,264 of which $110,893 was waived.
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.
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.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average portfolio
maturity; type of instruments in which the portfolio is invested; changes in
interest rates; changes in expenses; and the relative amount of cash flow. To
the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in shares of
the Fund, the performance will be reduced for those shareholders paying those
fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding capital
changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.
The Fund's yield for the seven-day period ended October 31, 1995, was 3.55%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended October 31, 1995, was
3.62%.
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, 1995,
was 6.41%.
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
TAX BRACKET
Combined Federal
and State:20.00% 33.00% 36.00% 41.00% 44.60%
Joint Return$1-39,000$39,001-94,250 $94,251-143,600$143,601-$256,500
OVER $256,500
Single Return$1-23,350 $23,351-56,550$56,551-117,950$117,951-256,500
OVER $256,500
Tax-Exempt
Yield Taxable Yield Equivalent
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. If you itemize deductions, your taxable yield
equivalent will be lower.
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a given
period that would equate a $1,000 initial investment to the ending redeemable
value of that investment. The ending redeemable value is computed by multiplying
the number of shares owned at the end of the period by the net asset value per
share at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of the period
with $1,000, adjusted over the period by any additional shares, assuming the
monthly reinvestment of all dividends and distributions.
The Fund's average annual total returns for the one-year period ended October
31, 1995 and for the period from December 3, 1993 (date of initial public
investment) through October 31, 1995 were 3.66% and 3.13%, respectively.
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
O LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports monthly
and 12-month-to-date investment results for the same money funds.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making-structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of competitive
investment products that have gained the confidence of thousands of clients and
their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the mutual
fund industry in 1974 with the creation of the first institutional money market
fund. Simultaneously, the company pioneered the use of the amortized cost method
of accounting for valuing shares of money market funds, a principal means used
by money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1994, Federated Investors managed more than $31 billion in assets across
approximately 43 money market funds, including 17 government, 8 prime and 18
municipal with assets approximating $17 billion, $7.4 billion and $6.6 billion,
respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
*Source: Investment Company Institute
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Mark R. Gensheimer, Executive
Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1
Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a
plus sign (+) designation.
SP-2
Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the long-
term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1
This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2
Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
LONG-TERM DEBT RATINGS
AAA
Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is
extremely strong.
AA
Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest
rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1
This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
AAA/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1
Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries,
high rates of return on funds employed, conservative capitalization
structure with moderate reliance on debt and ample asset protection, broad
margins in earning coverage of fixed financial charges and high internal
cash generation, well-established access to a range of financial markets
and assured sources of alternate liquidity
P-2
Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
LONG-TERM DEBT RATINGS
AAA
Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes is can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to
securities rated A-1 or P-1.
NR(1)
The underlying issuer/obligor/guarantor has other outstanding debt rated
"AAA" by S&P or "AAA" by Moody's.
NR(2)
The underlying issuer/obligor/guarantor has other outstanding debt rated
"AA" by S&P or "AA" by Moody's.
NR(3)
The underlying issuer/obligor/guarantor has other outstanding debt rated
"A" by S&P or Moody's.
Cusip 314229790
NORTH CAROLINA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
PROSPECTUS
The shares of North Carolina Municipal Cash Trust (the "Fund") offered by this
prospectus represent interests in a non-diversified portfolio of Federated
Municipal Trust (the "Trust"), an open-end management investment company (a
mutual fund). The Fund invests primarily in short-term North Carolina municipal
securities, including securities of states, territories, and possessions of the
United States which are not issued by or on behalf of North Carolina, or its
political subdivisions and financing authorities, but which provide income
exempt from federal regular income tax and the income tax imposed by the State
of North Carolina 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 December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SUMMARY OF FUND EXPENSES 1
- --------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- --------------------------------------------------
GENERAL INFORMATION 3
- --------------------------------------------------
INVESTMENT INFORMATION 3
- --------------------------------------------------
Investment Objective 3
Investment Policies 3
North Carolina Municipal Securities 6
Investment Risks 6
Non-Diversification 7
Investment Limitations 7
FUND INFORMATION 7
- --------------------------------------------------
Management of the Fund 7
Distribution of Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- --------------------------------------------------
HOW TO PURCHASE SHARES 9
- --------------------------------------------------
Special Purchase Features 10
HOW TO REDEEM SHARES 10
- --------------------------------------------------
Special Redemption Features 12
ACCOUNT AND SHARE INFORMATION 12
- --------------------------------------------------
TAX INFORMATION 13
- --------------------------------------------------
Federal Income Tax 13
State and Local Taxes 13
PERFORMANCE INFORMATION 14
- --------------------------------------------------
FINANCIAL STATEMENTS 15
- --------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 26
- --------------------------------------------------
ADDRESSES 27
- --------------------------------------------------
</TABLE>
I
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Charge 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
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver) (1)................................................................ 0.10%
12b-1 Fee........................................................................................ None
Total Other Expenses............................................................................. 0.49%
Shareholder Services Fee............................................................ 0.25%
Total Fund Operating Expenses (2)........................................................ 0.59%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.50%.
(2) The total operating expenses would have been 0.99% absent the voluntary
waiver of a portion of the management fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Trust will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Fund 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.
1
NORTH CAROLINA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 26.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------
1995 1994(a)
- ------------------------------------------------------------------------ ---------- -----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.04 0.02
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Distributions from net investment income (0.04) (0.02)
- ------------------------------------------------------------------------ ---------- -----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
- ------------------------------------------------------------------------ ---------- -----------
---------- -----------
TOTAL RETURN (b) 3.51% 2.06%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 0.59% 0.49%*
- ------------------------------------------------------------------------
Net investment income 3.46% 2.54%*
- ------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.40% 0.44%*
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $97,602 $85,249
- ------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from December 31, 1993 (date of initial
public investment) to October 31, 1994. For the period from November 29,
1993 (start of business) to December 31, 1993, the Fund had no investment
activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
2
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust September 1, 1989. The Declaration of Trust permits the Trust to offer
separate series of shares representing interests in separate portfolios of
securities. The Fund is designed for financial institutions acting in an agency
or fiduciary capacity as a convenient means of accumulating an interest in a
professionally managed, non-diversified portfolio investing primarily in
short-term North Carolina municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-North Carolina taxpayers because it
invests in municipal securities of that state. A minimum initial investment of
$10,000 within a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the income tax imposed by the State of North Carolina
consistent with stability of principal. 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 complying with
the various requirements of Rule 2a-7 under the Investment Company Act of 1940
which regulates money market mutual funds and by following the investment
policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of North
Carolina municipal securities (as defined below) maturing in 13 months or less.
As a matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be exempt from
federal regular income tax and North Carolina state income tax or at least 80%
of its net assets will be invested in obligations, the interest income from
which is exempt from federal regular and North Carolina state income tax.
(Federal regular income tax does not include the federal individual alternative
minimum tax or the federal alternative minimum tax for corporations.) The
average maturity of the securities in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies may be changed by the Trustees without shareholder approval.
Shareholders will be notified before any material change in these policies
becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of North Carolina and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and North Carolina income tax
3
("North Carolina Municipal Securities"). Examples of North Carolina Municipal
Securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and pre-refunded
bonds) and leases; and
- participation, trust, and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par.
The interest rate may float or be adjusted at regular intervals (ranging
from daily to annually), and is normally based on a published interest rate
or interest rate index. Most variable rate demand notes allow the Fund to
demand the repurchase of the security on not more than seven days prior
notice. Other notes only permit the Fund to tender the security at the time
of each interest rate adjustment or at other fixed intervals. See "Demand
Features." The Fund treats variable rate demand notes as maturing on the
later of the date of the next interest rate adjustment or the date on which
the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in North Carolina
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying North Carolina
Municipal Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment and
facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party
4
providing the credit enhancement will adversely affect the quality and
marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; 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
5
organization selling the Fund a temporary investment agrees at the time of sale
to repurchase it at a mutually agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain North Carolina
Municipal Securities is subject to the federal alternative minimum tax.
NORTH CAROLINA MUNICIPAL SECURITIES
North Carolina Municipal Securities are generally issued to finance public
works, such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works. They are
also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.
North Carolina Municipal Securities include industrial development bonds issued
by or on behalf of public authorities to provide financing aid to acquire sites
or construct and equip facilities for privately or publicly owned corporations.
The availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local employment.
The two principal classifications of North Carolina Municipal Securities are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed by
the bond or other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or charge against the general revenues of
a municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on North Carolina Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of North Carolina Municipal Securities and participation interests, or the
credit enhancers of either, to meet their obligations for the payment of
interest and principal when due. In addition, from time to time, the supply of
North Carolina Municipal Securities acceptable for purchase by the Fund could
become limited.
The Fund may invest in North Carolina Municipal Securities which are repayable
out of revenue streams generated from economically related projects or
facilities and/or whose issuers are located in the same state. Sizable
investments in these North Carolina Municipal Securities could involve an
increased risk to the Fund should any of these related projects or facilities
experience financial difficulties.
Obligations of issuers of North Carolina Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing
6
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. These investment limitations cannot be
changed without shareholder approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .50 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other
7
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. With over $72 billion invested across more
than 260 funds under management and/or administration by its subsidiaries,
as of December 31, 1994, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 1,750
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,000
financial institutions nationwide. More than 100,000 investment
professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to .25 of 1% of the average
daily net asset value of shares, computed at an annual rate, to obtain certain
personal services for shareholders and provide the maintenance of shareholder
accounts ("shareholder services"). From time to time and for such periods as
deemed appropriate, the amount stated above may be reduced voluntarily. Under
the Shareholder Services Agreement, Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
8
upon shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
-------------------- ------------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is open for business. Shares may be purchased as described below,
either through a financial institution (such as a bank or broker/dealer) or
9
by wire or by check directly from the Fund, with a minimum initial investment of
$10,000 or more within a 90-day period. Financial institutions may impose
different minimum investment requirements on their customers.
In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before shares can be purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may purchase
shares through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives payment by
wire or converts payment by check from the financial institution into federal
funds. It is the financial institution's responsibility to transmit orders
promptly. Financial institutions may charge additional fees for their services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling the Fund
before 1:00 p.m. (Eastern time). The order is considered received immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern time) in
order to begin earning dividends that same day. Federal funds should be wired as
follows: Federated Services Company, c/o State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: North Carolina Municipal Cash
Trust; Fund Number (this number can be found on the account statement or by
contacting the Fund.); Group Number or Order Number; Nominee or Institution
Name; and ABA Number 011000028. Shares cannot be purchased by wire on holidays
when wire transfers are restricted. Questions on wire purchases should be
directed to your shareholder services representative at the telephone number
listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to North Carolina Municipal Cash Trust. Please include an
account number on the check. 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.
10
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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name; the account name as registered
with the Fund; the account number; and the number of shares to be redeemed or
the dollar amount requested. All owners of the account must sign the request
exactly as the shares are registered. Normally, a check for the proceeds is
mailed within one business day, but in no event more than seven days, after the
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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit
11
Insurance Corporation; a member firm of a domestic stock exchange; or any other
"eligible guarantor institution," as defined in the Securities Exchange Act of
1934. The Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. Shareholder accounts will continue to
receive the daily dividend declared on the shares to be redeemed until the check
is presented to UMB Bank, N.A., the bank responsible for administering the
checkwriting program, for payment. However, checks should never be made payable
or sent to UMB Bank, N.A. or the Fund to redeem shares, and a check may not be
written to close an account.
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
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$10,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has 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. The
12
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 election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
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
North Carolina. Shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.
NORTH CAROLINA TAXES. Under existing North Carolina laws, distributions made by
the Fund will not be subject to North Carolina income taxes to the extent that
such distributions qualify as exempt-interest dividends under the Internal
Revenue Code, and represent (i) interest on obligations of the state of North
Carolina or any of its political subdivisions; or (ii) interest of obligations
of the United
13
States or its possessions. Conversely, to the extent that distributions made by
the Fund are derived from other types of obligations, such distributions will be
subject to North Carolina income taxes.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, 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.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
14
NORTH CAROLINA MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.0%
- -------------------------------------------------------------------------------
NORTH CAROLINA--88.8%
------------------------------------------------------------
$1,755,000 Alamance County, NC Industrial Facilities Authority, (Series
B) Weekly VRDNs (Culp, Inc.)/(First Union National Bank,
Charlotte, N.C. LOC) P-1 $ 1,755,000
------------------------------------------------------------
1,600,000 Buncombe County, NC Industrial Facilities & Pollution
Control Financing Authority, (Series 1991) Weekly VRDNs
(Rich Mount, Inc.)/(Bank of Tokyo Ltd., Tokyo LOC) A-1 1,600,000
------------------------------------------------------------
2,000,000 Buncombe County, NC, 3.80% BANs, 2/14/1996 NR(3) 2,000,833
------------------------------------------------------------
2,055,000 Burke County, NC Industrial Facilities & Pollution Control
Financing Authority Weekly VRDNs (Norwalk Furniture Corp &
Hickory Furniture)/(Branch Banking & Trust Co., Wilson LOC) P-1 2,055,000
------------------------------------------------------------
910,000 Catawba County, NC Industrial Facilities & Pollution Control
Financing Authority, (Series 1992) Weekly VRDNs (WSMP,
Inc.)/(Nationsbank, N.A. (Carolinas) LOC) A-1 910,000
------------------------------------------------------------
4,600,000 Catawba County, NC Industrial Facilities & Pollution Control
Financing Authority, (Series 1994) Weekly VRDNs (Ethan Allen
Inc Project)/(Bankers Trust Co., New York LOC) P-1 4,600,000
------------------------------------------------------------
4,445,600 (a) Charlotte-Mecklenburg Hospital Authority, NC, Loan
Participation Certificates (1995) VRNs (The Charlotte-
Mecklenburg Hospital Authority), 5/22/1996 NR(2) 4,445,600
------------------------------------------------------------
3,865,000 Cleveland County, NC Industrial Facilities and Pollution
Control Financing Authority, IDRB (Series 1990) Weekly VRDNs
(MetalsAmerica, Inc. Project)/(Nationsbank, N.A. (Carolinas)
LOC) P-1 3,865,000
------------------------------------------------------------
1,200,000 Cleveland County, NC Industrial Facilities and Pollution
Control Financing Authority, Pollution Control Revenue Bonds
(Series 1995) Weekly VRDNs (Grover Industries, Inc.
Project)/(Bank of America Illinois LOC) P-1 1,200,000
------------------------------------------------------------
</TABLE>
15
NORTH CAROLINA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
NORTH CAROLINA--CONTINUED
------------------------------------------------------------
$1,000,000 Davidson County, NC Industrial Facilities & PCFA, IDRB
(Series 1995) Weekly VRDNs (Lawrence Industries, Inc.
Project)/(Branch Banking & Trust Co., Wilson LOC) P-1 $ 1,000,000
------------------------------------------------------------
1,165,000 Durham & Wake Counties Special Airport District, NC, 5.75%
Bonds, 4/1/1996 Aaa 1,174,387
------------------------------------------------------------
2,110,000 Greensboro, NC , 6.00% Bonds, 3/1/1996 AAA 2,127,021
------------------------------------------------------------
1,800,000 Guilford County, NC Industrial Facilities & PCFA, (Series
1989) Weekly VRDNs (Bonset America Corp.)/ (Dai-Ichi Kangyo
Bank Ltd., Tokyo and Industrial Bank of Japan Ltd., Tokyo
LOCs) A-1 1,800,000
------------------------------------------------------------
2,000,000 Guilford County, NC Industrial Facilities & PCFA, (Series
1989) Weekly VRDNs (Culp, Inc.)/(Wachovia Bank of NC, NA,
Winston-Salem LOC) P-1 2,000,000
------------------------------------------------------------
7,000,000 Halifax County, NC Industrial Facilities & PCFA Weekly VRDNs
(Flambeau Airmold Project)/(Norwest Bank Minnesota,
Minneapolis LOC) P-1 7,000,000
------------------------------------------------------------
1,000,000 Iredell County, NC Industrial Facilities & Pollution Control
Financing Authority, Industrial Revenue Bonds Weekly VRDNs
(Jet Corr, Inc. Project)/(National Bank of Canada, Montreal
LOC) P-1 1,000,000
------------------------------------------------------------
3,000,000 Lincoln County, NC Industrial Facilities & Pollution Control
Financing Authority, Industrial Revenue Bonds Weekly VRDNs
(Leucadia, Inc. Project)/(National Bank of Canada, Montreal
LOC) P-1 3,000,000
------------------------------------------------------------
2,000,000 Mecklenberg County, NC Industrial Facility & PCFA Weekly
VRDNs (Manhasset Bay Associates)/(Bank of Tokyo Ltd., Tokyo
LOC) A-1 2,000,000
------------------------------------------------------------
1,555,000 New Hanover County, NC PCFA, (Series 1990), 4.15% TOBs
(Wilmington Machinery Inc. Project)/(Branch Banking & Trust
Co., Wilson LOC), Optional Tender 9/1/1996 P-1 1,555,000
------------------------------------------------------------
</TABLE>
16
NORTH CAROLINA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
NORTH CAROLINA--CONTINUED
------------------------------------------------------------
$2,037,000 North Carolina Eastern Municipal Power Agency, 3.75% CP
(Industrial Bank of Japan Ltd., Tokyo LOC), Mandatory Tender
12/12/1995 P-1 $ 2,037,000
------------------------------------------------------------
5,000,000 North Carolina Eastern Municipal Power Agency, 3.85% CP
(Industrial Bank of Japan Ltd., Tokyo LOC), Mandatory Tender
11/20/1995 P-1 5,000,000
------------------------------------------------------------
1,600,000 North Carolina Medical Care Commission Hospital, Revenue
Bonds (Series 1992B) Weekly VRDNs (North Carolina Baptist) A-1+ 1,600,000
------------------------------------------------------------
3,200,000 North Carolina Medical Care Commission Hospital, Revenue
Bonds (Series 1993) Weekly VRDNs (Moses H. Cone Memorial) A-1+ 3,200,000
------------------------------------------------------------
5,000,000 North Carolina Municipal Power Agency No. 1, 3.80% CP (Bank
of America NT and SA, San Francisco, Canadian Imperial Bank
of Commerce, Toronto, First Union National Bank, Charlotte,
N.C., Industrial Bank of Japan Ltd., Tokyo, Morgan Guaranty
Trust Co., New York and Nationsbank, N.A. (Carolinas) LIQs),
Mandatory Tender 12/12/1995 P-1 5,000,000
------------------------------------------------------------
2,875,000 North Carolina Municipal Power Agency No. 1, Catawba
Electric Revenue Bonds, 9.00% Bonds (United States Treasury
PRF), 1/1/1996 (@102) AAA 2,951,685
------------------------------------------------------------
4,000,000 North Carolina State, Clean Water Bonds, (Series 1995B),
4.25% Bonds, 6/1/1996 Aaa 4,014,636
------------------------------------------------------------
1,400,000 Piedmont, NC Airport Authority Weekly VRDNs (Triad
International Maintenance Corp.)/(Mellon Bank NA, Pittsburgh
LOC) P-1 1,400,000
------------------------------------------------------------
2,100,000 Randolph County, NC IDA, (Series 1990) Weekly VRDNs (Wayne
Steel, Inc.)/(Bank One, Akron, N.A. LOC) P-1 2,100,000
------------------------------------------------------------
4,000,000 Richmond County, NC Industrial Facilities & Pollution
Control, (Series 1991) Weekly VRDNs (Bibb Company)/
(Citibank NA, New York LOC) A-1 4,000,000
------------------------------------------------------------
</TABLE>
17
NORTH CAROLINA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
NORTH CAROLINA--CONTINUED
------------------------------------------------------------
$1,000,000 University of North Carolina at Chapel Hill, 4.00% Bonds,
8/1/1996 AA $ 1,001,447
------------------------------------------------------------
3,000,000 Wake County, NC Industrial Facilities & PCFA, (Series
1990B), 3.95% CP (Carolina Power & Light Co.)/(Fuji Bank,
Ltd., Tokyo LOC), Mandatory Tender 1/22/1996 P-1 3,000,000
------------------------------------------------------------
4,249,291 Wayne County, NC PCFA Weekly VRDNs (Cooper Industries,
Inc.)/(Sanwa Bank Ltd., Osaka LOC) A-1+ 4,249,291
------------------------------------------------------------
2,000,000 Wilson County, NC PCA, (Series 1994) Weekly VRDNs (Granutec,
Inc.)/(Branch Banking & Trust Co., Wilson LOC) P-1 2,000,000
------------------------------------------------------------ -----------
Total 86,641,900
------------------------------------------------------------ -----------
PUERTO RICO--7.7%
------------------------------------------------------------
500,000 Puerto Rico Government Development Bank Weekly VRDNs (Credit
Suisse, Zurich LOC) A-1+ 500,000
------------------------------------------------------------
4,000,000 Puerto Rico Government Development Bank, 3.70% CP, Mandatory
Tender 12/11/1995 A-1+ 4,000,000
------------------------------------------------------------
3,000,000 Puerto Rico Industrial, Medical & Environmental PCA, (Series
1983A), 3.75% TOBs (Reynolds Metals Co.)/(ABN AMRO Bank
N.V., Amsterdam LOC), Optional Tender 9/1/1996 A-1+ 3,000,000
------------------------------------------------------------ -----------
Total 7,500,000
------------------------------------------------------------ -----------
VIRGIN ISLANDS--2.5%
------------------------------------------------------------
2,500,000 Virgin Islands HFA, Single Family Mortgage Revenue Refunding
Bonds (1995 Series B), 4.375% TOBs (FGIC INS), Optional
Tender 2/1/1996 A-1+ 2,500,000
------------------------------------------------------------ -----------
TOTAL INVESTMENTS, (AT AMORTIZED COST)(b) $96,641,900
------------------------------------------------------------ -----------
-----------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 44.2% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. This security has been determined to be
liquid under criteria established by the Board of Trustees. At the end of
the period, this security amounted to $4,445,600 which represents 4.6% of
net assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($97,601,947) at October 31, 1995.
18
NORTH CAROLINA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
BANs --Bond Anticipation Notes
CP --Commercial Paper
FGIC --Financial Guaranty Insurance Company
HFA --Housing Finance Authority
IDA --Industrial Development Authority
IDRB --Industrial Development Revenue Bonds
INS --Insured
LIQs --Liquidity Agreement(s)
LOCs --Letter(s) of Credit
LOC --Letter of Credit
PCA --Pollution Control Authority
PCFA --Pollution Control Finance Authority
PRF --Prerefunded
TOBs --Tender Option Bonds
VRDNs --Variable Rate Demand Notes
VRNs --Variable Rate Notes
(See Notes which are an integral part of the Financial Statements)
19
NORTH CAROLINA MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------
Total investments in securities, at amortized cost and value $96,641,900
- -------------------------------------------------------------------
Cash 452,666
- -------------------------------------------------------------------
Income receivable 610,771
- -------------------------------------------------------------------
Receivable for shares sold 548
- -------------------------------------------------------------------
Deferred expenses 36,342
- ------------------------------------------------------------------- -----------
Total assets 97,742,227
- -------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------
Payable for shares redeemed $57,000
- ----------------------------------------------------------
Income distribution payable 51,537
- ----------------------------------------------------------
Accrued expenses 31,743
- ---------------------------------------------------------- -------
Total liabilities 140,280
- ------------------------------------------------------------------- -----------
NET ASSETS for 97,601,947 shares outstanding $97,601,947
- ------------------------------------------------------------------- -----------
-----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------
$97,601,947 DIVIDED BY 97,601,947 shares outstanding $ 1.00
- ------------------------------------------------------------------- -----------
-----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
20
NORTH CAROLINA MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------
Interest $4,352,210
- --------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------
Investment advisory fee $ 537,013
- --------------------------------------------------------
Administrative personnel and services fee 125,000
- --------------------------------------------------------
Custodian fees 29,641
- --------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 18,047
- --------------------------------------------------------
Directors'/Trustees' fees 1,382
- --------------------------------------------------------
Auditing fees 9,750
- --------------------------------------------------------
Legal fees 1,415
- --------------------------------------------------------
Portfolio accounting fees 27,535
- --------------------------------------------------------
Shareholder services fee 268,507
- --------------------------------------------------------
Share registration costs 23,596
- --------------------------------------------------------
Printing and postage 13,496
- --------------------------------------------------------
Insurance premiums 4,623
- --------------------------------------------------------
Miscellaneous 8,831
- -------------------------------------------------------- ----------
Total expenses 1,068,836
- --------------------------------------------------------
Deduct--Waiver of investment advisory fee (433,120)
- -------------------------------------------------------- ----------
Net expenses 635,716
- -------------------------------------------------------------------- ----------
Net investment income $3,716,494
- -------------------------------------------------------------------- ----------
----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
21
NORTH CAROLINA MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994(a)
---------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------
OPERATIONS--
- ---------------------------------------------
Net investment income $ 3,716,494 $ 1,501,904
- --------------------------------------------- ---------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------
Distributions from net investment income (3,716,494) (1,501,904)
- --------------------------------------------- ---------------- -------------------
SHARE TRANSACTIONS--
- ---------------------------------------------
Proceeds from sale of shares 901,368,780 539,042,342
- ---------------------------------------------
Net asset value of shares issued to
shareholders in payment of distributions
declared 2,529,218 1,065,423
- ---------------------------------------------
Cost of shares redeemed (891,545,071) (454,858,745)
- --------------------------------------------- ---------------- -------------------
Change in net assets resulting from share
transactions 12,352,927 85,249,020
- --------------------------------------------- ---------------- -------------------
Change in net assets 12,352,927 85,249,020
- ---------------------------------------------
NET ASSETS:
- ---------------------------------------------
Beginning of period 85,249,020 --
- --------------------------------------------- ---------------- -------------------
End of period $ 97,601,947 $ 85,249,020
- --------------------------------------------- ---------------- -------------------
---------------- -------------------
</TABLE>
(a) For the period from November 29, 1993 (start of business) to October 31,
1994.
(See Notes which are an integral part of the Financial Statements)
22
NORTH CAROLINA MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of North Carolina
Municipal Cash Trust (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
70.4% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or supported (backed) by a letter of credit for any one institution or
agency does not exceed 8.2% of total investments.
23
NORTH CAROLINA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
RESTRICTED SECURITIES--Restricted securities are securities that may only be
resold upon registration under federal securities laws or in transactions
exempt from such registration. Many restricted securities may be resold in
the secondary market in transactions exempt from registration. In some
cases, the restricted securities may be resold without registration upon
exercise of a demand feature. Such restricted securities may be determined
to be liquid under criteria established by the Board of Trustees. The Fund
will not incur any registration costs upon such resales. Restricted
securities are valued at amortized cost in accordance with Rule 2a-7 under
the Investment Company Act of 1940.
Additional information on each restricted security held at October 31, 1995
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
- ---------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Charlotte-Mecklenburg Hospital Authority, NC, Loan
Participation Certificates (1995) VRNs 06/30/95 $4,445,600
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
October 31, 1995, capital paid-in aggregated $97,601,947. Transactions in shares
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------
1995 1994(a)
- ---------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 901,368,780 539,042,342
- ----------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 2,529,218 1,065,423
- ----------------------------------------------------
Shares redeemed (891,545,071) (454,858,745)
- ---------------------------------------------------- ------------ ------------
Net change resulting from share transactions 12,352,927 85,249,020
- ---------------------------------------------------- ------------ ------------
------------ ------------
</TABLE>
(a) For the period from November 29, 1993 (start of business) to October 31,
1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .50 of 1% of the Fund's average
24
NORTH CAROLINA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
daily net assets. The Adviser may voluntarily choose to waive a portion of this
fee. The Adviser can modify or terminate this voluntary waiver at any time at
its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the Fund.
This fee is based on the size, type, and number of accounts and transactions
made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $21,879 and start-up
administrative service expenses of $31,507 were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational expenses and
start-up administrative expenses during the five year period following effective
date. For the period ended October 31, 1995, the Fund paid $4,254 and $6,126,
respectively, pursuant to this agreement.
INTERFUND TRANSACTIONS--During the year ended October 31, 1995, the Fund engaged
in purchase and sale transactions with funds that have a common investment
adviser, common Directors/Trustees, and/or common officers. These transactions
were made at current market value pursuant to Rule 17a-7 under the Act amounting
to $397,358,800 and $400,650,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(North Carolina Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of North
Carolina Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust, a Massachusetts business trust), including the schedule of portfolio
investments, as of October 31, 1995, the related statement of operations for the
year then ended, and the statement of changes in net assets and the financial
highlights (see page 2 of the prospectus) for the periods presented. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of North
Carolina Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
26
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
North Carolina Municipal Cash Trust Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
- --------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- --------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
</TABLE>
27
- --------------------------------------------------------------------------------
NORTH CAROLINA
MUNICIPAL CASH TRUST
PROSPECTUS
A Non-Diversified Portfolio
of Federated Municipal
Trust, an Open-End
Management Investment
Company
Prospectus dated December
31, 1995
[FEDERATED SECURITIES CORP. LOGO]
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 314229782
3090803A (12/95) [RECYCLED PAPER LOGO]
RECYCLED
PAPER
NORTH CAROLINA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of North Carolina Municipal Cash Trust (the "Fund"), a
portfolio of Federated Municipal Trust (the "Trust") dated December 31,
1995. This Statement is not a prospectus. You may request a copy of the
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated December 31, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated Investors
INVESTMENT POLICIES 2
Acceptable Investments 2
Participation Interests 2
Municipal Leases 2
Ratings 3
When-Issued and Delayed
Delivery Transactions 4
Repurchase Agreements 4
Reverse Repurchase Agreements 5
Credit Enhancement 5
NORTH CAROLINA INVESTMENT RISKS 6
INVESTMENT LIMITATIONS 7
Regulatory Compliance 11
FEDERATED MUNICIPAL TRUST
MANAGEMENT 11
Share Ownership 20
Trustees Compensation 21
Trustee Liability 23
INVESTMENT ADVISORY SERVICES 23
Investment Adviser 23
Advisory Fees 23
BROKERAGE TRANSACTIONS 24
OTHER SERVICES 26
Fund Administration 26
Custodian and Portfolio
Recordkeeper 26
Transfer Agent 26
Independent Public Accountants 27
SHAREHOLDER SERVICES AGREEMENT 27
DETERMINING NET ASSET VALUE 27
REDEMPTION IN KIND 28
MASSACHUSETTS PARTNERSHIP LAW 29
THE FUND'S TAX STATUS 29
PERFORMANCE INFORMATION 30
Yield 30
Effective Yield 31
Tax-Equivalent Yield 31
Tax-Equivalency Table 31
Total Return 33
Performance Comparisons 34
ABOUT FEDERATED INVESTORS 34
APPENDIX 36
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by
the Board of Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or any
guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation interests
include the right to demand payment from the issuers of those interests. By
purchasing these participation interests, the Fund is buying a security
meeting the maturity and quality requirements of the Fund and also is
receiving the tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments
by a governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the
appropriation for the lease. Furthermore, a lease may provide that the
participants cannot accelerate lease obligations upon default. The
participants would only be able to enforce lease payments as they became due.
In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Board of Trustees, will base
its determination on the following factors: whether the lease can be
terminated by the lessee; the potential recovery, if any, from a sale of the
leased property upon termination of the lease; the lessee's general credit
strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the potential
for an "event of non-appropriation"); and any credit enhancement or legal
recourse provided upon an event of non-appropriation or other termination of
the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations ("NRSROs") or be of comparable quality to
securities having such ratings. An NRSRO's two highest rating categories are
determined without regard for sub-categories and gradations. For example,
securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Ratings Group
("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or
FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all
considered rated in one of the two highest short-term rating categories. The
Fund will follow applicable regulations in determining whether a security
rated by more than one NRSRO can be treated as being in one of the two
highest short-term rating categories; currently, such securities must be
rated by two NRSROs in one of their two highest rating categories. See
"Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund`s records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20%
of the total value of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities
to the Fund and agree at the time of sale to repurchase them at a mutually
agreed upon time and price. To the extent that the seller does not repurchase
the securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. The Fund or its custodian will take
possession of the securities subject to repurchase agreements, and these
securities will be marked to market daily. In the event that a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of
the Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument in return
for a percentage of the instrument's market value in cash and agrees that on
a stipulated date in the future the Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an agreed
upon rate. The use of reverse repurchase agreements may enable the Fund to
avoid selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but does not ensure this result. When effecting reverse
repurchase agreements, liquid assets of the Fund, in a dollar amount
sufficient to make payment for the obligations to be purchased, are:
segregated on the Fund's records at the trade date; marked to market daily;
and maintained until the transaction is settled.
CREDIT ENHANCEMENT
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.
NORTH CAROLINA INVESTMENT RISKS
The state of North Carolina's credit strength is derived from a diversified
and growing economy, relatively low unemployment rates, strong financial
management, and a low debt burden. In recent years, the state's economy has
become less dependent on agriculture (primarily tobacco) and manufacturing
(textiles and furniture) and has experienced increased activity in financial
services, research, high-tech manufacturing, and tourism. Although by
national standards North Carolina is not one of the wealthier states (89% of
national average), it is among the top in the Southeast region and its growth
in personal income continues to outstrip national figures. The employment
picture in North Carolina remains healthy with unemployment rates
significantly below national averages and employment growth rates among the
highest in the county.
North Carolina is a conservative debt issuer and has consistently maintained
extremely low debt levels. Such conservative levels are inherent in the
state's financial structure which contains constitutional debt limits. The
state's administration continues to demonstrate its ability and willingness
to adjust financial planning and budgeting to preserve financial balance.
When finances became tight during the recession of the early 1990s, the state
quickly responded to shortfalls by increasing its sales and corporate tax
rates and implementing expenditure reductions. Since the recession, North
Carolina has seen improving state finances and has implemented a series of
tax cuts while maintaining to fund capital and budget reserve accounts. The
finances of many of North Carolina's municipalities are also very strong.
This strength can be partially attributed to the Local Government Commission
of North Carolina which serves as a central oversight and consulting group
which must approve all debt issued by state municipalities. It is interesting
to note that over 25% of all Aaa-rated tax-exempt bonds issued nationwide are
issued by local municipalities within the state.
The Fund's concentration in securities issued by the state and its political
subdivisions provide a greater level of risk than a fund which is diversified
across a number of states and municipal entities. The ability of the state or
its municipalities to meet their obligations will depend on the availability
of tax and other revenues; economic, political, and demographic conditions
within the state; and the underlying fiscal condition of the state, its
counties, and its municipalities.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements in amounts up to one-
third of the value of its net assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of its total assets are
outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases it may pledge assets having a
market value not exceeding the lesser of the dollar amounts borrowed or 15%
of the value of its total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except that it may acquire publicly
or nonpublicly issued North Carolina municipal securities or temporary
investments or enter into repurchase agreements in accordance with its
investment objective, policies, limitations, and its Declaration of Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate or real estate limited
partnerships, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are
secured by real estate or interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities, if, as a result of such purchase, 25%
or more of the value of its total assets would be invested in any one
industry or in industrial development bonds or other securities, the interest
upon which is paid from revenues of similar types of projects. However, the
Fund may invest as temporary investments more than 25% of the value of its
assets in cash or cash items, securities issued or guaranteed by the U.S.
government, its agencies, or instrumentalities, or instruments secured by
these money market instruments, such as repurchase agreements.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under federal securities law, except for
restricted securities determined to be liquid under criteria established by
the Trustees.
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
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 association having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items." Except
with respect to borrowing money, if a percentage limitation is adhered to at
the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
limitation.
The Fund does not intend to borrow money or pledge securities in excess of 5%
of the value of its net assets during the coming fiscal year.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940. In particular, the Fund
will comply with the various requirements of Rule 2a-7, 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.
FEDERATED MUNICIPAL TRUST MANAGEMENT
OFFICERS AND TRUSTEES ARE LISTED WITH THEIR ADDRESSES, BIRTHDATES, PRESENT
POSITIONS WITH FEDERATED MUNICIPAL TRUST, AND PRINCIPAL OCCUPATIONS.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive
Vice President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative
Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management
Center; Director, Trustee, or Managing General Partner of the Funds;
President Emeritus, University of Pittsburgh; founding Chairman, National
Advisory Council for Environmental Policy and Technology and Federal
Emergency Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global 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 of the
Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Services Company; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice President,
Federated Shareholder Services; Vice President, Federated Administrative
Services; Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; President and
Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies: American Leaders Fund, Inc.; Annuity
Management Series; Arrow Funds; Automated Government Money Trust; Blanchard
Funds; Blanchard Precious Metals, Inc.; Cash Trust Series II; Cash Trust
Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust; Federated ARMs Fund; Federated Equity Funds; Federated Exchange Fund,
Ltd.; Federated GNMA Trust; Federated Government Trust; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Master Trust; Federated
Short-Term Municipal Trust; Federated Short-Term U.S. Government Trust;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund: 3-5
Years; First Priority Funds; Fixed Income Securities, Inc.; Fortress
Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund,
Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash Trust; Insurance
Management Series; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity Income
Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities
Fund, Inc.; Liberty U.S. Government Money Market Trust; Liberty Term Trust,
Inc. - 1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; 111 Corcoran
Funds; Peachtree Funds; The Planters Funds; RIMCO Monument Funds; The Shawmut
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and
Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Trademark Funds; Trust for Financial Institutions; Trust
For Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; The Virtus Funds; World
Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.
As of December 4, 1995, the following shareholder(s) of record owned 5% or
more of the outstanding shares of the North Carolina Municipal Cash Trust:
Stephens, Inc., Little Rock, AR, 9.29% and Julius Blum, Inc., Stanley, NC,
12.94%.
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 68 other investment companies in the
Fund Complex
Thomas G. Bigley $2,458 $20,688 for the Trust and
Trustee 49 other investment companies in the Fund
Complex
John T. Conroy, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
William J. Copeland $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Glen R. Johnson $0 $0 for the Trust and
President and Trustee 14 other investment companies in the
Fund Complex
James E. Dowd $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D. $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Peter E. Madden $2,757 $90,563 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Gregor F. Meyer $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,762 $0 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Wesley W. Posvar $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Marjorie P. Smuts $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of
15 portfolios.
+The information is provided for the last calendar year.
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 the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the fiscal year ended
October 31, 1995, and for the period from November 29, 1993 (start of
business), to October 31, 1994, the adviser earned $537,013, and $296,066,
respectively, of which $433,120, and $261,597, respectively, were waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1-1/2%
per year of the remaining average net assets, the adviser will reimburse
the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the adviser will generally use
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. The
adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to guidelines established by the Board of Trustees. The
adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by
the adviser or its affiliates in advising the 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 year
ended October 31, 1995, and for the period from December 31, 1993 (date of
initial public investment), to October 31, 1994, the Fund paid no brokerage
commissions.
Although investment decisions for the Fund are made independently from those
of the other accounts managed by the adviser, investments of the type the
Fund may make may also be made by those other accounts. When the Fund and one
or more other accounts managed by the adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained
or disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated Administrative
Services, Inc., also a subsidiary of Federated Investors, served as the
Fund's Administrator. (For purposes of this Statement of Additional
Information, Federated Administrative Services and Federated Administrative
Services, Inc. may hereinafter collectively be referred to as the
"Administrators.") For the fiscal year ended October 31, 1995, and for the
period from November 29, 1993 (start of business), to October 31, 1994, the
Administrators earned $125,000 and $52,447, respectively.
Dr. Henry J. Gailliot, an officer of Federated Management, the adviser to the
Fund, holds approximately 20% of the outstanding common stock and serves as a
director of Commercial Data Services, Inc., a company which provides computer
processing services to Federated Administrative Services.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
TRANSFER AGENT
As transfer agent, Federated Services Company maintains all necessary
shareholder records. For its services, the transfer agent receives a fee
based on size, type, and number of accounts and transactions made by
shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
SHAREHOLDER SERVICES AGREEMENT
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 Agreement, 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 year ending October 31, 1995, the Fund paid Shareholder
Services fees in the amount of $268,507.
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.
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.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its net
income earned during the year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for those
shareholders paying those fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding
capital changes but including the value of any additional shares purchased
with dividends earned from the original one share and all dividends declared
on the original and any purchased shares; dividing the net change in the
account's value by the value of the account at the beginning of the base
period to determine the base period return; and multiplying the base period
return by 365/7.
The Fund's yield for the seven-day period ended October 31, 1995, was 3.47%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended October 31, 1995,
was 3.52%.
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,
1995, was 6.59%.
TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature. The
interest earned by the municipal securities in the Fund's portfolio generally
remains free from federal regular income tax,* and is often free from state
and local taxes as well. As the table below indicates, a "tax-free"
investment can be an attractive choice for investors, particularly in times
of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF NORTH CAROLINA
TAX BRACKET:
FEDERAL 15.00% 28.00% 31.00% 31.00%
36.00 39.60%
COMBINED
FEDERAL
AND STATE 22.00% 35.00% 38.00% 38.75%
43.75 47.35%
JOIN $1- $39,001- $94,251-
$100,001- $143,601- OVER
RETURN 39,000 94,250 100,000
143,600 256,500 $256,500
SINGLE $1- $23,351- $56,551- $60,001-
$117,951- OVER
RETURN 23,350 56,550 60,000 117,950
256,500 $256,500
Tax-Exempt
Yield Taxable Yield Equivalent
3.50% 4.49% 5.38% 5.65% 5.71% 6.22% 6.65%
4.00% 5.13% 6.15% 6.45% 6.53% 7.11% 7.60%
4.50% 5.77% 6.92% 7.26% 7.35% 8.00% 8.55%
5.00% 6.41% 7.69% 8.06% 8.16% 8.89% 9.50%
5.50% 7.05% 8.46% 8.87% 8.98% 9.78% 10.45%
6.00% 7.69% 9.23% 9.68% 9.80% 10.67% 11.40%
6.50% 8.33% 10.00% 10.48% 10.61% 11.56% 12.35%
7.00% 8.97% 10.77% 11.29% 11.43% 12.44% 13.30%
7.50% 9.62% 11.54% 12.10% 12.24% 13.33% 14.25%
8.00% 10.26% 12.31% 12.90% 13.06% 14.22% 15.19%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state
and local taxes paid on comparable taxable investments were not used to
increase federal deductions.
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is computed
by multiplying the number of shares owned at the end of the period by the net
asset value per share at the end of the period. The number of shares owned at
the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends and
distributions.
The Fund's average annual total returns for the one-year period ended October
31, 1995, and for the period from December 31, 1993 (date of initial public
investment) through October 31, 1995, were 3.51% and 3.04%, respectively.
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of any
index used, prevailing market conditions, portfolio compositions of other
funds, and methods used to value portfolio securities and compute offering
price. The financial publications and/or indices which the Fund uses in
advertising may include:
O LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports
monthly and 12-month-to-date investment results for the same money
funds.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected
in its investment decision making-structured, straightforward, and
consistent. This has resulted in a history of competitive performance with a
range of competitive investment products that have gained the confidence of
thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market funds,
a principal means used by money managers today to value money market fund
shares. Other innovations include the first institutional tax-free money
market fund. As of December 31, 1994, Federated Investors managed more than
$31 billion in assets across approximately 43 money market funds, including
17 government, 8 prime and 18 municipal with assets approximating $17
billion, $7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $2 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional
clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
*Source: Investment Company Institute
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a variable rate demand feature. The first rating (long-term
rating) addresses the likelihood of repayment of principal and interest when
due, and the second rating (short-term rating) describes the demand
characteristics. Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The
definitions for the long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
LONG-TERM DEBT RATINGS
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the
relative investment qualities of short-term obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the
use of the VMIG symbol to reflect such characteristics as payment upon
periodic demand rather than fixed maturity dates and payment relying on
external liquidity. In this case, two ratings are usually assigned, (for
example, AAA/VMIG-1); the first representing an evaluation of the degree of
risk associated with scheduled principal and interest payments, and the
second representing an evaluation of the degree of risk associated with the
demand feature. The VMIG rating can be assigned a 1 or 2 designation using
the same definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1 Issuers rated PRIME-1 (or related supporting institutions)
have a superior capacity for repayment of short-term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by
the following characteristics: leading market positions in well
established industries, high rates of return on funds employed,
conservative capitalization structure with moderate reliance on debt and
ample asset protection, broad margins in earning coverage of fixed
financial charges and high internal cash generation, well-established
access to a range of financial markets and assured sources of alternate
liquidity
P-2 Issuers rated PRIME-2 (or related supporting institutions)
have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is
maintained.
LONG-TERM DEBT RATINGS
AAA Bonds which are rated AAA are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected
by a large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such changes
is can be visualized are most unlikely to impair the fundamentally
strong position of such issues.
AA Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in AAA
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term
indebtedness. However, management considers them to be of comparable
quality to securities rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "AAA" by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "AA" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.
Cusip 314229782
- --------------------------------------------------------------------------------
MARYLAND MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
PROSPECTUS
The shares of Maryland Municipal Cash Trust (the "Fund") offered by this
prospectus represent interests in a non-diversified portfolio of Federated
Municipal Trust (the "Trust"), an open-end management investment company (a
mutual fund). The Fund invests primarily in short-term Maryland municipal
securities, including securities of states, territories, and possessions of the
United States which are not issued by or on behalf of Maryland, or its political
subdivisions and financing authorities, but which provide income exempt from
federal regular income tax and the personal income taxes imposed by the State of
Maryland and Maryland municipalities consistent with stability of principal and
liquidity.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SUMMARY OF FUND EXPENSES 1
- --------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- --------------------------------------------------
GENERAL INFORMATION 3
- --------------------------------------------------
INVESTMENT INFORMATION 3
- --------------------------------------------------
Investment Objective 3
Investment Policies 3
Maryland Municipal Securities 6
Investment Risks 6
Non-Diversification 7
Investment Limitations 7
FUND INFORMATION 7
- --------------------------------------------------
Management of the Fund 7
Distribution of Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- --------------------------------------------------
HOW TO PURCHASE SHARES 9
- --------------------------------------------------
Special Purchase Features 10
HOW TO REDEEM SHARES 10
- --------------------------------------------------
Special Redemption Features 12
ACCOUNT AND SHARE INFORMATION 12
- --------------------------------------------------
TAX INFORMATION 13
- --------------------------------------------------
Federal Income Tax 13
State and Local Taxes 13
PERFORMANCE INFORMATION 14
- --------------------------------------------------
FINANCIAL STATEMENTS 15
- --------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 25
- --------------------------------------------------
ADDRESSES 26
- --------------------------------------------------
</TABLE>
I
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price)......... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable)....................................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)............................... None
Exchange Fee..................................................................................... None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver) (1)................................................................ 0.00%
12b-1 Fee........................................................................................ None
Total Other Expenses............................................................................. 0.65%
Shareholder Services Fee (after waiver) (2)......................................... 0.24%
Total Fund Operating Expenses (3)........................................................ 0.65%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of the
management fee. The adviser can terminate this voluntary waiver at any time
at its sole discretion. The maximum management fee is 0.50%.
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 1.16% absent the voluntary
waivers of the management fee and a portion of the shareholder services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Trust will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Fund Information." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period................................................. $7 $21 $36 $81
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1
MARYLAND MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 25.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------
1995 1994(a)
- ------------------------------------------------------------------------ ---------- -----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.03 0.01
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Distributions from net investment income (0.03) (0.01)
- ------------------------------------------------------------------------ ---------- -----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
- ------------------------------------------------------------------------ ---------- -----------
---------- -----------
TOTAL RETURN (b) 3.36% 1.30%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 0.65% 0.46%*
- ------------------------------------------------------------------------
Net investment income 3.30% 2.68%*
- ------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.51% 0.53%*
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $51,400 $56,275
- ------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 9, 1994 (date of initial public
investment) to October 31, 1994. For the period from April 25, 1994 (start
of business) to May 9, 1994, the Fund had no investment activity.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
2
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust September 1, 1989. The Declaration of Trust permits the Trust to offer
separate series of shares representing interests in separate portfolios of
securities. The Fund is designed for financial institutions acting in an agency
or fiduciary capacity as a convenient means of accumulating an interest in a
professionally managed, non-diversified portfolio investing primarily in
short-term Maryland municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Maryland taxpayers because it invests
in municipal securities of that state. A minimum initial investment of $10,000
within a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the personal income taxes imposed by the State of
Maryland and Maryland municipalities consistent with stability of principal and
liquidity. This investment objective cannot be changed without shareholder
approval. While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by complying with the various requirements of
Rule 2a-7 under the Investment Company Act of 1940 which regulates money market
mutual funds and by following the investment policies described in this
prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Maryland municipal securities (as defined below) maturing in 13 months or less.
As a matter of investment policy, which cannot be changed without shareholder
approval, the Fund will invest so that at least 80% of the its annual interest
income is exempt from federal regular income tax and Maryland state and local
income tax. (Federal regular income tax does not include the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations.) The average maturity of the securities in the Fund's portfolio,
computed on a dollar-weighted basis, will be 90 days or less. Unless indicated
otherwise, the investment policies may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of Maryland and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and Maryland state and local income
3
tax ("Maryland Municipal Securities"). Examples of Maryland Municipal Securities
include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and pre-refunded
bonds) and leases; and
- participation, trust, and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par.
The interest rate may float or be adjusted at regular intervals (ranging
from daily to annually), and is normally based on a published interest rate
or interest rate index. Most variable rate demand notes allow the Fund to
demand the repurchase of the security on not more than seven days prior
notice. Other notes only permit the Fund to tender the security at the time
of each interest rate adjustment or at other fixed intervals. See "Demand
Features." The Fund treats variable rate demand notes as maturing on the
later of the date of the next interest rate adjustment or the date on which
the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Maryland
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Maryland Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment and
facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party
4
providing the credit enhancement will adversely affect the quality and
marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; 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
5
organization selling the Fund a temporary investment agrees at the time of sale
to repurchase it at a mutually agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain Maryland
Municipal Securities is subject to the federal alternative minimum tax.
MARYLAND MUNICIPAL SECURITIES
Maryland Municipal Securities are generally issued to finance public works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
Maryland Municipal Securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Maryland Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Maryland Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of Maryland Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of Maryland
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Maryland Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Maryland Municipal Securities could involve an increased risk to the Fund should
any of these related projects or facilities experience financial difficulties.
Obligations of issuers of Maryland Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of
6
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 more than 15% of the value
of its total assets to secure such borrowings. These investment limitations
cannot be changed without shareholder approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .50 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
7
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized 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. With over $72 billion invested across more than 260
funds under management and/or administration by its subsidiaries, as of
December 31, 1994, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 1,750 employees,
Federated continues to be led by the management who founded the company in
1955. Federated funds are presently at work in and through 4,000 financial
institutions nationwide. More than 100,000 investment professionals have
selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to .25 of 1% of the average
daily net asset value of shares, computed at an annual rate, to obtain certain
personal services for shareholders and provide the maintenance of shareholder
accounts ("shareholder services"). From time to time and for such periods as
deemed appropriate, the amount stated above may be reduced voluntarily. Under
the Shareholder Services Agreement, Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon shares owned by their clients or customers. The schedules of such fees and
the basis upon
8
which such fees will be paid will be determined from time to time by the Fund
and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
-------------------- ------------------------------------
<C> <S>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days which on the New York Stock
Exchange is 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 or more
9
within a 90-day period. Financial institutions may impose different minimum
investment requirements on their customers.
In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before shares can be purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may purchase
shares through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives payment by
wire or converts payment by check from the financial institution into federal
funds. It is the financial institution's responsibility to transmit orders
promptly. Financial institutions may charge additional fees for their services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling the Fund
before 1:00 p.m. (Eastern time). The order is considered received immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern time) in
order to begin earning dividends that same day. Federal funds should be wired as
follows: Federated Services Company, c/o State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: Maryland Municipal Cash Trust;
Fund Number (this number can be found on the account statement or by contacting
the Fund.); Group Number or Order Number; Nominee or Institution Name; and ABA
Number 011000028. Shares cannot be purchased by wire on holidays when wire
transfers are restricted. Questions on wire purchases should be directed to your
shareholder services representative at the telephone number listed on your
account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to Maryland Municipal Cash Trust. Please include an
account number on the check. 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
10
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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name; the account name as registered
with the Fund; the account number; and the number of shares to be redeemed or
the dollar amount requested. All owners of the account must sign the request
exactly as the shares are registered. Normally, a check for the proceeds is
mailed within one business day, but in no event more than seven days, after the
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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor
11
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. Shareholder accounts will continue to
receive the daily dividend declared on the shares to be redeemed until the check
is presented to UMB Bank, N.A., the bank responsible for administering the
checkwriting program, for payment. However, checks should never be made payable
or sent to UMB Bank, N.A. or the Fund to redeem shares, and a check may not be
written to close an account.
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
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$10,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has 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. The
Trust is not required to hold annual shareholder meetings. Shareholder approval
will be sought only
12
for certain changes in the Trust's or the Fund's operation and for election of
Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
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
Maryland. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
MARYLAND TAXES. Under existing Maryland laws, distributions made by the Fund
will not be subject to Maryland state or local income taxes to the extent that
such distributions qualify as exempt-interest dividends under the Internal
Revenue Code, and represent (i) interest on tax-exempt obliga-
tions of Maryland or its political subdivisions or authorities; (ii) interest on
obligations of the United States or an authority, commission, instrumentality,
possession or territory of the United States; or (iii) gain realized by the Fund
from the sale or exchange of bonds issued by Maryland, a political
13
subdivision of Maryland, or the United States government (excluding obligations
issued by the District of Columbia, a territory or possession of the United
States, or a department, agency, instrumentality, or political subdivision of
the District, territory or possession). Conversely, to the extent that
distributions made by the Fund are derived from other types of obligations, such
distributions will be subject to Maryland income taxes.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, 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.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
14
MARYLAND MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--98.6%
- -------------------------------------------------------------------------------
MARYLAND--92.0%
------------------------------------------------------------
$1,190,000 Anne Arundel County, MD, 4.00% Bonds, 4/1/1996 AA+ $ 1,191,951
------------------------------------------------------------
2,000,000 Anne Arundel County, MD, EDRB (Series 1988), 3.80% CP
(Baltimore Gas & Electric Co.), Mandatory Tender 11/16/1995 A-1 2,000,000
------------------------------------------------------------
2,000,000 Anne Arundel County, MD, EDRB (Series 1988), 3.90% CP
(Baltimore Gas & Electric Co.), Mandatory Tender 1/16/1996 A-1 2,000,000
------------------------------------------------------------
2,000,000 Anne Arundel County, MD, EDRB (Series 1988), 3.90% CP
(Baltimore Gas & Electric Co.), Mandatory Tender 12/13/1995 A-1 2,000,000
------------------------------------------------------------
2,475,000 Baltimore County, MD IDA, (Series 1994A) Weekly VRDNs (Pitts
Realty Limited Partnership)/(PNC Bank, NA, Delaware LOC) P-1 2,475,000
------------------------------------------------------------
1,900,000 Baltimore County, MD Metropolitan District, Special
Assessment Bonds-63rd Issue, 5.70% Bonds, 7/1/1996 Aaa 1,922,883
------------------------------------------------------------
3,000,000 (a) Baltimore County, MD, Puttable T-E Rec, Series 20, Der
Inverse T-E Rec (Series-20) Weekly VRDNs (Morgan Guaranty
Trust Co., New York LIQ) VMIG1 3,000,000
------------------------------------------------------------
2,700,000 Baltimore County, MD, Revenue Bonds (1994 Issue) Weekly
VRDNs (Direct Marketing Associates, Inc. Facility)/(First
National Bank of Maryland, Baltimore LOC) A-1 2,700,000
------------------------------------------------------------
500,000 Baltimore, MD PCR Weekly VRDNs (SCM Plants, Inc.)/(Barclays
Bank PLC, London LOC) A-1+ 500,000
------------------------------------------------------------
2,000,000 Baltimore, MD, (Series 1988) Weekly VRDNs (Cherill
Associated Facility)/(Nationsbank of Maryland, N.A. LOC) P-1 2,000,000
------------------------------------------------------------
1,500,000 Cecil County, MD, County Commissioners EDRB (Series 1988S)
Weekly VRDNs (Williams Mobile Offices, Inc.)/(First National
Bank of Maryland, Baltimore LOC) A-1 1,500,000
------------------------------------------------------------
</TABLE>
15
MARYLAND MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
MARYLAND--CONTINUED
------------------------------------------------------------
$ 995,000 Elkton, MD, Revenue Refunding Bonds (Series 1992) Weekly
VRDNs (Highway Service Ventures, Inc. Facility)/(First Union
National Bank, Charlotte, NC LOC) A-1 $ 995,000
------------------------------------------------------------
3,141,000 Hartford County, MD, (Series 1989) Weekly VRDNs (Hartford
Commons Associates Facility)/(Nationsbank of Virginia, N.A.
LOC) P-1 3,141,000
------------------------------------------------------------
2,000,000 Maryland EDC, Pooled Financing Revenue Bonds, (Series 1995)
Weekly VRDNs (Maryland Municipal Bond Fund)/(Nationsbank of
Maryland, N.A. LOC) A-1 2,000,000
------------------------------------------------------------
500,000 Maryland Health & Higher Educational Facilities Authority,
(Series 1985B) Weekly VRDNs (First National Bank of Chicago
LOC) VMIG1 500,000
------------------------------------------------------------
1,900,000 Maryland Health & Higher Educational Facilities Authority,
ACESsm Revenue Bonds (Series 1994) Weekly VRDNs (Daughters
of Charity) VMIG1 1,900,000
------------------------------------------------------------
1,000,000 Maryland Health & Higher Educational Facilities Authority,
Revenue Bonds (Series 1992B) Weekly VRDNs (North Arundel
Hospital)/(Mellon Bank NA, Pittsburgh LOC) VMIG1 1,000,000
------------------------------------------------------------
2,000,000 Maryland State Energy Financing Administration, Annual
Tender Solid Waste Disposal Revenue Refunding Bonds, 4.30%
TOBs (Nevamar Corp.)/(International Paper Co. GTD), Optional
Tender 9/1/1996 A- 2,000,000
------------------------------------------------------------
2,400,000 Maryland State IDFA Kelly Springfield Tire, Economic
Development Revenue Refunding Bonds (Series 1994) Weekly
VRDNs (Johnson Controls, Inc.) VMIG1 2,400,000
------------------------------------------------------------
2,000,000 Montgomery County, MD EDA Weekly VRDNs (Howard Hughes
Medical Center) A-1+ 2,000,000
------------------------------------------------------------
1,500,000 Montgomery County, MD EDA Weekly VRDNs (U.S. Pharmacopeial
Convention Facility)/(Chemical Bank, New York LOC) VMIG1 1,500,000
------------------------------------------------------------
</TABLE>
16
MARYLAND MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
MARYLAND--CONTINUED
------------------------------------------------------------
$2,000,000 Montgomery County, MD, Multifamily Housing Revenue Bonds
1991 (Issue A) Weekly VRDNs (South Bay Club Apartments --
Van Nuys, G.P.)/(General Electric Capital Corp. LOC) A-1+ $ 2,000,000
------------------------------------------------------------
2,000,000 Montgomery County, MD, Unlimited GO's, 9.20% Bonds, 6/1/1996 NR(1) 2,061,727
------------------------------------------------------------
1,100,000 Prince George's County, MD, IDRB (Series 1993), 4.00% TOBs
(International Paper Co.), Optional Tender 7/15/1996 A- 1,100,000
------------------------------------------------------------
1,135,000 Washington Suburban Sanitary District, MD, General
Construction GO Bonds, 4.50% Bonds, 6/1/1996 Aa1 1,140,119
------------------------------------------------------------
2,260,000 Wicomico County, MD, EDRB (Series 1994) Weekly VRDNs (Field
Container Co. L.P.)/(Northern Trust Co., Chicago, IL LOC) A-1+ 2,260,000
------------------------------------------------------------ -----------
Total 47,287,680
------------------------------------------------------------ -----------
PUERTO RICO--2.7%
------------------------------------------------------------
1,400,000 Puerto Rico Industrial, Medical & Environmental PCA, (Series
1983A), 3.75% TOBs (Reynolds Metals Co.)/(ABN AMRO Bank
N.V., Amsterdam LOC), Optional Tender 9/1/1996 A-1+ 1,400,000
------------------------------------------------------------ -----------
VIRGIN ISLANDS--3.9%
------------------------------------------------------------
2,000,000 Virgin Islands HFA, Single Family Mortgage Revenue Refunding
Bonds (1995 Series B), 4.375% TOBs (FGIC INS), Optional
Tender 2/1/1996 A-1+ 2,000,000
------------------------------------------------------------ -----------
TOTAL SHORT TERM MUNICIPAL SECURITIES
(AT AMORTIZED COST)(b) $50,687,680
------------------------------------------------------------ -----------
-----------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 47.5% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. These securities have been determined to be
liquid under criteria established by the Board of Trustees. At the end of
the period, these securities amounted to $3,000,000 which represents 5.8% of
net assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($51,400,194) at October 31, 1995.
17
MARYLAND MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
ACES --Adjustable Convertible Extendible Securities
CP --Commercial Paper
EDA --Economic Development Authority
EDC --Economic Development Commission
EDRB --Economic Development Revenue Bonds
FGIC --Financial Guaranty Insurance Company
GO --General Obligation
GTD --Guaranty
HFA --Housing Finance Authority
IDA --Industrial Development Authority
IDFA --Industrial Development Finance Authority
IDRB --Industrial Development Revenue Bonds
INS --Insured
LIQ --Liquidity Agreement
LOC --Letter of Credit
PCA --Pollution Control Authority
PCR --Pollution Control Revenue
PLC --Public Limited Company
TOBs --Tender Option Bonds
VRDNs --Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
18
MARYLAND MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------
Investments in securities, at amortized cost and value $50,687,680
- -------------------------------------------------------------------
Cash 281,048
- -------------------------------------------------------------------
Income receivable 445,550
- -------------------------------------------------------------------
Deferred expenses 30,035
- ------------------------------------------------------------------- -----------
Total assets 51,444,313
- -------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------
Payable for shares redeemed $ 501
- ----------------------------------------------------------
Income distribution payable 10,391
- ----------------------------------------------------------
Accrued expenses 33,227
- ---------------------------------------------------------- -------
Total liabilities 44,119
- ------------------------------------------------------------------- -----------
NET ASSETS for 51,400,194 shares outstanding $51,400,194
- ------------------------------------------------------------------- -----------
-----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------
$51,400,194 DIVIDED BY 51,400,194 shares outstanding $ 1.00
- ------------------------------------------------------------------- -----------
-----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
19
MARYLAND MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------
Interest $2,338,974
- --------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------
Investment advisory fee $ 296,327
- --------------------------------------------------------
Administrative personnel and services fee 125,000
- --------------------------------------------------------
Custodian fees 27,900
- --------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 13,996
- --------------------------------------------------------
Directors'/Trustees' fees 538
- --------------------------------------------------------
Auditing fees 9,750
- --------------------------------------------------------
Legal fees 263
- --------------------------------------------------------
Portfolio accounting fees 31,285
- --------------------------------------------------------
Shareholder services fee 148,133
- --------------------------------------------------------
Share registration costs 11,607
- --------------------------------------------------------
Printing and postage 12,082
- --------------------------------------------------------
Insurance premiums 4,047
- --------------------------------------------------------
Miscellaneous 4,673
- -------------------------------------------------------- ----------
Total expenses 685,601
- --------------------------------------------------------
Waivers--
- ---------------------------------------------
Waiver of investment advisory fee $(295,202)
- ---------------------------------------------
Waiver of shareholder services fee (4,024)
- --------------------------------------------- ---------
Total waivers (299,226)
- -------------------------------------------------------- ----------
Net expenses 386,375
- -------------------------------------------------------------------- ----------
Net investment income $1,952,599
- -------------------------------------------------------------------- ----------
----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
20
MARYLAND MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994*
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------
Net investment income $ 1,952,599 $ 735,164
- -------------------------------------------------------- ---------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------
Distributions from net investment income (1,952,599) (735,164)
- -------------------------------------------------------- ---------------- -----------------
SHARE TRANSACTIONS--
- --------------------------------------------------------
Proceeds from sale of shares 180,327,160 231,266,672
- --------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 1,800,625 596,061
- --------------------------------------------------------
Cost of shares redeemed (187,002,830) (175,587,494)
- -------------------------------------------------------- ---------------- -----------------
Change in net assets resulting from share
transactions (4,875,045) 56,275,239
- -------------------------------------------------------- ---------------- -----------------
Change in net assets (4,875,045) 56,275,239
- --------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------
Beginning of period 56,275,239 0
- -------------------------------------------------------- ---------------- -----------------
End of period $ 51,400,194 $ 56,275,239
- -------------------------------------------------------- ---------------- -----------------
---------------- -----------------
</TABLE>
* For the period from April 25, 1994 (start of business) to October 31, 1994.
(See Notes which are an integral part of the Financial Statements)
21
MARYLAND MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Maryland Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
55.2% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or supported (backed) by a letter of credit for any one institution or
agency does not exceed 8.3% of total investments.
22
MARYLAND MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
RESTRICTED SECURITIES--Restricted securities are securities that may only be
resold upon registration under federal securities laws or in transactions
exempt from such registration. Many restricted securities may be resold in
the secondary market in transactions exempt from registration. In some
cases, the restricted securities may be resold without registration upon
exercise of a demand feature. Such restricted securities may be determined
to be liquid under criteria established by the Board of Trustees. The Trust
will not incur any registration costs upon such resales. Restricted
securities are valued at amortized cost in accordance with Rule 2a-7 under
the Investment Company Act of 1940.
Additional information on each restricted security held at October 31, 1995
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
-------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Baltimore County, Md, Puttable T-E Rec, Series 20 August 11, 1994 $3,000,000
</TABLE>
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
October 31, 1995, capital paid-in aggregated $51,400,194. Transactions in shares
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994(a)
- --------------------------------------------- ---------------- --------------------
<S> <C> <C>
Shares sold 180,327,160 231,266,672
- ---------------------------------------------
Shares issued to shareholders in payment of
distributions declared 1,800,625 596,061
- ---------------------------------------------
Shares redeemed (187,002,830) (175,587,494)
- --------------------------------------------- ---------------- --------------------
Net change resulting from share
transactions (4,875,045) 56,275,239
- --------------------------------------------- ---------------- --------------------
---------------- --------------------
</TABLE>
(a) For the period from April 25, 1994 (start of business) to October 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .50 of 1% of the Fund's average
23
MARYLAND MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
daily net assets. The Adviser may voluntarily choose to waive any portion of its
fee and/or reimburse certain operating expenses of the Fund. The Adviser can
modify or terminate this voluntary waiver and/or reimbursement at any time at
its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS,") the Fund will pay FSS up to .25 of
1% of daily average net assets of the Trust for the period. This fee is to
obtain certain services for shareholders and to maintain shareholder accounts.
FSS may voluntarily choose to waive a portion of its fee. FSS can modify or
terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $14,426 and start-up
administrative service expenses of $31,506 were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational expenses and
start-up administrative expenses during the five year period following effective
date. For the period ended October 31, 1995, the Fund paid $1,523 and $3,326,
respectively, pursuant to this agreement
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common Officers. These
transactions were made at current market value pursuant to Rule 17a-7 under the
Act amounting to $151,635,000 and $168,035,000 respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors of the above companies.
24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Maryland Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of Maryland
Municipal Cash Trust (an investment portfolio of Federated Municipal Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of October 31, 1995, the related statement of operations for the year then
ended, and the statement of changes in net assets and the financial highlights
(see page 2 of the prospectus) for the periods presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Maryland Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
25
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Maryland Municipal Cash Trust Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
- --------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- --------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Plaza
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
</TABLE>
26
- --------------------------------------------------------------------------------
MARYLAND MUNICIPAL
CASH TRUST
PROSPECTUS
A Non-Diversified Portfolio
of Federated Municipal
Trust, an Open-End
Management Investment
Company
Prospectus dated December
31, 1995
[FEDERATED SECURITIES CORP. LOGO]
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 314229774
G00105-01-A (12/95) [RECYCLED PAPER LOGO]
RECYCLED
MARYLAND MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus
of Maryland Municipal Cash Trust (the "Fund"), a portfolio of Federated
Municipal Trust (the "Trust") dated December 31, 1995. This Statement is
not a prospectus. You may request a copy of the prospectus or a paper copy
of this Statement, if you have received it electronically, free of charge
by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated December 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated Investors
INVESTMENT POLICIES 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
Ratings 2
When-Issued and Delayed
Delivery Transactions 3
Repurchase Agreements 3
Reverse Repurchase Agreements 3
Credit Enhancement 4
MARYLAND INVESTMENT RISKS 4
INVESTMENT LIMITATIONS 6
Regulatory Compliance 9
FEDERATED MUNICIPAL TRUST
MANAGEMENT 9
Share Ownership 18
Trustees Compensation 18
Trustee Liability 20
INVESTMENT ADVISORY SERVICES 20
Investment Adviser 20
Advisory Fees 20
BROKERAGE TRANSACTIONS 21
OTHER SERVICES 22
Fund Administration 22
Custodian and Portfolio
Recordkeeper 23
Transfer Agent 23
Independent Public Accountants 23
SHAREHOLDER SERVICES AGREEMENT 23
DETERMINING NET ASSET VALUE 24
REDEMPTION IN KIND 25
MASSACHUSETTS PARTNERSHIP LAW 25
THE FUND'S TAX STATUS 26
PERFORMANCE INFORMATION 26
Yield 26
Effective Yield 27
Tax-Equivalent Yield 27
Tax-Equivalency Table 27
Total Return 29
Performance Comparisons 30
ABOUT FEDERATED INVESTORS 30
APPENDIX 32
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by the
Board of Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or any
guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation interests
frequently provide or secure from another financial institution irrevocable
letters of credit or guarantees and give the Fund the right to demand payment of
the principal amounts of the participation interests plus accrued interest on
short notice (usually within seven days). The municipal securities subject to
the participation interests are not limited to the Fund's maximum maturity
requirements so long as the participation interests include the right to demand
payment from the issuers of those interests. By purchasing these participation
interests, the Fund is buying a security meeting the maturity and quality
requirements of the Fund and also is receiving the tax-free benefits of the
underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments by
a governmental or nonprofit entity. The lease payments and other rights under
the lease provide for and secure payments on the certificates. Lease obligations
may be limited by municipal charter or the nature of the appropriation for the
lease. Furthermore, a lease may provide that the participants cannot accelerate
lease obligations upon default. The participants would only be able to enforce
lease payments as they became due. In the event of a default or failure of
appropriation, unless the participation interests are credit enhanced, it is
unlikely that the participants would be able to obtain an acceptable substitute
source of payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Board of Trustees, will base its
determination on the following factors: whether the lease can be terminated by
the lessee; the potential recovery, if any, from a sale of the leased property
upon termination of the lease; the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and prospects); the
likelihood that the lessee will discontinue appropriating funding for the leased
property because the property is no longer deemed essential to its operations
(e.g., the potential for an "event of non-appropriation"); and any credit
enhancement or legal recourse provided upon an event of non-appropriation or
other termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two highest
short-term rating categories by one or more nationally recognized statistical
rating organizations ("NRSROs") or be of comparable quality to securities having
such ratings. An NRSRO's two highest rating categories are determined without
regard for sub-categories and gradations. For example, securities rated SP-1+,
SP-1, or SP-2 by Standard & Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by
Moody's Investors Service, Inc. ("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch
Investors Service, Inc. ("Fitch") are all considered rated in one of the two
highest short-term rating categories. The Fund will follow applicable
regulations in determining whether a security rated by more than one NRSRO can
be treated as being in one of the two highest short-term rating categories;
currently, such securities must be rated by two NRSROs in one of their two
highest rating categories. See "Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund`s
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities to
the Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. The Fund or its custodian will take possession
of the securities subject to repurchase agreements, and these securities will be
marked to market daily. In the event that a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the Fund might
be delayed pending court action. The Fund believes that under the regular
procedures normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Fund and allow retention or disposition of such securities. The
Fund will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the Fund's
adviser to be creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument in return for a percentage of the
instrument's market value in cash and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but does not ensure
this result. When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the obligations to be
purchased, are: segregated on the Fund's records at the trade date; marked to
market daily; and maintained until the transaction is settled.
CREDIT ENHANCEMENT
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.
MARYLAND INVESTMENT RISKS
The state of Maryland's economy differs from that of the nation, with a heavier
dependence on government, services (particularly business, engineering, and
management services), and trade than the typical state and less reliance on
manufacturing. The state's economic structure reflects its proximity to
Washington D.C. with one-tenth of civilian wages paid in the state coming from
federal agencies located in Maryland and 10% of Maryland's personal income
originating from jobs in the District of Columbia. Although this structure adds
a degree of concentration risk, the wages earned by Maryland's federal workers
also contributes to the state's above average income and below average
unemployment figures. In 1993, Maryland's per capita personal income was the
fifth highest in the nation. Although the Maryland economy is rebounding from
the recession in the early 1990s, the pace of job growth has trailed that of the
nation. This weakness is expected to continue and is largely attributable to
the recent restructuring within the government and defense-related industries.
State finances are well-managed with strong administrative control exercised by
the State Board of Public Works, which is comprised of the governor, the
treasurer, and the controller. The revenue stream is well diversified relying
heavily on sales, income and a variety of other taxes (including a state
property tax). The finances of the state have improved significantly since the
recession in the early 1990s. The state went from a significant deficit
position in 1992 to a healthy surplus in both 1994 and 1995. Although Maryland
remains one of the nations more indebted states, it has restrained borrowings in
recent years resulting in a more modest debt burden. Maryland relies on its
Debt Affordability Committee to formulate annual guidelines for prudent debt
issuance. For fiscal year 1996, the state legislature mandated that the state
fund a State Reserve Fund and a revenue stabilization account. These funds
should provide an additional cushion in the case of future financial hardships.
The Fund's concentration in securities issued by the state and its political
subdivisions provide a greater level of risk than a fund which is diversified
across a number of states and municipal entities. The ability of the state or
its municipalities to meet their obligations will depend on the availability of
tax and other revenues; economic, political, and demographic conditions within
the state; and the underlying fiscal condition of the state, its counties, and
its municipalities.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for clearance
of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow money
directly or through reverse repurchase agreements in amounts up to one-third of
the value of its net assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is deemed
to be inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of 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 Maryland municipal securities or temporary investments or
enter into repurchase agreements in accordance with its investment objective,
policies, and limitations, and its Declaration of Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate or real estate limited
partnerships, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
sale of securities in accordance with its investment objective, policies, and
limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities, if as a result of such purchase, 25% or
more of the value of its total assets would be invested in any one industry or
in industrial development bonds or other securities, the interest upon which is
paid from revenues of similar types of projects. However, the Fund may invest as
temporary investments more than 25% of the value of its assets in cash or cash
items, securities issued or guaranteed by the U.S. government, its agencies, or
instrumentalities, or instruments secured by these money market instruments,
such as repurchase agreements.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities subject
to restrictions on resale under federal securities law, except for restricted
securities determined to be liquid under criteria established by the Trustees.
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
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 associations 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.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940. In particular, the Fund will comply
with the various requirements of Rule 2a-7, 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.
FEDERATED MUNICIPAL TRUST MANAGEMENT
OFFICERS AND TRUSTEES ARE LISTED WITH THEIR ADDRESSES, BIRTHDATES, PRESENT
POSITIONS WITH FEDERATED MUNICIPAL TRUST, AND PRINCIPAL OCCUPATIONS.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management Advisory
Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global 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 of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Services Company; Chairman, Treasurer, and Trustee, Federated Administrative
Services; Trustee or Director of some of the Funds; President, Executive Vice
President and Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors; Controller,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., and Passport Research, Ltd.; Senior Vice President, Federated Shareholder
Services; Vice President, Federated Administrative Services; Treasurer of some
of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President, Secretary,
and Trustee, Federated Administrative Services; President and Trustee, Federated
Shareholder Services; Director, Federated Securities Corp.; Executive Vice
President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between meetings
of the Board.
As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies: American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; Automated Government Money Trust; Blanchard Funds;
Blanchard Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series, Inc.;
DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Master Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 3-5 Years; First Priority Funds;
Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund,
Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund
for U.S. Government Securities, Inc.; Government Income Securities, Inc.; High
Yield Cash Trust; Insurance Management Series; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty Municipal Securities Fund, Inc.; Liberty U.S. Government Money Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; 111 Corcoran Funds; Peachtree Funds; The Planters Funds; RIMCO
Monument Funds; The Shawmut Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for Financial
Institutions; Trust For Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; The Virtus Funds;
World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.
As of December 4, 1995, the following shareholders of record owned 5% or more of
the outstanding shares of the Maryland Municipal Cash Trust: United
Communications Group, Rockville, MD, 14.25%; Charles Bresler, Washington, D.C.,
14.56%; and James G. Robinson, Baltimore, MD, 16.97%.
TRUSTEES COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
<S> <C> <C>
John F. Donahue $0 $0 for the Trust and
Chairman and Trustee
68 other investment companies in the Fund Complex
Thomas G. Bigley $2,458 $20,688 for the Trust and
Trustee 49 other investment companies in the Fund Complex
John T. Conroy, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
William J. Copeland $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Glen R. Johnson $0 $0 for the Trust and
President and Trustee
14 other investment companies in the Fund Complex
James E. Dowd $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $3,166
$106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Edward L. Flaherty, Jr. $3,520
$117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Peter E. Madden $2,757 $90,563 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Gregor F. Meyer $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
John E. Murray, Jr., $1,762
$0 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Wesley W. Posvar $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Marjorie P. Smuts $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
</TABLE>
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of 15
portfolios.
+The information is provided for the last calendar year.
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 the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the fiscal year ended October
31, 1995, and for the period from April 25, 1994 (start of business), to October
31, 1994, the adviser earned $296,327, and $137,219, respectively, of which
$295,202, and $137,147, respectively, were waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses) exceed
2-1/2% per year of the first $30 million of average net assets, 2% per year
of the next $70 million of average net assets, and 1-1/2% per year of the
remaining average net assets, the adviser will reimburse the Fund for its
expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this limitation,
the investment advisory fee paid will be reduced by the amount of the
excess, subject to an annual adjustment. If the expense limitation is
exceeded, the amount to be reimbursed by the adviser will be limited, in
any single fiscal year, by the amount of the investment advisory fees.
This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Board of Trustees. The adviser may select brokers
and dealers who offer brokerage and research services. These services may be
furnished directly to the Fund or to the adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the adviser or its affiliates in advising the 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
year ended October 31, 1995, and for the period from May 9, 1994 (date of
initial public investment), to October 31, 1994, the Fund paid no brokerage
commissions.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Fund's Administrator.
(For purposes of this Statement of Additional Information, Federated
Administrative Services and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the "Administrators.") For the fiscal
year ended October 31, 1995, and for the period from April 25, 1994 (start of
business), to October 31, 1994, the Administrators earned $125,000, and $20,890,
respectively. Dr. Henry J. Gailliot, an officer of Federated Management, the
adviser to the Fund, holds approximately 20% of the outstanding common stock and
serves as a director of Commercial Data Services, Inc., a company which provides
computer processing services to Federated Administrative Services.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Fund. It also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments.
TRANSFER AGENT
As transfer agent, Federated Services Company maintains all necessary
shareholder records. For its services, the transfer agent receives a fee based
on size, type, and number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
SHAREHOLDER SERVICES AGREEMENT
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 Agreement, 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 year ending October 31, 1995, the Fund paid Shareholder Services fees
in the amount of $148,133, of which $4,024 was waived.
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.
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.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average portfolio
maturity; type of instruments in which the portfolio is invested; changes in
interest rates; changes in expenses; and the relative amount of cash flow. To
the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in shares of
the Fund, the performance will be reduced for those shareholders paying those
fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding capital
changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.
The Fund's yield for the seven-day period ended October 31, 1995, was 3.35%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended October 31, 1995, was
3.41%.
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, 1995,
was 5.55%.
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 MARYLAND
INCLUDING LOCAL INCOME TAX
COMBINED FEDERAL, STATE, AND COUNTY INCOME TAX BRACKET:
22.50% 35.50% 38.50% 40.00% 45.00%
48.60%
SINGLE $1- $23,351- $56,551- $100,001-
$117,951- OVER
RETURN 23,350 56,550 100,000 117,950
256,500 256,500
Tax-Exempt
Yield Taxable Yield Equivalent
2.00% 2.58% 3.10% 3.25% 3.33% 3.64%
3.89%
2.50% 3.23% 3.88% 4.07% 4.17% 4.55%
4.86%
3.00% 3.87% 4.65% 4.88% 5.00% 5.45%
5.84%
3.50% 4.52% 5.43% 5.69% 5.83% 6.36%
6.81%
4.00% 5.16% 6.20% 6.50% 6.67% 7.27%
7.78%
4.50% 5.81% 6.98% 7.32% 7.50% 8.18%
8.75%
5.00% 6.45% 7.75% 8.13% 8.33% 9.09%
9.73%
5.50% 7.10% 8.53% 8.94% 9.17% 10.00% 10.70%
6.00% 7.74% 9.30% 9.76% 10.00% 10.91% 11.67%
6.50% 8.39% 10.08% 10.57% 10.83% 11.82% 12.65%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state and
local taxes paid on comparable taxable investments were not used to
increase federal deductions. The local income tax rate is assumed to be 50%
of the state rate for all counties excluding Alleghany, Baltimore,
Montgomery, Prince George's, Talbot and Worcester.
The chart above is for illustrative purposes only. It is not an indicator
of past or future performance of Fund shares.
* Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a given
period that would equate a $1,000 initial investment to the ending redeemable
value of that investment. The ending redeemable value is computed by multiplying
the number of shares owned at the end of the period by the net asset value per
share at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of the period
with $1,000, adjusted over the period by any additional shares, assuming the
monthly reinvestment of all dividends and distributions.
The Fund's average annual total returns for the one-year period ended October
31, 1995, and for the period from May 9, 1994 (date of initial public
investment), through October 31, 1995, were 3.36% and 3.16%, respectively.
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
O LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports monthly
and 12-month-to-date investment results for the same money funds.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making-structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of competitive
investment products that have gained the confidence of thousands of clients and
their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the mutual
fund industry in 1974 with the creation of the first institutional money market
fund. Simultaneously, the company pioneered the use of the amortized cost method
of accounting for valuing shares of money market funds, a principal means used
by money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1994, Federated Investors managed more than $31 billion in assets across
approximately 43 money market funds, including 17 government, 8 prime and 18
municipal with assets approximating $17 billion, $7.4 billion and $6.6 billion,
respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
*Source: Investment Company Institute
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Mark R. Gensheimer, Executive
Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1
Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a
plus sign (+) designation.
SP-2
Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the long-
term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1
This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2
Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
LONG-TERM DEBT RATINGS
AAA
Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is
extremely strong.
AA
Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest
rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1
This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
AAA/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1
Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries,
high rates of return on funds employed, conservative capitalization
structure with moderate reliance on debt and ample asset protection, broad
margins in earning coverage of fixed financial charges and high internal
cash generation, well-established access to a range of financial markets
and assured sources of alternate liquidity
P-2
Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
LONG-TERM DEBT RATINGS
AAA
Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes is can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to
securities rated A-1 or P-1.
NR(1)
The underlying issuer/obligor/guarantor has other outstanding debt rated
"AAA" by S&P or "AAA" by Moody's.
NR(2)
The underlying issuer/obligor/guarantor has other outstanding debt rated
"AA" by S&P or "AA" by Moody's.
NR(3)
The underlying issuer/obligor/guarantor has other outstanding debt rated
"A" by S&P or Moody's.
Cusip 314229774
CALIFORNIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
PROSPECTUS
The shares of California Municipal Cash Trust (the "Fund") offered by this
prospectus represent interests in a non-diversified portfolio of Federated
Municipal Trust (the "Trust"), an open-end management investment company (a
mutual fund). The Fund invests primarily in short-term California municipal
securities, including securities of states, territories, and possessions of the
United States which are not issued by or on behalf of California, or its
political subdivisions and financing authorities, but which provide income
exempt from federal regular income tax and the personal income taxes imposed by
the State of California consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
California Municipal Securities 5
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Shares 8
Administration of the Fund 8
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 9
- ------------------------------------------------------
Special Purchases Features 10
HOW TO REDEEM SHARES 10
- ------------------------------------------------------
Special Redemption Features 11
ACCOUNT AND SHARE INFORMATION 12
- ------------------------------------------------------
TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
State and Local Taxes 13
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
FINANCIAL STATEMENTS 15
- ------------------------------------------------------
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS 27
- ------------------------------------------------------
ADDRESSES 28
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................................ None
Maximum Sales Charge 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)............................................. 0.07%
12b-1 Fee.................................................................... None
Total Other Expenses......................................................... 0.52%
Shareholder Services Fee (after waiver)(2)......................... 0.18%
Total 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 operating expenses would have been 1.09% absent the voluntary
waivers of a portion of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Fund Information." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ---------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period......... $6 $19 $33 $ 74
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
CALIFORNIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 27.
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED YEAR ENDED SEPTEMBER 30,
OCTOBER 31, OCTOBER 31, --------------------------------------------------------
1995 1994(A) 1994 1993 1992 1991 1990 1989(B)
----------- ------------- ----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------
Net investment income 0.03 0.002 0.02 0.02 0.03 0.04 0.05 0.03
- --------------------------------
Net realized loss on
investments (0.01) -- -- -- -- -- -- --
- -------------------------------- ------- -------- ---- ---- ---- ---- ---- -----
Total from investment
operations 0.02 0.002 0.02 0.02 0.03 0.04 0.05 0.03
- -------------------------------- ------- -------- ---- ---- ---- ---- ---- -----
CAPITAL CONTRIBUTION 0.01 -- -- -- -- -- -- --
- -------------------------------- ------- -------- ---- ---- ---- ---- ---- -----
LESS DISTRIBUTIONS
- --------------------------------
Distributions from net
investment income (0.03) (0.002) (0.02) (0.02) (0.03) (0.04) (0.05) (0.03)
- -------------------------------- ------- --------- ---- ---- ---- ---- ---- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------- ------- -------- ---- ---- ---- ---- ---- -----
TOTAL RETURN (C) 3.37% 0.23% 2.07% 2.03% 2.83% 4.30% 5.38% 2.95%
- --------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------
Expenses 0.59% 0.59%* 0.58% 0.54% 0.45% 0.35% 0.38% 0.40%*
- --------------------------------
Net investment income 3.33% 2.71%* 2.03% 2.00% 2.76% 4.19% 5.27% 5.86%*
- --------------------------------
Expense waiver/ reimbursement
(d) 0.50% 0.44%* 0.40% 0.35% 0.58% 0.75% 0.86% 0.89%*
- --------------------------------
SUPPLEMENTAL DATA
- --------------------------------
Net assets, end of period (000
omitted) $96,534 $81,563 $74,707 $104,322 $59,709 $56,754 $50,391 $36,628
- --------------------------------
</TABLE>
* Computed on an annualized basis.
(a) For the one month ended October 31, 1994. The Fund changed its fiscal
year-end from September 30, to October 31, beginning September 30, 1994.
(b) Reflects operations for the period from March 15, 1989 (date of initial
public offering) to September 30, 1989.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The Fund is designed for banks and other institutions that hold
assets for individuals, trusts, estates, or partnerships as a convenient means
of accumulating an interest in a professionally managed, non-diversified
portfolio investing primarily in short-term California municipal securities. The
Fund may not be a suitable investment for retirement plans or for non-California
taxpayers because it invests in municipal securities of that state. A minimum
initial investment of $25,000 within a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the personal income taxes imposed by the State of
California consistent with stability of principal. This investment objective
cannot be changed without shareholder approval. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
complying with the various requirements of Rule 2a-7 under the Investment
Company Act of 1940 which regulates money market mutual funds and by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
California municipal securities (as defined below) maturing in 13 months or
less. As a matter of investment policy, which cannot be changed without
shareholder approval, at least 80% of the Fund's annual interest income will be
exempt from federal regular income tax and California state income tax (Federal
regular income tax does not include the federal individual alternative minimum
tax or the federal alternative minimum tax for corporations.) The average
maturity of the securities in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies may be changed by the Trustees without shareholder approval.
Shareholders will be notified before any material change in these policies
becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of California and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and California state income tax imposed upon non-corporate taxpayers
("California Municipal Securities"). Examples of California Municipal Securities
include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in California
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying California Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; 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 California
Municipal Securities is subject to the federal alternative minimum tax.
CALIFORNIA MUNICIPAL SECURITIES
California Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer
works. They are also issued to repay outstanding obligations, to raise funds for
general operating expenses, and to make loans to other public institutions and
facilities.
California Municipal Securities include industrial development bonds issued by
or on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of California Municipal Securities are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed by
the bond or other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or charge against the general revenues of
a municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on California Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of California Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of California
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in California Municipal Securities which are repayable out
of revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
California Municipal Securities could involve an increased risk to the Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of California Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge up to 15% of the value of those assets to secure such
borrowings. These investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management
who founded the company in 1955. Federated funds are presently at work in
and through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to .25 of 1% of the average
daily net asset value of Fund shares, computed at an annual rate, to obtain
certain personal services for shareholders and provide maintenance of
shareholder accounts ("shareholder services"). From time to time and for such
periods as deemed appropriate, the amount stated above may be reduced
voluntarily.
Under the Shareholder Services Agreement, Federated Shareholder Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting ser-
vices) necessary to operate the Fund. Federated Administrative Services provides
these at an annual rate as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
----------- -----------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Fund cannot
guarantee that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 9:00 a.m., (Pacific time) (12:00 noon
Eastern time), 10:00 a.m. Pacific time (1:00 p.m. Eastern time), and as of the
close of trading (normally 1:00 p.m. Pacific time or 4:00 p.m., Eastern time) on
the New York Stock Exchange, Monday through Friday, except on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days which the New York Stock Exchange
is 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 or more
within a 90-day period. Financial institutions may impose different minimum
investment requirements on their customers.
In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before shares can be purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may purchase
shares through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives payment by
wire or converts payment by check from the financial institution
into federal funds. It is the financial institution's responsibility to transmit
orders promptly. Financial institutions may charge additional fees for their
services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling the Fund
before 10:00 p.m. Pacific time (1:00 p.m. Eastern time). The order is considered
received immediately. Payment by federal funds must be received before 12:00
noon Pacific time (3:00 p.m. Eastern time) in order to begin earning dividends
that same day. Federal funds should be wired as follows: Federated Services
Company, c/o State Street Bank and Trust Company, Boston, MA; Attention:
EDGEWIRE; For Credit to: California Municipal Cash Trust ; Fund Number (This
number can be found on the account statement or by contacting the Fund.); Group
Number or Order Number; Nominee or Institution Name; and ABA Number 011000028.
Shares cannot be purchased by wire on holidays when wire transfers are
restricted. Questions on wire purchases should be directed to your shareholder
services representative at the telephone number listed on your account
statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to California Municipal Cash Trust. 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 9:00 a.m. Pacific time (12:00 noon Eastern time) will
be wired the same day to the shareholder's account at a domestic commercial bank
which is a member of the Federal Reserve System, but will not include that day's
dividend. Proceeds from redemption requests received after that time include
that day's dividend but will be wired the following business day. Proceeds from
redemption requests received on holidays when wire transfers are restricted will
be wired the following business day. Questions about telephone redemptions on
days when wire transfers are restricted should be directed to your shareholder
services representative at the telephone number listed on your account
statement. Under limited circumstances, arrangements may be made with the
distributor for same-day payment of proceeds, without that day's dividend, for
redemption requests received before 11:00 a.m. Pacific time (2 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name; the account name as registered
with the Fund; the account number; and the number of shares to be redeemed or
the dollar amount requested. All owners of the account must sign the request
exactly as the shares are registered. Normally, a check for the proceeds is
mailed within one business day, but in no event more than seven days, after the
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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. Shareholder accounts will continue to
receive the daily dividend declared on the shares to be redeemed until the check
is presented to UMB Bank, N.A., the bank responsible for administering the check
writing program, for payment. However, checks should never be made payable or
sent to UMB Bank, N.A. or the Fund to redeem shares, and a check may not be
written to close an account.
DEBIT CARD. Upon request, a debit account will be established. This account
allows shareholders to redeem shares by using a debit card. A fee will be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of at
least $25,000, a systematic withdrawal program may be established whereby
automatic redemptions are made from the account and transferred electronically
to any commercial bank, savings bank, or credit union that is an ACH member.
Shareholders may apply for participation in this program through their financial
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$25,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has 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. 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 election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Fund may purchase all types of municipal bonds, including private activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than
California. Shareholders are urged to consult their own tax advisers regarding
the status of their accounts under state and local tax laws.
CALIFORNIA TAXES. Under existing California laws, distributions made by the
Fund will not be subject to California individual income taxes to the extent
that such distributions qualify as exempt-interest dividends under the
California Revenue and Taxation Code, so long as at the close of each quarter,
at least 50 percent of the value of the total assets of the Fund consists of
obligations the interest on which is exempt from California taxation under
either the Constitution or laws of California or the Constitution or laws of the
United States. The Fund will furnish its shareholders with a written note
designating exempt-interest dividends within 60 days after the close of its
taxable year. Conversely, to the extent that distributions made by the Fund are
derived from other types of obligations, such distributions will be subject to
California individual income taxes.
Dividends of the Fund are not exempt from the California taxes payable by
corporations.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, 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.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
CALIFORNIA MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ---------- -------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPALS--99.3%
- ------------------------------------------------------------------------
CALIFORNIA--95.2%
--------------------------------------------------------
$1,100,000 California Health Facilities Financing Authority Weekly
VRDNs (FGIC INS)/(Morgan Guaranty Trust Co., New York
LIQ) VMIG1 $ 1,100,000
--------------------------------------------------------
100,000 California Health Facilities Financing Authority Weekly
VRDNs (Santa Barbara Hospital)/(Credit Suisse, Zurich
LOC) VMIG1 100,000
--------------------------------------------------------
2,400,000 California Health Facilities Financing Authority,
(Series B) Daily VRDNs (Sutter Health)/(Morgan Guaranty
Trust Co., New York LOC) VMIG1 2,400,000
--------------------------------------------------------
3,000,000 California PCFA, (Series 1988E), 3.75% CP (Pacific Gas &
Electric Co.)/(Morgan Guaranty Trust Co., New York LOC),
Mandatory Tender 1/10/1996 A-1+ 3,000,000
--------------------------------------------------------
4,400,000 California PCFA, (Series 1991) Weekly VRDNs (North
County, CA Recycling & Energy Recovery)/(Union Bank of
Switzerland, Zurich LOC) A-1+ 4,400,000
--------------------------------------------------------
1,000,000 California State, 8.50%, 11/1/1995 NR(3) 1,000,000
--------------------------------------------------------
5,000,000 California State, Revenue Anticipation Warrants (Series
C), 5.75% RANs (Bank of America NT and SA, San
Francisco, Bank of Nova Scotia, Toronto, Banque
Nationale de Paris, Canadian Imperial Bank of Commerce,
Toronto, Chemical Bank, New York, Citibank NA, New York,
Credit Suisse, Zurich, Morgan Guaranty Trust Co., New
York, National Westminster Bank, PLC, London, Societe
Generale North America, Inc., Sumitomo Bank Ltd., Osaka,
Swiss Bank Corp., Basle, Toronto-Dominion Bank and
Westdeutsche Landesbank Girozentrale LOCs), 4/25/1996 SP-1 5,021,142
--------------------------------------------------------
4,200,000 California Statewide Communities Development Authority,
(Series A) Weekly VRDNs (Barton Memorial Hospital)/
(Banque Nationale de Paris LOC) VMIG1 4,200,000
--------------------------------------------------------
4,000,000 Central Unified School District, CA, Variable Rate
Certificates of Participation (1995 Financing Project)
Weekly VRDNs (Bank of California N.A. LOC) VMIG1 4,000,000
--------------------------------------------------------
</TABLE>
CALIFORNIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ---------- -------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ------------------------------------------------------------------------
CALIFORNIA--CONTINUED
--------------------------------------------------------
$ 100,000 Kern County, CA Public Facility Corp. Weekly VRDNs
(Union Bank of Switzerland, Zurich LOC) VMIG1 $ 100,000
--------------------------------------------------------
1,300,000 Kern County, CA Public Facility Corp. Weekly VRDNs
(Union Bank of Switzerland, Zurich LOC) VMIG1 1,300,000
--------------------------------------------------------
1,000,000 Livermore Valley, CA USD, TRANs (Series 1995-96), 4.75%,
9/19/1996 MIG1 1,005,930
--------------------------------------------------------
5,000,000 Long Beach, CA Housing Authority, (1995 Series A) Weekly
VRDNs (Channel Point Apartments)/(Union Bank, San
Francisco LOC) VMIG1 5,000,000
--------------------------------------------------------
1,000,000 Los Angeles County, CA Metropolitan Transportation
Authority, 3.80% CP (ABN AMRO Bank N.V., Amsterdam, Bank
of California N.A., Banque Nationale de Paris, Canadian
Imperial Bank of Commerce, Toronto and National
Westminster Bank, PLC, London LOCs), Mandatory Tender
12/21/1995 P-1 1,000,000
--------------------------------------------------------
3,000,000 Los Angeles County, CA Metropolitan Transportation
Authority, 3.85% CP (ABN AMRO Bank N.V., Amsterdam, Bank
of California N.A., Banque Nationale de Paris, Canadian
Imperial Bank of Commerce, Toronto and National
Westminster Bank, PLC, London LOCs), Mandatory Tender
11/16/1995 P-1 3,000,000
--------------------------------------------------------
4,500,000 Los Angeles County, CA Metropolitan Transportation
Authority, General Revenue Bonds, (Series 1995-A) Weekly
VRDNs (Union Station Gateway Project)/(FSA INS)/
(Societe Generale, Paris LIQ) A-1+ 4,500,000
--------------------------------------------------------
2,400,000 Los Angeles, CA Wastewater System, 3.75% CP, Mandatory
Tender 12/12/1995 P-1 2,400,000
--------------------------------------------------------
2,000,000 Los Angeles, CA Wastewater System, 3.85% CP, Mandatory
Tender 2/21/1996 P-1 2,000,000
--------------------------------------------------------
3,000,000 (a) Los Angeles, CA Wastewater System, Tender Option
Certificates, (Series 1995D) Weekly VRDNs (MBIA
Insurance Corporation INS)/(Canadian Imperial Bank of
Commerce, Toronto LIQ) A-1+ 3,000,000
--------------------------------------------------------
</TABLE>
CALIFORNIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ---------- -------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ------------------------------------------------------------------------
CALIFORNIA--CONTINUED
--------------------------------------------------------
$2,000,000 Monterey Peninsula, CA Water Management District Weekly
VRDNs (Wastewater Reclaimation)/(Sumitomo Bank Ltd.,
Osaka LOC) VMIG1 $ 2,000,000
--------------------------------------------------------
4,000,000 Orange County, CA IDA, (Series 1985B-Niguel Summit II)
Weekly VRDNs (Hon Development Corp.)/(Bank of America NT
and SA, San Francisco LOC) VMIG1 4,000,000
--------------------------------------------------------
5,000,000 Orange County, CA IDA, (Series 1991A) Weekly VRDNs (The
Lakes)/(Citibank NA, New York LOC) A-1 5,000,000
--------------------------------------------------------
4,000,000 Orange County, CA Local Transportation Authority, Sales
Tax Revenue Notes, 3.90% CP (Industrial Bank of Japan
Ltd., Tokyo LOC), Mandatory Tender 12/14/1995 P-1 4,000,000
--------------------------------------------------------
4,250,000 Pomona, CA, 4.70% TRANs, 6/28/1996 SP-1+ 4,260,683
--------------------------------------------------------
2,400,000 Riverside County, CA, (Series A) Weekly VRDNs
(Riverside, CA Public Facility Finance)/(Sanwa Bank
Ltd., Osaka LOC) MIG1 2,400,000
--------------------------------------------------------
950,000 Roseville, CA, Hospital Facilities Authority, (Series
1989A) Weekly VRDNs (Toronto-Dominion Bank LOC) VMIG1 950,000
--------------------------------------------------------
1,600,000 Sacramento, CA, (Series 1990) Weekly VRDNs
(Administration Center & Courthouse Project)/(Union Bank
of Switzerland, Zurich LOC) VMIG1 1,600,000
--------------------------------------------------------
1,700,000 San Bernardino County, CA, (Series 1985) Weekly VRDNs
(Woodview Apartments)/(Bank of America NT and SA, San
Francisco LOC) VMIG1 1,700,000
--------------------------------------------------------
3,400,000 San Dimas, CA Redevelopment Agency, (Series 1995) Weekly
VRDNs (Diversified Shopping Center Project)/ (Morgan
Guaranty Trust Co., New York LOC) A-1+ 3,400,000
--------------------------------------------------------
1,500,000 San Francisco, CA Redevelopment Finance Agency, (Series
B1) Weekly VRDNs (Fillmore Center)/(Bank of Nova Scotia,
Toronto LOC) A-1+ 1,500,000
--------------------------------------------------------
1,000,000 Santa Clara County, CA, Housing Authority Weekly VRDNs
(Benton Park Central Apartments)/(Citibank NA, New York
LOC) P-1 1,000,000
--------------------------------------------------------
</TABLE>
CALIFORNIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ---------- -------------------------------------------------------- -------- -----------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ------------------------------------------------------------------------
CALIFORNIA--CONTINUED
--------------------------------------------------------
$1,400,000 Santa Clara County-El Comino Hospital District, CA,
(Series 1985G) Weekly VRDNs (Valley Medical
Center)/(National Westminster Bank, PLC, London LOC) A-1+ $ 1,400,000
--------------------------------------------------------
400,000 Santa Clara, CA, (Series 1985C) Weekly VRDNs (Santa
Clara, CA Electric System)/(National Westminster Bank,
PLC, London LOC) A-1+ 400,000
--------------------------------------------------------
4,000,000 Santa Cruz County, CA, 4.50% TRANs, 7/11/1996 SP-1+ 4,013,281
--------------------------------------------------------
1,500,000 Selma, CA, 4.75% TRANs, 6/30/1996 SP-1+ 1,504,106
--------------------------------------------------------
710,000 Stockton, CA, (Series 1993) Weekly VRDNs (La Quinta
Inns, Inc.)/(Nationsbank of Texas, N.A. LOC) P-1 710,000
--------------------------------------------------------
2,500,000 Temecula Valley Unified School District, CA, 4.50%
TRANs, 7/5/1996 SP-1+ 2,508,104
--------------------------------------------------------
995,000 Vallejo, CA, Commercial Development Revenue Refunding
Bonds (1994 Series A) Weekly VRDNs (Vallejo Center
Associates Project)/(Bank of Tokyo Ltd., Tokyo LOC) A-1 995,000
-------------------------------------------------------- -----------
Total 91,868,246
-------------------------------------------------------- -----------
PUERTO RICO--4.1%
--------------------------------------------------------
4,000,000 Puerto Rico Government Development Bank, 3.80% CP,
Mandatory Tender 12/8/1995 A-1+ 4,000,000
-------------------------------------------------------- -----------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $95,868,246
-------------------------------------------------------- -----------
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. This security has been determined to be
liquid under criteria established by the Board of Trustees. At the end of
the period, this security amounted to $3,000,000 which represents 3.1% of
net assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($96,533,858) at October 31, 1995.
CALIFORNIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
CP -- Commercial Paper
FGIC -- Financial Guaranty Insurance Company
FSA -- Financial Security Assurance
IDA -- Industrial Development Authority
INS -- Insured
LIQ -- Liquidity Agreement
LOCs -- Letter(s) of Credit
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
PCFA -- Pollution Control Finance Authority
PLC -- Public Limited Company
RANs -- Revenue Anticipation Notes
TRANs -- Tax and Revenue Anticipation Notes
USD -- University School District
VRDNs -- Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CALIFORNIA MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $95,868,246
- -------------------------------------------------------------------------------
Cash 267,336
- -------------------------------------------------------------------------------
Income receivable 657,697
- ------------------------------------------------------------------------------- -----------
Total assets 96,793,279
- -------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------
Payable for shares redeemed $ 9,263
- --------------------------------------------------------------------
Income distribution payable 216,978
- --------------------------------------------------------------------
Accrued expenses 33,180
- -------------------------------------------------------------------- --------
Total liabilities 259,421
- ------------------------------------------------------------------------------- -----------
NET ASSETS for 96,533,858 shares outstanding $96,533,858
- ------------------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$96,533,858 / 96,533,858 shares outstanding $1.00
- ------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CALIFORNIA MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest $3,650,873
- ------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------
Investment advisory fee $ 465,728
- ----------------------------------------------------------------------
Administrative personnel and services fee 125,000
- ----------------------------------------------------------------------
Custodian fees 28,922
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 42,992
- ----------------------------------------------------------------------
Directors'/Trustees' fees 2,208
- ----------------------------------------------------------------------
Auditing fees 18,633
- ----------------------------------------------------------------------
Legal fees 10,375
- ----------------------------------------------------------------------
Portfolio accounting fees 38,125
- ----------------------------------------------------------------------
Shareholder services fee 232,864
- ----------------------------------------------------------------------
Share registration costs 35,569
- ----------------------------------------------------------------------
Printing and postage 7,059
- ----------------------------------------------------------------------
Insurance premiums 9,767
- ----------------------------------------------------------------------
Miscellaneous 1,839
- ---------------------------------------------------------------------- ----------
Total expenses 1,019,081
- ----------------------------------------------------------------------
Waivers--
- ----------------------------------------------------------------------
Waiver of investment advisory fee $(402,906)
- ----------------------------------------------------------
Waiver of shareholder services fee (65,184)
- ---------------------------------------------------------- ---------
Total waivers (468,090)
- ---------------------------------------------------------------------- ----------
Net expenses 550,991
- ------------------------------------------------------------------------------------ ----------
Net investment income 3,099,882
- ------------------------------------------------------------------------------------ ----------
Net realized loss on investments (750,875)
- ------------------------------------------------------------------------------------ ----------
Change in net assets resulting from operations $2,349,007
- ------------------------------------------------------------------------------------ ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CALIFORNIA MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED YEAR ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994* SEPTEMBER 30, 1994
----------------- ------------------ -------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------
OPERATIONS--
- -------------------------------------
Net investment income $ 3,099,882 $ 189,550 $ 1,905,264
- -------------------------------------
Net realized gain (loss) on
investments (750,875) -- --
- ------------------------------------- ----------------- ---------------- ------------------
Change in net assets resulting
from operations 2,349,007 189,550 1,905,264
- ------------------------------------- ----------------- ---------------- ------------------
CAPITAL CONTRIBUTION 750,875 -- --
- ------------------------------------- ----------------- ---------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------
Distributions from net investment
income (3,099,882) (189,550) (1,905,264)
- ------------------------------------- ----------------- ---------------- ------------------
SHARE TRANSACTIONS--
- -------------------------------------
Proceeds from sale of shares 361,842,642 30,010,373 362,061,495
- -------------------------------------
Net asset value of shares issued to
shareholders in payment of
distributions declared 471,326 30,088 324,591
- -------------------------------------
Cost of shares redeemed (347,342,783) (23,185,135) (392,000,668)
- ------------------------------------- ----------------- ---------------- ------------------
Change in net assets resulting
from share transactions 14,971,185 6,855,326 (29,614,582)
- ------------------------------------- ----------------- ---------------- ------------------
Change in net assets 14,971,185 6,855,326 (29,614,582)
- -------------------------------------
NET ASSETS:
- -------------------------------------
Beginning of period 81,562,673 74,707,347 104,321,929
- ------------------------------------- ----------------- ---------------- ------------------
End of period $ 96,533,858 $ 81,562,673 $ 74,707,347
- ------------------------------------- ----------------- ---------------- ------------------
</TABLE>
* For the one month ended October 31, 1994.
(See Notes which are an integral part of the Financial Statements)
CALIFORNIA MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Effective August 13, 1994, California Municipal Cash Trust (the "Fund") was
reorganized into an investment portfolio of Federated Municipal Trust (the
"Trust"). The Trust is registered under the Investment Company Act of 1940, as
amended (the "Act") as an open-end, management investment company. The Trust
consists of fifteen non-diversified portfolios. The financial statements
included herein are only those of the Fund. The financial statements of the
other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
76.3% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or
CALIFORNIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
supported (backed) by a letter of credit for any one institution or agency
does not exceed 9.2% of total investments.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. Many restricted securities may
be resold in the secondary market in transactions exempt from registration.
In some cases, the restricted securities may be resold without registration
upon exercise of a demand feature. Such restricted securities may be
determined to be liquid under criteria established by the Board of
Trustees. The Trust will not incur any registration costs upon such
resales. Restricted securities are valued at amortized cost in accordance
with Rule 2a-7 under the Investment Company Act of 1940.
Additional information on each restricted security held at October 31, 1995
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
-------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Los Angeles, CA, Wastewater System, Tender Option
Certificates, (Series 1995D) Weekly VRDNs 6/1/95 $ 3,000,000\
CHANGE IN FISCAL YEAR--The Fund has changed its fiscal year-end from
September 30, to October 31, beginning September 30, 1994.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
October 31, 1995, capital paid-in aggregated $96,533,858.
Transactions in shares were as follows:
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, SEPTEMBER 30,
1995 1994* 1994
- ---------------------------------------------------- ------------ ------------ --------------
<S> <C> <C> <C>
Shares sold 361,842,642 30,010,373 362,061,495
- ----------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 471,326 30,088 324,591
- ----------------------------------------------------
Shares redeemed (347,342,783) (23,185,135) (392,000,668)
- ---------------------------------------------------- ------------ ------------ -------------
Net change resulting from share transactions 14,971,185 6,855,326 (29,614,582)
- ---------------------------------------------------- ------------ ------------ -------------
</TABLE>
* For the one month ended October 31, 1994.
CALIFORNIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of daily average net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive a portion of this fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the Fund.
This fee is based on the size, type, and number of accounts and transactions
made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
CAPITAL CONTRIBUTION--Federated Management made a capital contribution in the
amount of $750,875 to California Municipal Cash Trust during the year ended
October 31, 1995. The contribution represents the excess over fair market value
($720,000) paid by Federated Management to acquire $4,000,000 par, Orange
County, CA, Series B Bonds from the fund on July 10, 1995. The contribution also
consists of the cost of an LOC ($30,875) obtained by Federated Management on
December 7, 1994 to support the value of the Orange County Bonds. The LOC
guaranteed the principal amount of the securities in the event that the issuer
did not timely pay the principal at maturity.
These transctions resulted in a permanent book and tax difference. As such, the
paid-in-capital and accumulated net realized gain/loss accounts have been
adjusted accordingly. This adjustment did not affect net investment income, net
realized gains/losses, or net assets.
CALIFORNIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common Officers. These
transactions were made at current market value pursuant to Rule 17a-7 under the
Act amounting to $216,700,000 and $205,000,000 respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(California Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of
California Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust, a Massachusetts business trust), including the schedule of portfolio
investments, as of October 31, 1995, the related statement of operations for the
year then ended, changes in net assets for the year ended September 30, 1994,
for the period from October 1, 1994, to October 31 1994, and for the year ended
October 31, 1995, and the financial highlights (see page 2 of the prospectus)
for the periods presented. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits. The financial highlights for the periods ended September 30,
1989, through September 30, 1993, were audited by other auditors whose report
dated November 12, 1993, expressed an unqualified opinion on those financial
highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
California Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations for the year then
ended, the changes in net assets for the year ended September 30, 1994, for the
period from October 1, 1994, to October 31 1994, and for the year ended October
31, 1995, and its financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
California Municipal Cash Trust
Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
- ----------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- ----------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- ----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL
CASH TRUST
PROSPECTUS
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated December 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229766
G00329-01 (12/95)
(LOGO)
CALIFORNIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus(es) of California Municipal Cash Trust (the "Fund"), a
portfolio of Federated Municipal Trust (the "Trust") dated December 31,
1995. This Statement is not a prospectus. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated December 31, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated Investors
INVESTMENT POLICIES 2
Acceptable Investments 2
Participation Interests 2
Municipal Leases 2
Ratings 3
When-Issued and Delayed Delivery
Transactions 4
Repurchase Agreements 4
Credit Enhancement 5
CALIFORNIA INVESTMENT RISKS 5
INVESTMENT LIMITATIONS 8
Regulatory Compliance 12
FEDERATED MUNICIPAL TRUST
MANAGEMENT 6
Share Ownership 11
Trustees Compensation 22
Trustee Liability 24
INVESTMENT ADVISORY SERVICES 24
Investment Adviser 24
Advisory Fees 25
BROKERAGE TRANSACTIONS 26
OTHER SERVICES 27
Fund Administration 27
Custodian and Portfolio
Recordkeeper 28
Transfer Agent 14
Independent Public Accountants 14
SHAREHOLDER SERVICES AGREEMENT 28
DETERMINING NET ASSET VALUE 29
REDEMPTION IN KIND 30
MASSACHUSETTS PARTNERSHIP LAW 30
THE FUND'S TAX STATUS 31
PERFORMANCE INFORMATION 31
Yield 16
Effective Yield 32
Tax-Equivalent Yield 32
Tax-Equivalency Table 33
Total Return 34
Performance Comparisons 18
ABOUT FEDERATED INVESTORS 36
Mutual Fund Market 37
Institutional Clients 37
Trust Organizations 37
Broker/Dealers and Bank
Broker/Dealer Subsidiaries 37
APPENDIX 20
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by the
Board of Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or any
guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation interests
include the right to demand payment from the issuers of those interests. By
purchasing these participation interests, the Fund is buying a security
meeting the maturity and quality requirements of the Fund and also is
receiving the tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments
by a governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the
appropriation for the lease. Furthermore, a lease may provide that the
participants cannot accelerate lease obligations upon default. The
participants would only be able to enforce lease payments as they became due.
In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be terminated by
the lessee; the potential recovery, if any, from a sale of the leased property
upon termination of the lease; the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and prospects);
the likelihood that the lessee will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to its
operations (e.g., the potential for an "event of non-appropriation"); and any
credit enhancement or legal recourse provided upon an event of non-
appropriation or other termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations ("NRSROs") or be of comparable quality to
securities having such ratings. An NRSRO's two highest rating categories are
determined without regard for sub-categories and gradations. For example,
securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Ratings Group
("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or
FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all
considered rated in one of the two highest short-term rating categories. The
Fund will follow applicable regulations in determining whether a security
rated by more than one NRSRO can be treated as being in one of the two highest
short-term rating categories; currently, such securities must be rated by two
NRSROs in one of their two highest rating categories. See "Regulatory
Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the
Fund`s records at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities to
the Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. The Fund or its custodian will take
possession of the securities subject to repurchase agreements, and these
securities will be marked to market daily. In the event that a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of
the Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.
CREDIT ENHANCEMENT
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.
CALIFORNIA INVESTMENT RISKS
LIMITS ON TAXING AND SPENDING AUTHORITY
Developments in California ( the "State" or "California") which constrain the
taxing and spending authority of California governmental entities could
adversely affect the ability of such entities to meet their interest and/or
principal payment obligations on securities they have issued or will issue.
The following information constitutes only a brief summary and is not intended
as a complete description.
In 1978, a statewide referendum approved Proposition 13, an amendment to the
California Constitution limiting both the valuation of real property for
property tax purposes and the power of local taxing authorities to increase
real property tax revenues. To provide revenue to local governments,
legislation was enacted shortly thereafter providing for the redistribution to
local governments of the State's then existing surplus in its General Fund,
reallocation of revenues to local governments, and assumption by the State of
certain local government obligations. More recent California legislation has,
however, reduced State assistance payments to local governments and
reallocated a portion of such payments to the State's General Fund.
In 1979, California voters amended the California Constitution again by
passing Article XIII B, which imposes an appropriations limit on the spending
authority of certain State and local government entities. The State's
appropriations limit is based on its 1978-1979 fiscal year authorizations to
expend proceeds of taxes and is adjusted annually to reflect changes in cost
of living and population and transfer of financial responsibility from one
governmental unit to another. If a California governmental entity raises
revenues beyond its appropriations limit, the excess must be returned to the
entity's taxpayers within the two subsequent fiscal years, generally by a tax
credit, refund, or temporary suspension of tax rates or fee schedules. These
spending limitations do not, however, apply to the debt service on obligations
existing or legally authorized as of January 1, 1979, or on bonded
indebtedness thereafter approved by the voters.
In November 1988, California voters approved Proposition 98. This initiative
requires that revenues in excess of amounts permitted to be spent, and which
would otherwise be returned by revision of tax rates or fee schedules, be
transferred and allocated (up to a maximum of 4%) to the State School Fund and
be expended solely for purposes of instructional improvement and
accountability. Any funds allocated to the State school fund shall cause the
appropriation limits to be annually increased for any such allocation made in
the prior year. Proposition 98 also requires the State to provide a minimum
level of funding for public schools and community colleges. The initiative
permits the enactment of legislation, by a two-thirds vote, to suspend the
minimum funding requirement for one year.
On September 28, 1995, the California Supreme Court upheld the
constitutionality of Proposition 62. This referendum was approved by the
State's voters in 1986, but not enforced due to previous judicial decisions.
Proposition 62 requires a two-thirds voter approval for special taxes and a
new simple majority approval for general municipal purposes. The future effect
of Proposition 62 on the financial performance of California local governments
and on note and debt security in unclear. It is possible that court
challenges, based on Proposition 62, to taxes raised or imposed after 1986,
may reduce general municipal revenues available for financing municipal
operations and services, including repayment of tax anticipation notes and
other forms of debt such as certificates of participation.
The effect of these various constitutional and statutory changes upon the
ability of California municipal securities issuers to pay interest and
principal on their obligations remains unclear. Furthermore, other measures
affecting the taxing or spending authority of California or its political
subdivisions may be approved or enacted in the future.
ECONOMIC DEVELOPMENTS
The California economy is in recovery. Statewide unemployment in September,
1995 was one full percentage point lower that in September, 1994. Major
sectors of employment growth have been high tech industries and motion picture
production. Gains in these and other sectors have more than offset continued
job losses in the aerospace and financial services industries. Other positive
economic developments include greatly increased exports, new home construction
and retail sales.
As a result of the improvement in the economy, tax revenues have been higher
than budgeted. In the first quarter of fiscal year 1996, the State's General
(operating) Fund revenues were $525 million (5.3%) above the budget forecast.
Financial challenges clearly remain, as the budget for fiscal year 1996
appears to reflect optimism about certain revenue sources, most notably
federal government aid for illegal immigrants.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for clearance
of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money in amounts up to one-third of the value of its net assets, including the
amounts borrowed.
The Fund will not borrow money for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate management of
the portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while borrowings in
excess of 5% of the value of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings. In those cases, it may pledge assets
having a market value not exceeding the lesser of the dollar amounts borrowed
or 15% of the value of total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may acquire publicly
or non-publicly issued California municipal securities or temporary
investments or enter into repurchase agreements, in accordance with its
investment objective, policies, limitations, and the Trust's Declaration of
Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, although it may invest in
securities of issuers whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or interests in real
estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase, 25% or
more of the value of its total assets would be invested in any one industry,
or in industrial development bonds or other securities, the interest upon
which is paid from revenues of similar types of projects. However, the Fund
may invest as temporary investments more than 25% of the value of its assets
in cash or certain money market instruments, securities issued or guaranteed
by the U.S. government, its agencies or instrumentalities, or instruments
secured by these money market instruments, such as repurchase agreements.
INVESTMENTS IN ANY ONE ISSUER
With respect to securities comprising 75% of its assets, the Fund will not
invest more than 10% of its total assets in the securities of any one issuer
(except cash and cash items, repurchase agreements collateralized by U.S.
government securities, and U.S. government obligations).
Under this limitation, each governmental subdivision, including states,
territories, possessions of the United States, or their political
subdivisions, agencies, authorities, instrumentalities, or similar entities,
will be considered a separate issuer if its assets and revenues are separate
from those of the government body creating it and the security is backed only
by its own assets and revenues.
Industrial development bonds backed only by the assets and revenues of a non-
governmental user are considered to be issued solely by that user. If in the
case of an industrial development bond or government- issued security, a
governmental or other entity guarantees the security, such guarantee would be
considered a separate security issued by the guarantor, as well as the other
issuer, subject to limited exclusions allowed by the Investment Company Act of
1940.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under federal securities law, except for
restricted securities determined to be liquid under criteria established by
the Trustees.
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 association having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items." Except
with respect to borrowing money, if a percentage limitation is adhered to at
the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
limitation.
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.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in its
prospectus and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940. In particular, the Fund
will comply with the various requirements of Rule 2a-7, 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.
FEDERATED MUNICIPAL TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive
Vice President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative
Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; founding Chairman, National Advisory
Council for Environmental Policy and Technology and Federal Emergency
Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global 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 of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Services Company; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice President,
Federated Shareholder Services; Vice President, Federated Administrative
Services; Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; President and
Trustee, Federated Shareholder Services; Director, Federated Securities Corp.;
Executive Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 3-5 Years; First Priority Funds; Fixed Income Securities, Inc.; Fortress
Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund,
Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash Trust; Insurance
Management Series; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity Income
Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities
Fund, Inc.; Liberty U.S. Government Money Market Trust; Liberty Term Trust,
Inc. - 1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; 111 Corcoran
Funds; Peachtree Funds; The Planters Funds; RIMCO Monument Funds; The Shawmut
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; Trademark Funds; Trust for Financial Institutions; Trust For Government
Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; The Virtus Funds; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.
As of December 4, 1995, the following shareholder(s) of record owned 5% or
more of the outstanding shares of the California Municipal Cash Trust:
Citibank NA, Long Island City, NY, 22.15%; Fiduciary Trust Co. International,
New York, NY, 16.58%; REPUB & Co. Los Angeles, CA, 8.09%; Borel Bank & Trust,
San Mateo, CA, 7.65%, First Interstate Bank, Calabasas, CA, 7.15%; and Piper
Jaffray Inc., Minneapolis, MN, 6.45%.
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 68 other investment companies in the
Fund Complex
Thomas G. Bigley $2,458 $20,688 for the Trust and
Trustee 49 other investment companies in the Fund
Complex
John T. Conroy, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
William J. Copeland $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Glen R. Johnson $0 $0 for the Trust and
President and Trustee 14 other investment companies in the
Fund Complex
James E. Dowd $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D. $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Peter E. Madden $2,757 $90,563 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Gregor F. Meyer $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,762 $0 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Wesley W. Posvar $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Marjorie P. Smuts $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of
fifteen portfolios.
+The information is provided for the last calendar year.
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 the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the fiscal year ended October
31, 1995, and for the period from October 1, 1994 to October 31, 1994, the
adviser earned $465,758 and $34,909, respectively, of which $402,906 and
$30,860, respectively, were waived. For the fiscal year ended September 30,
1994 and 1993, the adviser earned $469,163 and $541,209, respectively, of
which $370,160 and $376,910, respectively, were waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1-1/2% per
year of the remaining average net assets, the adviser will reimburse the
Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
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 year ended October 31, 1995, and for the period
from October 1, 1994 to October 31, 1994, as well as the fiscal years ended
September 30, 1994 and 1993, 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.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus Prior to March 1, 1994, Federated Administrative
Services, Inc., also a subsidiary of Federated Investors, served as the Fund's
Administrator. (For purposes of this Statement of Additional Information,
Federated Administrative Services and Federated Administrative Services, Inc.
may hereinafter collectively be referred to as the "Administrators".) For the
fiscal year ended October 31, 1995, and for the period from October 1, 1994 to
October 31, 1994, Federated Administrative Services earned $125,000 and
$10,617, respectively. For the fiscal year ended September 30, 1994, the
Administrators collectively earned $178,552. For the fiscal year ended
September 30, 1993, Federated Administrative Services, Inc., earned $235,058.
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 the size, type and number of accounts and transactions made by
shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
SHAREHOLDER SERVICES AGREEMENT
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 balances;
answering routine client inquiries; and assisting clients in changing dividend
options, account designations, and addresses. By adopting the Shareholder
Services Agreement, the Trustees expect 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 year ended October 31, 1995, the Fund paid shareholder services
fees in the amount of $232,864, of which $65,184 were waived.
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.
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.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its net
income earned during the year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers charge
fees in connection with services provided in conjunction with an investment in
shares of the Fund, the performance will be reduced for those shareholders
paying those fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding
capital changes but including the value of any additional shares purchased
with dividends earned from the original one share and all dividends declared
on the original and any purchased shares; dividing the net change in the
account's value by the value of the account at the beginning of the base
period to determine the base period return; and multiplying the base period
return by 365/7.
The Fund's yield for the seven-day period ended October 31, 1995, was 3.31%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended October 31, 1995,
was 3.37%.
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,
1995, was 6.70%.
TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature. The
interest earned by the municipal securities in the Fund's portfolio generally
remains free from federal regular income tax,* and is often free from state
and local taxes as well. As the table below indicates, a "tax-free" investment
can be an attractive choice for investors, particularly in times of narrow
spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
State of California
TAX BRACKET
Combined Federal
and State
Tax Bracket: 21.00% 37.30% 40.30% 46.00% 49.60%
50.60%
Joint $1- $39,001- $94,251-
$143,601- $256,501- OVER
Return $39,00 $94,250 $143,600
$256,500 $429,858 $429,858
Tax-Exempt
Yield Taxable
Yield Equivalent
1.50% 1.90% 2.39% 2.51% 2.78% 2.98% 3.04%
2.00 2.53 3.19 3.35 3.70 3.97 4.05
2.50 3.16 3.99 4.19 4.63 4.96 5.06
3.00 3.80 4.78 5.03 5.56 5.95 6.07
3.50 4.43 5.58 5.86 6.48 6.94 7.09
4.00 5.06 6.38 6.70 7.41 7.94 8.10
4.50 5.70 7.18 7.54 8.33 8.93 9.11
5.00 6.33 7.97 8.38 9.26 9.92 10.12
5.50 6.96 8.77 9.21 10.19 10.91 11.13
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state
and local taxes paid on comparable taxable investments were not used to
increase federal deductions. If you itemize deductions, your taxable
yield equivalent will be lower.
The chart above is for illustrative purposes only. It is not an indicator
of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is computed
by multiplying the number of shares owned at the end of the period by the net
asset value per share at the end of the period. The number of shares owned at
the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends and
distributions.
The average annual total returns for the one-year and five-year periods ended
October 31, 1995, and for the period from April 3, 1989 (date of initial
public investment) through October 31, 1995, were 3.37%, 2.87%, and 3.52%,
respectively.
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
O LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports monthly
and 12-month-to-date investment results for the same money funds.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected
in its investment decision making-structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands
of clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market funds,
a principal means used by money managers today to value money market fund
shares. Other innovations include the first institutional tax-free money
market fund. As of December 31, 1994, Federated Investors managed more than
$31 billion in assets across approximately 43 money market funds, including 17
government, 8 prime and 18 municipal with assets approximating $17 billion,
$7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional
clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
*Source: Investment Company Institute
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios.
The marketing effort to trust clients is headed by Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a variable rate demand feature. The first rating (long-term
rating) addresses the likelihood of repayment of principal and interest when
due, and the second rating (short-term rating) describes the demand
characteristics. Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The
definitions for the long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
LONG-TERM DEBT RATINGS
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the
relative investment qualities of short-term obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the
use of the VMIG symbol to reflect such characteristics as payment upon
periodic demand rather than fixed maturity dates and payment relying on
external liquidity.
In this case, two ratings are usually assigned, (for example, Aaa/VMIG-1); the
first representing an evaluation of the degree of risk associated with
scheduled principal and interest payments, and the second representing an
evaluation of the degree of risk associated with the demand feature. The VMIG
rating can be assigned a 1 or 2 designation using the same definitions
described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1 Issuers rated PRIME-1 (or related supporting institutions) have
a superior capacity for repayment of short- term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well
established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on
debt and ample asset protection, broad margins in earning
coverage of fixed financial charges and high internal cash generation,
well-established access to a range of financial markets and assured
sources of alternate liquidity
P-2 Issuers rated PRIME-2 (or related supporting institutions) have
a strong capacity for repayment of short- term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is
maintained.
LONG-TERM DEBT RATINGS
AAA Bonds which are rated AAA are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes is can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in AAA securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger
than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to
securities rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "Aaa" by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "Aa" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt rated
"A" by S&P or Moody's.
Cusip 314229766
NEW YORK MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
CASH II SHARES
PROSPECTUS
The Cash II Shares of New York Municipal Cash Trust (the "Fund") offered by this
prospectus represent interests in a non-diversified portfolio of Federated
Municipal Trust (the "Trust"), an open-end management investment company (a
mutual fund). The Fund invests primarily in short-term New York municipal
securities, including securities of states, territories, and possessions of the
United States which are not issued by or on behalf of New York, or its political
subdivisions and financing authorities, but which provide income exempt from
federal regular income tax and the personal income taxes imposed by New York
State and New York municipalities consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CASH II SERIES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
New York Municipal Securities 5
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Cash II Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 9
- ------------------------------------------------------
Special Purchase Features 10
HOW TO REDEEM SHARES 10
- ------------------------------------------------------
Special Redemption Features 11
ACCOUNT AND SHARE INFORMATION 12
- ------------------------------------------------------
TAX INFORMATION 12
- ------------------------------------------------------
Federal Income Tax 12
State and Local Taxes 13
OTHER CLASSES OF SHARES 13
- ------------------------------------------------------
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES 15
- ------------------------------------------------------
FINANCIAL STATEMENTS 16
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 31
- ------------------------------------------------------
ADDRESSES 32
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CASH II SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................................ None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)............................................ 0.29%
12b-1 Fee (after waiver) (2)................................................. 0.02%
Total Other Expenses......................................................... 0.40%
Shareholder Services Fee (after waiver) (3)............................. 0.23%
Total Operating Expenses (4)....................................... 0.71%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.40%.
(2) The maximum 12b-1 fee is 0.25%.
(3) The maximum shareholder services fee is 0.25%.
(4) The total operating expenses would have been 1.07% absent the voluntary
waivers of a portion of the management fee, a portion of the 12b-1 fee and a
portion of the shareholder services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Cash II Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Fund Information". Wire-transferred redemptions
of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period........... $ 7 $ 23 $ 40 $ 88
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
NEW YORK MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH II SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 31.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------
1995 1994 1993** 1992 1991(A)
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00
- ------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.02
- ------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.02 ) (0.03) (0.02 )
- ------------------------------------------ ------ ------ ----- ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00
- ------------------------------------------ ------ ------ ----- ------ ------
TOTAL RETURN (B) 3.37% 2.15% 1.98 % 2.86% 2.20 %
- ------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------
Expenses 0.71% 0.71% 0.71 % 0.73% 0.46 %*
- ------------------------------------------
Net investment income 3.20% 2.19% 1.96 % 2.46% 4.08 %*
- ------------------------------------------
Expense waiver/reimbursement(c) 0.36% 0.21% 0.17 % -- --
- ------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------
Net assets, end of period (000 omitted) $14,439 $134,051 $58,884 $4,641 $56
- ------------------------------------------
</TABLE>
* Computed on an annualized basis.
** Prior to November 9, 1992, the Fund provided three classes of shares
(a) Reflects operations for the period from April 25, 1991 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established two classes of shares known as Cash II Shares and Institutional
Service Shares. This prospectus relates only to Cash II Shares of the Fund,
which are designed to provide a cash management vehicle for certain customers of
financial institutions which would include corporations and municipalities, as
well as larger individual accounts, seeking a high level of cash management
services from the participating institution. The Fund may not be a suitable
investment for retirement plans or for non-New York taxpayers because it invests
in municipal securities of that state. A minimum initial investment of $25,000
within a 90 day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the personal income taxes imposed by New York State and
New York municipalities consistent with stability of principal. This investment
objective cannot be changed without shareholder approval. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of New
York municipal securities (as defined below) maturing in 13 months or less. As a
matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be exempt from
federal regular income tax and the personal income taxes imposed by New York
State and New York municipalities or so that at least 80% of its net assets is
invested in obligations, the interest income from which is exempt from federal
regular income tax and the personal income taxes imposed by New York State and
New York municipalities. (Federal regular income tax does not include the
federal individual alternative minimum tax or the federal alternative minimum
tax for corporations.) The average maturity of the securities in the Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less. Unless
indicated otherwise, the investment policies may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of New York and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax,
the personal income taxes imposed by New York State and New York municipalities,
and New York State income tax imposed upon non-corporate
taxpayers ("New York Municipal Securities"). Examples of New York Municipal
Securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in New York
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying New York Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; 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 New York
Municipal Securities is subject to the federal alternative minimum tax.
NEW YORK MUNICIPAL SECURITIES
New York Municipal Securities are generally issued to finance public works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
New York Municipal Securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or
publicly owned corporations. The availability of this financing encourages these
corporations to locate within the sponsoring communities and thereby increases
local employment.
The two principal classifications of New York Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on New York Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of New York Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of New York
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in New York Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
New York Municipal Securities could involve an increased risk to the Fund should
any of these related projects or facilities experience financial difficulties.
Obligations of issuers of New York Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge up to 10% of the value of total assets to secure such
borrowings. These investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being pur-
chased or sold, or being considered for purchase or sale, by the Fund; prohibit
purchasing securities in initial public offerings; and prohibit taking profits
on securities held for less than sixty days. Violations of the codes are subject
to review by the Trustees, and could result in severe penalties.
DISTRIBUTION OF CASH II SHARES
Federated Securities Corp. is the principal distributor for Cash II Shares of
the Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the distributor may be paid a fee in an amount computed at an annual rate of .25
of 1% of the average daily net asset value of Cash II Shares to finance any
activity which is principally intended to result in the sale of shares subject
to the Distribution Plan. The distributor may select financial institutions such
as banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide services or distribution-related support services as
agents for their clients or customers.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Fund
under the Distribution Plan.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up .25 of 1% of the average daily net asset value of
Cash II Shares to obtain certain personal services for shareholders and for the
maintenance of shareholder accounts. Federated Shareholders Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. With respect to Cash II
Shares, in addition to payments made pursuant to the Distribution Plan and
Shareholder Services Agreement, Federated Securities Corp. and Federated
Shareholder Services, from their own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution-related support services, or shareholder services. The support may
include sponsoring sales, educational and training seminars for their employees,
providing sales literature, and engineering computer software programs that
emphasize the attributes of the Fund. Such assistance will be predicated upon
the amount of shares the financial institution sells or may sell, and/or upon
the type and nature of sales or marketing support furnished by the financial
institution. Any payments made by the distributor may be reimbursed by the
Fund's investment adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- -------------- -------------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Cash II Shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting liabilities attributable to shares
from the value of Fund assets attributable to shares, and dividing the remainder
by the number of shares outstanding. The Fund cannot guarantee that its net
asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 3:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
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 which the New York Stock Exchange
is 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 within a
90-day period. Financial institutions may impose different minimum investment
requirements on their customers.
In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before shares can be purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may purchase
shares through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives payment by
wire or converts payment by check from the financial institution
into federal funds. It is the financial institution's responsibility to transmit
orders promptly. Financial institutions may charge additional fees for their
services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling the Fund
before 3:00 p.m. (Eastern time). The order is considered received immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern time) in
order to begin earning dividends that same day. Federal funds should be wired as
follows: Federated Services Company, c/o State, Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: New York Municipal Cash Trust,
Cash II Shares; Fund Number (This number can be found on the account statement
or by contacting the Fund.); Group Number or Order Number; Nominee or
Institution Name; and ABA Number 011000028. Shares cannot be purchased by wire
on holidays when wire transfers are restricted. Questions on wire purchases
should be directed to your shareholder services representative at the telephone
number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to New York Municipal Cash Trust--Cash II Shares. 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
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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days
when wire transfers are restricted should be directed to your shareholder
services representative at the telephone number listed on your account
statement. 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 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. The check writing service allows
shareholders to receive the daily dividend declared on the shares to be redeemed
until the check is presented to UMB Bank, N.A., the bank responsible for
administering the check writing program, for payment. However, checks should
never be made payable or sent to UMB Bank, N.A. or the Fund to redeem shares,
and a check may not be written to close an account.
DEBIT CARD. Upon request, a debit account will be established. This account
allows shareholders to redeem shares by using a debit card. A fee will be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of at
least $25,000, a systematic withdrawal program may be established whereby
automatic redemptions are made from the account and transferred electronically
to any commercial bank, savings bank, or credit union that is an ACH member.
Shareholders may apply for participation in this program through their financial
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$25,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has one vote in Trustee elections and other
matters submitted to shareholders for vote. All shares of all classes of each
portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Fund may purchase all types of municipal bonds, including private activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than New
York. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
NEW YORK TAXES. Under existing New York laws, distributions made by the Fund
will not be subject to New York State or New York City personal income taxes to
the extent that such distributions qualify as exempt-interest dividends the
Internal Revenue Code, and represent interest income attributable to obligations
issued of the State of New York and its political subdivisions as well as
certain other obligations, the interest on which is exempt from New York State
and New York City personal income taxes, such as, for example, certain
obligations of the Commonwealth of Puerto Rico. Conversely, to the extent that
distributions made by the Fund are derived from other types of obligations, such
distributions will be subject to New York State and New York City personal
income taxes.
The Fund cannot predict in advance the exact portion of its dividends that will
be exempt from New York State and New York City personal income taxes. However,
the Fund will report to shareholders at least annually what percentage of the
dividends it actually paid is exempt from such taxes.
Dividends paid by the Fund are exempt from the New York City unincorporated
business taxes to the same extent that they are exempt from the New York City
personal income taxes.
Dividends paid by the Fund are not excluded from net income in determining New
York State or New York City franchise taxes on corporations or financial
institutions.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called Institutional Service Shares
that are sold primarily to banks and other institutions that hold assets for
individuals, trusts, estates, or partnerships. Institutional Service Shares are
sold at net asset value and are subject to a Rule 12b-1 Plan and a Shareholder
Services Agreement. Investments in Institutional Service Shares are subject to a
minimum initial investment of $25,000 within a 90-day period.
Cash II Shares and Institutional Service Shares are subject to certain of the
same expenses. Expense differences, however, between Cash II Shares and
Institutional Service Shares may affect the performance of each class.
To obtain more information and a prospectus for Institutional Service Shares,
investors may call 1-800-235-4669.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the shares' tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
NEW YORK MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 31.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-------------------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING OF
PERIOD $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------
INCOME FROM
INVESTMENT
OPERATIONS
- ---------------
Net investment
income 0.04 0.02 0.02 0.03 0.04 0.05 0.06 0.05 0.04 0.04
- ---------------
LESS
DISTRIBUTIONS
- ---------------
Distributions
from net
investment
income (0.04) (0.02) (0.02) (0.03) (0.04) (0.05) (0.06) (0.05) (0.04) (0.04)
- --------------- ---- ---- ----- ---- ---- ---- ---- ---- ---- ----
NET ASSET
VALUE,
END OF PERIOD $1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL RETURN(A) 3.56% 2.35% 2.16% 3.01% 4.59% 5.51% 5.70% 4.66% 3.90% 4.35%
- ---------------
RATIOS TO
AVERAGE NET
ASSETS
- ---------------
Expenses 0.54% 0.52% 0.54% 0.57% 0.52% 0.54% 0.55% 0.51% 0.47% 0.47%
- ---------------
Net investment
income 3.49% 2.31% 2.14% 2.99% 4.48% 5.36% 5.56% 4.57% 3.81% 4.18%
- ---------------
Expense
waiver/
reimbursement(b) 0.53% 0.13% 0.17% -- -- -- -- -- --
- ---------------
SUPPLEMENTAL
DATA
- ---------------
Net assets,
end of period
(000 omitted) $276,149 $236,580 $274,357 $164,492 $191,616 $197,213 $245,542 $212,786 $141,040 $183,941
- ---------------
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NEW YORK MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ------------ ----------------------------------------------------- -------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.2%
- ------------------------------------------------------------------------
NEW YORK--95.8%
-----------------------------------------------------
$ 4,525,000 Albany City School District, NY, (Series 1995), 4.75%
BANs, 5/3/1996 NR(3) $ 4,533,714
-----------------------------------------------------
2,500,000 Albany, NY IDA, (Series 1995) Weekly VRDNs
(Davies Office Refurbishing, Inc. Project)/
(Marine Midland Bank N.A., Buffalo, NY LOC) P-2 2,500,000
-----------------------------------------------------
1,000,000 Babylon, NY IDA, (1994 Series) Weekly VRDNs (J.
D'Addario & Company, Inc. Project)/
(National Westminster Bank, PLC, London LOC) VMIG1 1,000,000
-----------------------------------------------------
3,246,000 Beacon, NY, 4.00% BANs, 8/16/1996 NR(3) 3,246,855
-----------------------------------------------------
6,000,000 Brentwood Union Free School District, NY, 4.375%
TANs, 6/28/1996 NR(3) 6,010,366
-----------------------------------------------------
5,000,000 Brentwood Union Free School District, NY, 4.50% TANs,
6/28/1996 NR(3) 5,012,605
-----------------------------------------------------
3,600,000 Broome County, NY, (Series 1995), 4.75% BANs,
4/19/1996 NR(3) 3,607,210
-----------------------------------------------------
3,300,000 Chautauqua County, NY IDA Weekly VRDNs (Cliffstar
Corp.)/(Society National Bank, Cleveland, OH LOC) P-1 3,300,000
-----------------------------------------------------
3,900,000 Chautauqua County, NY IDA Weekly VRDNs (Mogen David
Wine Corp.)/(Wells Fargo Bank, N.A. LOC) P-1 3,900,000
-----------------------------------------------------
3,000,000 Chautauqua County, NY, (Series 1995), 5.50% TANs,
12/21/1995 NR(3) 3,001,530
-----------------------------------------------------
1,140,000 Colonie, NY IDA Weekly VRDNs (Herbert S. Ellis)/
(Marine Midland Bank N.A., Buffalo, NY LOC) P-2 1,140,000
-----------------------------------------------------
820,000 Colonie, NY IDA, (Series 1988) Weekly VRDNs (13 Green
M-1 Drive Project)/(Marine Midland Bank N.A.,
Buffalo, NY LOC) P-2 820,000
-----------------------------------------------------
5,000,000 Erie County, NY IDA, IDRB (Series 1994) Weekly VRDNs
(Servotronics, Inc. Project)/(Fleet Bank of New York
LOC) P-1 5,000,000
-----------------------------------------------------
</TABLE>
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ------------ ----------------------------------------------------- -------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
NEW YORK--CONTINUED
-----------------------------------------------------
$ 1,800,000 Franklin County, NY IDA, (Series 1991A) Weekly VRDNs
(KES Chateaugay)/(Bank of Tokyo Ltd., Tokyo LOC) A-1 $ 1,800,000
-----------------------------------------------------
1,500,000 Guilderland, NY IDA, (Series 1993A) Weekly VRDNs
(Northeastern Industrial Park, Inc.)/(Chemical Bank,
New York LOC) P-1 1,500,000
-----------------------------------------------------
5,140,000 Hempstead Union Free School District, NY, 4.50% TANs,
6/28/1996 NR(3) 5,160,103
-----------------------------------------------------
4,000,000 Hempstead, NY, (Series 1995A), 5.50% BANs, 3/1/1996 VMIG1 4,009,720
-----------------------------------------------------
4,760,000 Herkimer County, NY IDA, 1994 IDRB Weekly VRDNs
(Granny's Kitchen)/(Bank of New York, New York LOC) A-1 4,760,000
-----------------------------------------------------
3,500,000 Hudson Falls, NY Central School District, 3.82% BANs,
6/28/1996 NR(3) 3,500,421
-----------------------------------------------------
3,700,000 Levittown Union Free School District, NY, 4.125%
BANs, 10/25/1996 NR 3,706,077
-----------------------------------------------------
1,000,000 Levittown Union Free School District, NY, 4.50% BANs,
10/25/1996 NR 1,005,183
-----------------------------------------------------
927,000 Liverpool Central School District, NY, 3.90% BANs,
6/19/1996 NR(3) 927,839
-----------------------------------------------------
3,770,000 Lockport, NY, 4.17% BANs, 5/30/1996 NR(3) 3,771,464
-----------------------------------------------------
4,200,000 Longwood Central School District, NY, 4.50% TANs,
6/26/1996 NR 4,211,814
-----------------------------------------------------
2,120,000 Madison County, NY IDA, (Series 1989A) Weekly VRDNs
(Madison, NY Upstate Metals)/(Fleet Bank of New York
LOC) A-1 2,120,000
-----------------------------------------------------
15,000,000 Marine Midland, NY, Premium Tax-Exempt Bond & Loan
Trust Weekly VRDNs (Marine Midland New York
Trust)/(Marine Midland Bank N.A., Buffalo, NY LOC) P-1 15,000,000
-----------------------------------------------------
1,002,814 Nassau County, NY IDA Weekly VRDNs (D.L. Blair
Corp.)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LOC) P-1 1,002,814
-----------------------------------------------------
10,000,000 Nassau County, NY, (Series 1995A), 4.50% TANs,
3/15/1996 SP-1+ 10,021,790
-----------------------------------------------------
</TABLE>
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ------------ ----------------------------------------------------- -------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
NEW YORK--CONTINUED
-----------------------------------------------------
$ 4,000,000 New York City Municipal Water Finance Authority,
(Series 4), 3.75% CP (Credit Suisse, Zurich LOC),
Mandatory Tender 1/23/1996 A-1+ $ 4,000,000
-----------------------------------------------------
283,334 New York City, NY IDA Weekly VRDNs (David Rosen
Bakers Supply)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LOC) P-1 283,334
-----------------------------------------------------
466,668 New York City, NY IDA Weekly VRDNs (Lomar Development
Corp.)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LOC) P-1 466,668
-----------------------------------------------------
81,265 New York City, NY IDA Weekly VRDNs (MLN
Associates)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LOC) P-1 81,265
-----------------------------------------------------
3,300,000 New York City, NY IDA Weekly VRDNs (Mindel
Associates)/(Chemical Bank, New York LOC) A-1 3,300,000
-----------------------------------------------------
1,900,000 New York City, NY IDA, Special Facility Revenue Bonds
(Series 1990) Weekly VRDNs (Air France)/(Societe
Generale, Paris LOC) A-1+ 1,900,000
-----------------------------------------------------
5,000,000 New York State Dormitory Authority, (Series 1989B),
3.60% CP (Sloan-Kettering Memorial Cancer Center)/
(Chemical Bank, New York LOC), Mandatory Tender
11/17/1995 P-1 5,000,000
-----------------------------------------------------
5,475,000 (a) New York State Dormitory Authority, PA-60 (Series
1993) Weekly VRDNs (Rochester General Hospital)/(FHA
INS)/(Merrill Lynch Capital Services, Inc. LIQ) A-1+ 5,475,000
-----------------------------------------------------
2,700,000 New York State Energy Research & Development
Authority Weekly VRDNs (Long Island Lighting
Co.)/(Toronto-Dominion Bank LOC) VMIG1 2,700,000
-----------------------------------------------------
3,285,000 New York State Energy Research & Development
Authority, (Series 1985), 4.40% TOBs (Rochester Gas &
Electric Corp)/(Credit Suisse, Zurich LOC), Optional
Tender 11/15/1995 A-1+ 3,285,000
-----------------------------------------------------
2,000,000 New York State Energy Research & Development
Authority, (Series 1985A), 4.70% TOBs (Long Island
Lighting Co.)/(Deutsche Bank, AG LOC), Mandatory
Tender 3/1/1996 A-1+ 2,000,000
-----------------------------------------------------
</TABLE>
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ------------ ----------------------------------------------------- -------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
NEW YORK--CONTINUED
-----------------------------------------------------
$ 3,000,000 New York State Energy Research & Development
Authority, (Series 1993A) Weekly VRDNs (Long Island
Lighting Co.)/(Toronto-Dominion Bank LOC) VMIG1 $ 3,000,000
-----------------------------------------------------
2,000,000 New York State Energy Research & Development
Authority, 4.65% TOBs (New York State Electric and
Gas Corp.)/(J.P. Morgan Delaware, Wilmington LOC),
Optional Tender 3/15/1996 A-1+ 2,000,000
-----------------------------------------------------
2,500,000 New York State HFA Weekly VRDNs (Special Surgery
Hospital)/(Chemical Bank, New York LOC) VMIG1 2,500,000
-----------------------------------------------------
4,000,000 New York State HFA, Housing Revenue Bonds (1985
Series A) Weekly VRDNs (Liberty View Apartments)/
(Chemical Bank, New York LOC) A-1 4,000,000
-----------------------------------------------------
1,290,000 New York State Job Development Authority Weekly VRDNs
(Sumitomo Bank Ltd., Osaka LOC) VMIG1 1,290,000
-----------------------------------------------------
1,590,000 New York State Job Development Authority Weekly VRDNs
(Sumitomo Bank Ltd., Osaka LOC) VMIG1 1,590,000
-----------------------------------------------------
4,625,000 (a) New York State Medical Care Facilities Finance
Agency, Hospital & Nursing Home Mortgage Revenue
Bonds (1994 Series C) Weekly VRDNs (FHA INS)/(Merrill
Lynch Capital Services, Inc. LIQ) A-1+ 4,625,000
-----------------------------------------------------
3,700,000 (a) New York State Mortgage Agency, (Series PA-29) Weekly
VRDNs (Merrill Lynch Capital Services, Inc. LIQ) VMIG1 3,700,000
-----------------------------------------------------
4,945,000 (a) New York State Mortgage Agency, Homeowner Mortgage
Revenue Bonds (PA-87) Weekly VRDNs (Merrill Lynch
Capital Services, Inc. LIQ) VMIG1 4,945,000
-----------------------------------------------------
2,640,000 (a) New York State Mortgage Agency, Homeowner Mortgage
Revenue Bonds (Series PT-15B) Weekly VRDNs (Dai-Ichi
Kangyo Bank Ltd., Tokyo LIQ) VMIG1 2,640,000
-----------------------------------------------------
6,500,000 Niagara County, NY IDA Weekly VRDNs (Allegheny Ludlum
Corp.)/(PNC Bank, N.A. LOC) A-1 6,500,000
-----------------------------------------------------
</TABLE>
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ------------ ----------------------------------------------------- -------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
NEW YORK--CONTINUED
-----------------------------------------------------
$ 6,000,000 Niagara County, NY IDA, Solid Waste Disposal Facility
Revenue Bonds (Series 1994B), 4.00% CP (American Ref-
Fuel Company)/(Air Products & Chemicals, Inc. and
Browning-Ferris Industries, Inc. GTDs), Mandatory
Tender 12/8/1995 A-1 $ 6,000,000
-----------------------------------------------------
9,900,000 Niagara County, NY IDA, Solid Waste Disposal Facility
Revenue Bonds (Series 1994C), 3.90% CP (American
Ref-Fuel Company)/(Air Products & Chemicals, Inc. and
Browning-Ferris Industries, Inc. GTDs), Mandatory
Tender 2/13/1996 A-1 9,900,000
-----------------------------------------------------
6,000,000 Niagara County, NY IDA, Solid Waste Disposal Facility
Revenue Bonds (Series 1994C), 4.00% CP (American
Ref-Fuel Company)/(Air Products & Chemicals, Inc. and
Browning-Ferris Industries, Inc. GTDs), Mandatory
Tender 1/11/1996 A-1 6,000,000
-----------------------------------------------------
1,010,000 North Hempstead, NY, (1995 Series B), 4.75% BANs,
4/25/1996 NR(3) 1,012,093
-----------------------------------------------------
820,000 Onondaga County, NY IDA Weekly VRDNs (Beverage
Corp.)/(Marine Midland Bank N.A., Buffalo, NY LOC) P-2 820,000
-----------------------------------------------------
1,075,000 Onondaga County, NY IDA, (Series 1987) Weekly VRDNs
(Southern Container Corp.)/(Chemical Bank, New York
LOC) VMIG1 1,075,000
-----------------------------------------------------
1,725,000 Onondaga County, NY Weekly VRDNs (Grainger (W.W.),
Inc.) A-1+ 1,725,000
-----------------------------------------------------
1,500,000 Ontario, NY IDA Weekly VRDNs (Hillcrest
Enterprises/Buckeye Corrugated)/(National City Bank,
Cleveland, OH LOC) P-1 1,500,000
-----------------------------------------------------
5,700,000 Oswego County, NY IDA Weekly VRDNs (Copperweld
Corp.)/(Credit Lyonnais, North America LOC) P-1 5,700,000
-----------------------------------------------------
1,525,000 Perry Central School District, NY, 4.125% BANs,
6/21/1996 NR(3) 1,528,971
-----------------------------------------------------
15,000,000 Port Authority of New York and New Jersey Weekly
VRDNs A-1+ 15,000,000
-----------------------------------------------------
15,000,000 Port Authority of New York and New Jersey Weekly
VRDNs A-1+ 15,000,000
-----------------------------------------------------
</TABLE>
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ------------ ----------------------------------------------------- -------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
NEW YORK--CONTINUED
-----------------------------------------------------
$ 1,000,000 Port Authority of New York and New Jersey, (Series 3)
Weekly VRDNs (KIAC Partners)/(Deutsche Bank, AG LOC) P-1 $ 1,000,000
-----------------------------------------------------
1,000,000 Rotterdam, NY IDA, (Series 1993A) Weekly VRDNs
(Rotterdam Industrial Park)/(Chemical Bank, New York
LOC) P-1 1,000,000
-----------------------------------------------------
4,000,000 Saranac Central School District, NY, 4.50% BANs,
6/28/1996 NR(2) 4,016,394
-----------------------------------------------------
650,817 Schenectady, NY IDA Weekly VRDNs (McClellan Street
Associates)/(Ford Motor Credit Corp. 1994-A LIQ)/
(Dai-Ichi Kangyo Bank Ltd., Tokyo LOC) P-1 650,817
-----------------------------------------------------
3,000,000 Suffolk County, NY IDA Weekly VRDNs (C & J Realty
Corp.)/(Ford Motor Credit Corp. 1994-A LIQ)/(Dai-Ichi
Kangyo Bank Ltd., Tokyo LOC) P-1 3,000,000
-----------------------------------------------------
509,167 Suffolk County, NY IDA Weekly VRDNs (CS Property/
Tara Toy, Inc.)/(Ford Motor Credit Corp. 1994-A
LIQ)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LOC) P-1 509,167
-----------------------------------------------------
432,000 Suffolk County, NY IDA Weekly VRDNs (D.A.
Yaron)/(Ford Motor Credit Corp. 1994-A LIQ)/(Dai-Ichi
Kangyo Bank Ltd., Tokyo LOC) P-1 432,000
-----------------------------------------------------
1,050,000 Suffolk County, NY IDA Weekly VRDNs (Poly Research
Corp.)/(Marine Midland Bank N.A., Buffalo, NY LOC) P-2 1,050,000
-----------------------------------------------------
1,800,000 Suffolk County, NY IDA, 5.6875% TOBs (Grainger
(W.W.), Inc.), Optional Tender 12/1/1995 P-1 1,800,000
-----------------------------------------------------
5,000,000 (a) VRDC/IVRC Trust, (Series 1992A) Weekly VRDNs (New
York City Municipal Water Finance Authority)/(MBIA
Insurance Corporation INS)/(HongKong & Shanghai
Banking Corp. LIQ) A-1 5,000,000
-----------------------------------------------------
7,000,000 (a) VRDC/IVRC Trust, (Series 1993B) Weekly VRDNs (New
York Metropolitan Transportation Authority)/(AMBAC
INS)/(HongKong & Shanghai Banking Corp. LIQ) A-1 7,000,000
-----------------------------------------------------
7,500,000 Walden Village, NY IDA, IDRB (Series 1994) Weekly
VRDNs (Spence Engineering Co.)/(First Union National
Bank, Charlotte, N.C. LOC) P-1 7,500,000
-----------------------------------------------------
</TABLE>
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ------------ ----------------------------------------------------- -------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
NEW YORK--CONTINUED
-----------------------------------------------------
$ 5,685,000 Warren & Washington Counties, NY IDA Weekly VRDNs
(Sandy Hill Corp.)/(First Union National Bank,
Charlotte, N.C. LOC) A-1 $ 5,685,000
-----------------------------------------------------
1,415,000 Yates County, NY IDA, (Series 1992A) Weekly VRDNs
(Clearplass Container)/(Fleet Bank of New York LOC) A-1 1,415,000
-----------------------------------------------------
2,300,000 Yonkers, NY IDA, (Series 1992A) Weekly VRDNs
(Consumers Union Facility)/(Industrial Bank of Japan
Ltd., Tokyo LOC) VMIG1 2,300,000
----------------------------------------------------- ------------
TOTAL 278,470,214
----------------------------------------------------- ------------
PUERTO RICO--3.4%
-----------------------------------------------------
10,000,000 (a) Commonwealth of Puerto Rico, Public Improvement
Refunding Bonds TOC (Series 1995B) Weekly VRDNs (MBIA
Insurance Corporation INS)/(Dai-Ichi Kangyo Bank
Ltd., Tokyo LIQ) A-1 10,000,000
----------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST(B) $288,470,214
----------------------------------------------------- ------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 34% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. These securities have been determined to be
liquid under criteria established by the Board of Trustees. At the end of
the period, these securities amounted to ($43,385,000) which represents 15%
of net assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($290,587,984) at October 31, 1995.
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronym(s) are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
BANs -- Bond Anticipation Notes
CP -- Commercial Paper
FHA -- Federal Housing Administration
GTDs -- Guarantees
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDRB -- Industrial Development Revenue Bond
INS -- Insured
LIQ -- Liquidity Agreement
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
PLC -- Public Limited Company
TANs -- Tax Anticipation Notes
TOBs -- Tender Option Bonds
TOC -- Tender Option Certificate
VRDNs -- Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW YORK MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $288,470,214
- ------------------------------------------------------------------------------
Cash 388,388
- ------------------------------------------------------------------------------
Income receivable 2,534,760
- ------------------------------------------------------------------------------
Receivable for shares sold 266
- ------------------------------------------------------------------------------ ------------
Total assets 291,393,628
- ------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------------
Payable for shares redeemed $183,571
- -------------------------------------------------------------------
Income distribution payable 585,672
- -------------------------------------------------------------------
Accrued expenses 36,401
- ------------------------------------------------------------------- --------
Total liabilities 805,644
- ------------------------------------------------------------------------------ ------------
NET ASSETS for 290,593,593 shares outstanding $290,587,984
- ------------------------------------------------------------------------------ ------------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------
Paid in capital $290,593,593
- ------------------------------------------------------------------------------
Accumulated net realized loss on investments (5,609)
- ------------------------------------------------------------------------------ ------------
Total Net Assets $290,587,984
- ------------------------------------------------------------------------------ ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES:
- ------------------------------------------------------------------------------
$276,149,176/276,155,517 shares outstanding $1.00
- ------------------------------------------------------------------------------ ------------
CASH II SHARES:
- ------------------------------------------------------------------------------
$14,438,808/14,438,076 shares outstanding $1.00
- ------------------------------------------------------------------------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW YORK MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------
Interest $13,386,966
- ----------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Investment advisory fee $ 1,335,835
- -------------------------------------------------------------------------
Administrative personnel and services fee 252,807
- -------------------------------------------------------------------------
Custodian fees 88,001
- -------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 53,726
- -------------------------------------------------------------------------
Directors'/Trustees' fees 5,982
- -------------------------------------------------------------------------
Auditing fees 19,781
- -------------------------------------------------------------------------
Legal fees 2,827
- -------------------------------------------------------------------------
Portfolio accounting fees 64,263
- -------------------------------------------------------------------------
Distribution services fee--Institutional Service Shares 690,979
- -------------------------------------------------------------------------
Distribution services fee--Cash II Shares 143,918
- -------------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 690,979
- -------------------------------------------------------------------------
Shareholder services fee--Cash II Shares 143,918
- -------------------------------------------------------------------------
Share registration costs 19,808
- -------------------------------------------------------------------------
Printing and postage 26,828
- -------------------------------------------------------------------------
Insurance premiums 8,298
- -------------------------------------------------------------------------
Miscellaneous 4,914
- ------------------------------------------------------------------------- -----------
Total expenses 3,552,864
- -------------------------------------------------------------------------
Waivers--
- -------------------------------------------------------------------------
Waiver of investment advisory fee $(351,948)
- -------------------------------------------------------------
Waiver of distribution services fee--Institutional Service
Shares (690,979)
- -------------------------------------------------------------
Waiver of distribution services fee--Cash II Shares (130,887)
- -------------------------------------------------------------
Waiver of shareholder services fee--Institutional Service
Shares (477,927)
- -------------------------------------------------------------
Waiver of shareholder services fee--Cash II Shares (13,031)
- ------------------------------------------------------------- ---------
Total waivers (1,664,772)
- ------------------------------------------------------------------------- -----------
Net expenses 1,888,092
- ---------------------------------------------------------------------------------------- -----------
Net investment income 11,498,874
- ---------------------------------------------------------------------------------------- -----------
Net realized gain on investments 12,000
- ---------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $11,510,874
- ---------------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW YORK MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------
1995 1994
--------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 11,498,874 $ 7,881,134
- ------------------------------------------------------------ --------------- -------------
Net realized gain (loss) on investments 12,000 322
- ------------------------------------------------------------ --------------- -------------
Change in net assets resulting from operations 11,510,874 7,881,456
- ------------------------------------------------------------ --------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------
Distributions from net investment income
- ------------------------------------------------------------
Institutional Service Shares (9,657,797) (5,630,675)
- ------------------------------------------------------------
Cash II Shares (1,841,077) (2,250,459)
- ------------------------------------------------------------ --------------- -------------
Change in net assets resulting from distributions to
shareholders (11,498,874) (7,881,134)
- ------------------------------------------------------------ --------------- -------------
SHARE TRANSACTIONS--
- ------------------------------------------------------------
Proceeds from sale of Shares 1,236,075,244 918,756,952
- ------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment
of distributions declared 3,314,165 2,705,999
- ------------------------------------------------------------
Cost of Shares redeemed (1,319,444,545) (884,074,127)
- ------------------------------------------------------------ --------------- -------------
Change in net assets resulting from share transactions (80,055,136) 37,388,824
- ------------------------------------------------------------ --------------- -------------
Change in net assets (80,043,136) 37,389,146
- ------------------------------------------------------------ --------------- -------------
NET ASSETS:
- ------------------------------------------------------------
Beginning of period 370,631,120 333,241,974
- ------------------------------------------------------------ --------------- -------------
End of period $ 290,587,984 $ 370,631,120
- ------------------------------------------------------------ --------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW YORK MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of New York Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund offers two classes of shares: Institutional Service Shares and Cash II
Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
At October 31, 1995, the Fund, for federal tax purposes, had a capital loss
carryforward of $5,609, which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
--------------------------------- ---------------------------------
<S> <C>
1996 $5,609
</TABLE>
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers in that
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
state than would be a comparable tax-exempt mutual fund that invests
nationally. In order to reduce the credit risk associated with such
factors, at October 31, 1995, 61% of the securities in the portfolio of
investments are backed by letters of credit or bond insurance of various
financial institutions and financial guaranty assurance agencies. The value
of investments insured by or supported (backed) by a letter of credit for
any one institution or agency do not exceed 7.6% of total investments.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. Many restricted securities may
be resold in the secondary market in transactions exempt from registration.
In some cases, the restricted securities may be resold without registration
upon exercise of a demand feature. Such restricted securities may be
determined to be liquid under criteria established by the Board of
Trustees. The Fund will not incur any registration costs upon such resales.
Restricted securities are valued at amortized cost in accordance with Rule
2a-7 under the Investment Company Act of 1940.
Additional information on each restricted security held at October 31, 1995
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
---------------------------------------------------- ---------------- ----------------
<S> <C> <C>
New York State Dormitory Authority PA-60 (Series March 13, 1995 $ 5,475,000
1989B)
New York State Medical Care Facilities Finance July 5, 1995 4,625,000
Agency
New York State Mortgage Agency (Series PA-29) April 3, 1995 3,700,000
New York State Mortgage Agency (Series PA-87) July 5, 1995 4,945,000
New York State Mortgage Agency (Series PT-15B) July 5, 1995 2,640,000
VRDC/IVRC Trust (Series 1992A) New York City July 5, 1995 5,000,000
Municipal Water Finance Authority
VRDC/IVRC Trust (Series 1993B) New York Metropolitan May 19, 1995 7,000,000
Transportation Authority
Commonwealth of Puerto Rico, Public Improvement May 25, 1995 10,000,000
Refunding Bonds TOC (Series 1995b)
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $290,593,593.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
INSTITUTIONAL SERVICE SHARES 1995 1994
- ------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Shares sold 1,002,966,036 548,493,561
- -------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 1,484,402 758,005
- -------------------------------------------------------------
Shares redeemed (964,892,684) (587,029,347)
- ------------------------------------------------------------- ------------- -------------
Net change resulting from Institutional Service share
transactions 39,557,754 (37,777,781)
- ------------------------------------------------------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
CASH II SHARES 1995 1994
- ------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Shares sold 233,109,208 370,263,391
- -------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 1,829,763 1,947,994
- -------------------------------------------------------------
Shares redeemed (354,551,861) (297,044,780)
- ------------------------------------------------------------- ------------- -------------
Net change resulting from Cash II share transactions (119,612,890) 75,166,605
- ------------------------------------------------------------- ------------- -------------
Net change resulting from share transactions (80,055,136) 37,388,824
- ------------------------------------------------------------- ------------- -------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
reimburse Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's Institutional Service Shares and Cash II Shares. The Plan provides
that the Fund may incur distribution expenses up to .25 of 1% of the average
daily net assets of the Institutional Service Shares and Cash II Shares,
annually, to reimburse FSC.
SHAREHOLDER SERVICE FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of the
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
Fund shares for the period. This fee is to obtain certain services for
shareholders and to maintain shareholder accounts. FSS may voluntarily choose to
waive a portion of its fee. FSS can modify or terminate this voluntary waiver at
any time at its sole discretion.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common Officers. These
transactions were made at current market value pursuant to rule 17a-7 under the
Act amounting to $518,060,000 and $576,715,000 respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(New York Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of New York
Municipal Cash Trust (an investment portfolio of Federated Municipal Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of October 31, 1995, the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights (see pages 2 and 15 of the
prospectus) for the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for the periods ended October 31,
1993 and prior, were audited by other auditors whose report dated December 17,
1993, expressed and unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of New
York Municipal Cash Trust (an investment portfolio of Federated Municipal Trust)
as of October 31, 1995, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then
ended, and the financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
New York Municipal Cash Trust
Cash II Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
- ----------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- ----------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- ----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NEW YORK MUNICIPAL
CASH TRUST
CASH II SHARES
PROSPECTUS
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated December 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229733
G00208-02 (12/95)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NEW YORK MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares of New York Municipal Cash Trust (the "Fund")
offered by this prospectus represent interests in a non-diversified portfolio of
Federated Municipal Trust (the "Trust"), an open-end management investment
company (a mutual fund). The Fund invests primarily in short-term New York
municipal securities, including securities of states, territories, and
possessions of the United States which are not issued by or on behalf of New
York, or its political subdivisions and financing authorities, but which provide
income exempt from federal regular income tax and personal income taxes imposed
by New York State and New York municipalities consistent with stability of
principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
New York Municipal Securities 5
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Institutional Service Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 9
- ------------------------------------------------------
Special Purchase Features 10
HOW TO REDEEM SHARES 10
- ------------------------------------------------------
Special Redemption Features 11
ACCOUNT AND SHARE INFORMATION 12
- ------------------------------------------------------
TAX INFORMATION 12
- ------------------------------------------------------
Federal Income Tax 12
State and Local Tax 13
OTHER CLASSES OF SHARES 13
- ------------------------------------------------------
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--CASH II SHARES 15
- ------------------------------------------------------
FINANCIAL STATEMENTS 16
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 31
- ------------------------------------------------------
ADDRESSES 32
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................................ None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)............................................ 0.29%
12b-1 Fee (after waiver) (2)................................................. 0.00%
Total Other Expenses......................................................... 0.27%
Shareholder Services Fee (after waiver) (3)............................. 0.10%
Total Operating Expenses (4)....................................... 0.56%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.40%.
(2) The maximum 12b-1 fee is 0.25%.
(3) The maximum shareholder services fee is 0.25%.
(4) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending October 31, 1996. The total operating
expenses were 0.54% for the fiscal year ended October 31, 1995 and would have
been 1.07% absent the voluntary waivers of a portion of the management fee, the
12b-1 fee and a portion of the shareholder services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Institutional Service Shares of
the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Fund Information." Wire-
transferred redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period........... $ 6 $ 18 $ 31 $ 70
</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.
NEW YORK MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 31.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
-------------------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------
INCOME FROM
INVESTMENT
OPERATIONS
- ---------------
Net investment
income 0.04 0.02 0.02 0.03 0.04 0.05 0.06 0.05 0.04 0.04
- ---------------
LESS
DISTRIBUTIONS
- ---------------
Distributions
from net
investment
income (0.04) (0.02) (0.02) (0.03) (0.04) (0.05) (0.06) (0.05) (0.04) (0.04)
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
NET ASSET
VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL RETURN(A) 3.56% 2.35% 2.16% 3.01% 4.59% 5.51% 5.70% 4.66% 3.90% 4.35%
- ---------------
RATIOS TO
AVERAGE NET
ASSETS
- ---------------
Expenses 0.54% 0.52% 0.54% 0.57% 0.52% 0.54% 0.55% 0.51% 0.47% 0.47%
- ---------------
Net investment
income 3.49% 2.31% 2.14% 2.99% 4.48% 5.36% 5.56% 4.57% 3.81% 4.18%
- ---------------
Expense
waiver/
reimbursement(b) 0.53% 0.13% 0.17% -- -- -- -- -- --
- ---------------
SUPPLEMENTAL
DATA
- ---------------
Net assets,
end of period
(000 omitted) $276,149 $236,580 $274,357 $164,492 $191,616 $197,213 $245,542 $212,786 $141,040 $183,941
- ---------------
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established two classes of shares known as Institutional Service Shares and Cash
II Shares. This prospectus relates only to Institutional Service Shares of the
Fund, which are designed primarily for banks and other institutions that hold
assets for individuals, trusts, estates, or partnerships, as a convenient means
of accumulating an interest in a professionally managed, non-diversified
portfolio investing primarily in short-term New York municipal securities. The
Fund may not be a suitable investment for retirement plans or for non-New York
taxpayers because it invests in municipal securities of that state. A minimum
initial investment of $25,000 within 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, the personal income taxes imposed by New York State and New
York municipalities consistent with stability of principal. This investment
objective cannot be changed without shareholder approval. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by complying with the various requirements of Rule 2a-7 under the
Investment Company Act of 1940 which regulates money market funds and by
following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of New
York municipal securities (as defined below) maturing in 13 months or less. As a
matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be exempt from
federal regular income tax and the personal income taxes imposed by New York
State and New York municipalities or so that at least 80% of its net assets is
invested in obligations, the interest income from which is exempt from federal
regular income tax and the personal income taxes imposed by New York State and
New York municipalities. (Federal regular income tax does not include the
federal individual alternative minimum tax or the federal alternative minimum
tax for corporations.) The average maturity of the securities in the Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less. Unless
indicated otherwise, the investment policies may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of New York and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified
legal counsel, exempt from federal regular income tax, the personal income taxes
imposed by New York State and New York municipalities, and New York State income
tax imposed upon non-corporate taxpayers ("New York Municipal Securities").
Examples of New York Municipal Securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in New York
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying New York Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; 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 New York
Municipal Securities is subject to the federal alternative minimum tax.
NEW YORK MUNICIPAL SECURITIES
New York Municipal Securities are generally issued to finance public works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
New York Municipal Securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of New York Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on New York Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of New York Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of New York
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in New York Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
New York Municipal Securities could involve an increased risk to the Fund should
any of these related projects or facilities experience financial difficulties.
Obligations of issuers of New York Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge up to 10% of the value of total assets to secure such
borrowings. These investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being pur-
chased or sold, or being considered for purchase or sale, by the Fund; prohibit
purchasing securities in initial public offerings; and prohibit taking profits
on securities held for less than sixty days. Violations of the codes are subject
to review by the Trustees, and could result in severe penalties.
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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the distributor may be paid a fee in an amount computed at an annual rate of .25
of 1% of the average daily net asset value of Institutional Service Shares to
finance any activity which is principally intended to result in the sale of
shares subject to the Distribution Plan. The Fund does not currently make
payments to the distributor or charge a fee under the Distribution Plan and
shareholders will be notified if the Fund intends to charge a fee under the
Distribution Plan. The distributor may select financial institutions such as
banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide services or distribution-related support services as
agents for their clients or customers.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Fund
under the Distribution Plan.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up .25 of 1% of the average daily net asset value of
Institutional Service Shares to obtain certain personal services for
shareholders and for the maintenance of shareholder accounts. Federated
Shareholders Services will either perform shareholder services directly or will
select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. With respect to Institutional
Service Shares, in addition to payments made pursuant to the Distribution Plan
and Shareholder Services Agreement, Federated Securities Corp. and Federated
Shareholder Services, from their own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution-related support services, or shareholder services. The support may
include sponsoring sales, educational and training seminars for their employees,
providing sales literature, and engineering computer software programs that
emphasize the attributes of the Fund. Such assistance will be predicated upon
the amount of shares the financial institution sells or may sell, and/or upon
the type and nature of sales or marketing support furnished by the financial
institution. Any payments made by the distributor may be reimbursed by the
Fund's investment adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
-------------------------------- --------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
on assets in excess of $750
.075 of 1% million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Institutional Service
Shares at $1.00 by valuing the portfolio securities using the amortized cost
method. The net asset value per share is determined by subtracting liabilities
attributable to shares from the value of Fund assets attributable to shares, and
dividing the remainder by the number of shares outstanding. The Fund cannot
guarantee that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 3:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
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 which the New York Stock Exchange
is 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 within a
90-day period. Financial institutions may impose different minimum investment
requirements on their customers.
In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before shares can be purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may purchase
shares through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives payment by
wire or converts payment by check from the financial institution
into federal funds. It is the financial institution's responsibility to transmit
orders promptly. Financial institutions may charge additional fees for their
services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling the Fund
before 3:00 p.m. (Eastern time). The order is considered received immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern time) in
order to begin earning dividends that same day. Federal funds should be wired as
follows: Federated Services Company, c/o State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: New York Municipal Cash Trust,
Institutional Service Shares; Fund Number (This number can be found on the
account statement or by contacting the Fund.); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to New York Municipal Cash Trust--Institutional Service
Shares. 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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days
when wire transfers are restricted should be directed to your shareholder
services representative at the telephone number listed on your account
statement. 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 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. The check writing service allows
shareholders to receive the daily dividend declared on the shares to be redeemed
until the check is presented to UMB Bank, N.A., the bank responsible for
administering the check writing program, for payment. However, checks should
never be made payable or sent to UMB Bank, N.A. or the Fund to redeem shares,
and a check may not be written to close an account.
DEBIT CARD. Upon request, a debit account will be established. This account
allows shareholders to redeem shares by using a debit card. A fee will be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of at
least $25,000, a systematic withdrawal program may be established whereby
automatic redemptions are made from the account and transferred electronically
to any commercial bank, savings bank, or credit union that is an ACH member.
Shareholders may apply for participation in this program through their financial
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$25,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has one vote in Trustee elections and other
matters submitted to shareholders for vote. All shares of all classes of each
portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Fund may purchase all types of municipal bonds, including private activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than New
York. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
NEW YORK TAXES. Under existing New York laws, distributions made by the Fund
will not be subject to New York State or New York City personal income taxes to
the extent that such distributions qualify as exempt-interest dividends the
Internal Revenue Code, and represent interest income attributable to obligations
issued of the State of New York and its political subdivisions as well as
certain other obligations, the interest on which is exempt from New York State
and New York City personal income taxes, such as, for example, certain
obligations of the Commonwealth of Puerto Rico. Conversely, to the extent that
distributions made by the Fund are derived from other types of obligations, such
distributions will be subject to New York State and New York City personal
income taxes.
The Fund cannot predict in advance the exact portion of its dividends that will
be exempt from New York State and New York City personal income taxes. However,
the Fund will report to shareholders at least annually what percentage of the
dividends it actually paid is exempt from such taxes.
Dividends paid by the Fund are exempt from the New York City unincorporated
business taxes to the same extent that they are exempt from the New York City
personal income taxes.
Dividends paid by the Fund are not excluded from net income in determining New
York State or New York City franchise taxes on corporations or financial
institutions.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called Cash II Shares that are sold
primarily to certain customers of financial institutions which would include
corporations and municipalities, as well as larger individual accounts, seeking
a high level of cash management services. Cash II Shares are sold at net asset
value and are subject to a Rule 12b-1 Plan and a Shareholder Services Agreement.
Investments in Cash II Shares are subject to a minimum initial investment of
$25,000 within a 90-day period.
Institutional Service Shares and Cash II Shares are subject to certain of the
same expenses. Expense differences, however, between Institutional Service
Shares and Cash II Shares may affect the performance of each class.
To obtain more information and a prospectus for Cash II Shares, investors may
call 1-800-235-4669.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the shares' tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
NEW YORK MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH II SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 31.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------
1995 1994 1993** 1992 1991(A)
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00
- ------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.02
- ------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.02 ) (0.03) (0.02 )
- ------------------------------------------ ------ ------ ----- ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00
- ------------------------------------------ ------ ------ ----- ------ ------
TOTAL RETURN (B) 3.37% 2.15% 1.98 % 2.86% 2.20 %
- ------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------
Expenses 0.71% 0.71% 0.71 % 0.73% 0.46 %*
- ------------------------------------------
Net investment income 3.20% 2.19% 1.96 % 2.46% 4.08 %*
- ------------------------------------------
Expense waiver/reimbursement(c) 0.36% 0.21% 0.17 % -- --
- ------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------
Net assets, end of period (000 omitted) $14,439 $134,051 $58,884 $4,641 $56
- ------------------------------------------
</TABLE>
* Computed on an annualized basis.
** Prior to November 9, 1992, the Fund provided three classes of shares.
(a) Reflects operations for the period from April 25, 1991 (date of initial
public investment) to October 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NEW YORK MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ------------ ----------------------------------------------------- -------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.2%
- ------------------------------------------------------------------------
NEW YORK--95.8%
-----------------------------------------------------
$ 4,525,000 Albany City School District, NY, (Series 1995), 4.75%
BANs, 5/3/1996 NR(3) $ 4,533,714
-----------------------------------------------------
2,500,000 Albany, NY IDA, (Series 1995) Weekly VRDNs
(Davies Office Refurbishing, Inc. Project)/
(Marine Midland Bank N.A., Buffalo, NY LOC) P-2 2,500,000
-----------------------------------------------------
1,000,000 Babylon, NY IDA, (1994 Series) Weekly VRDNs (J.
D'Addario & Company, Inc. Project)/
(National Westminster Bank, PLC, London LOC) VMIG1 1,000,000
-----------------------------------------------------
3,246,000 Beacon, NY, 4.00% BANs, 8/16/1996 NR(3) 3,246,855
-----------------------------------------------------
6,000,000 Brentwood Union Free School District, NY, 4.375%
TANs, 6/28/1996 NR(3) 6,010,366
-----------------------------------------------------
5,000,000 Brentwood Union Free School District, NY, 4.50% TANs,
6/28/1996 NR(3) 5,012,605
-----------------------------------------------------
3,600,000 Broome County, NY, (Series 1995), 4.75% BANs,
4/19/1996 NR(3) 3,607,210
-----------------------------------------------------
3,300,000 Chautauqua County, NY IDA Weekly VRDNs (Cliffstar
Corp.)/(Society National Bank, Cleveland, OH LOC) P-1 3,300,000
-----------------------------------------------------
3,900,000 Chautauqua County, NY IDA Weekly VRDNs (Mogen David
Wine Corp.)/(Wells Fargo Bank, N.A. LOC) P-1 3,900,000
-----------------------------------------------------
3,000,000 Chautauqua County, NY, (Series 1995), 5.50% TANs,
12/21/1995 NR(3) 3,001,530
-----------------------------------------------------
1,140,000 Colonie, NY IDA Weekly VRDNs (Herbert S. Ellis)/
(Marine Midland Bank N.A., Buffalo, NY LOC) P-2 1,140,000
-----------------------------------------------------
820,000 Colonie, NY IDA, (Series 1988) Weekly VRDNs (13 Green
M-1 Drive Project)/(Marine Midland Bank N.A.,
Buffalo, NY LOC) P-2 820,000
-----------------------------------------------------
5,000,000 Erie County, NY IDA, IDRB (Series 1994) Weekly VRDNs
(Servotronics, Inc. Project)/(Fleet Bank of New York
LOC) P-1 5,000,000
-----------------------------------------------------
</TABLE>
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ------------ ----------------------------------------------------- -------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
NEW YORK--CONTINUED
-----------------------------------------------------
$ 1,800,000 Franklin County, NY IDA, (Series 1991A) Weekly VRDNs
(KES Chateaugay)/(Bank of Tokyo Ltd., Tokyo LOC) A-1 $ 1,800,000
-----------------------------------------------------
1,500,000 Guilderland, NY IDA, (Series 1993A) Weekly VRDNs
(Northeastern Industrial Park, Inc.)/(Chemical Bank,
New York LOC) P-1 1,500,000
-----------------------------------------------------
5,140,000 Hempstead Union Free School District, NY, 4.50% TANs,
6/28/1996 NR(3) 5,160,103
-----------------------------------------------------
4,000,000 Hempstead, NY, (Series 1995A), 5.50% BANs, 3/1/1996 VMIG1 4,009,720
-----------------------------------------------------
4,760,000 Herkimer County, NY IDA, 1994 IDRB Weekly VRDNs
(Granny's Kitchen)/(Bank of New York, New York LOC) A-1 4,760,000
-----------------------------------------------------
3,500,000 Hudson Falls, NY Central School District, 3.82% BANs,
6/28/1996 NR(3) 3,500,421
-----------------------------------------------------
3,700,000 Levittown Union Free School District, NY, 4.125%
BANs, 10/25/1996 NR 3,706,077
-----------------------------------------------------
1,000,000 Levittown Union Free School District, NY, 4.50% BANs,
10/25/1996 NR 1,005,183
-----------------------------------------------------
927,000 Liverpool Central School District, NY, 3.90% BANs,
6/19/1996 NR(3) 927,839
-----------------------------------------------------
3,770,000 Lockport, NY, 4.17% BANs, 5/30/1996 NR(3) 3,771,464
-----------------------------------------------------
4,200,000 Longwood Central School District, NY, 4.50% TANs,
6/26/1996 NR 4,211,814
-----------------------------------------------------
2,120,000 Madison County, NY IDA, (Series 1989A) Weekly VRDNs
(Madison, NY Upstate Metals)/(Fleet Bank of New York
LOC) A-1 2,120,000
-----------------------------------------------------
15,000,000 Marine Midland, NY, Premium Tax-Exempt Bond & Loan
Trust Weekly VRDNs (Marine Midland New York
Trust)/(Marine Midland Bank N.A., Buffalo, NY LOC) P-1 15,000,000
-----------------------------------------------------
1,002,814 Nassau County, NY IDA Weekly VRDNs (D.L. Blair
Corp.)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LOC) P-1 1,002,814
-----------------------------------------------------
10,000,000 Nassau County, NY, (Series 1995A), 4.50% TANs,
3/15/1996 SP-1+ 10,021,790
-----------------------------------------------------
</TABLE>
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ------------ ----------------------------------------------------- -------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
NEW YORK--CONTINUED
-----------------------------------------------------
$ 4,000,000 New York City Municipal Water Finance Authority,
(Series 4), 3.75% CP (Credit Suisse, Zurich LOC),
Mandatory Tender 1/23/1996 A-1+ $ 4,000,000
-----------------------------------------------------
283,334 New York City, NY IDA Weekly VRDNs (David Rosen
Bakers Supply)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LOC) P-1 283,334
-----------------------------------------------------
466,668 New York City, NY IDA Weekly VRDNs (Lomar Development
Corp.)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LOC) P-1 466,668
-----------------------------------------------------
81,265 New York City, NY IDA Weekly VRDNs (MLN
Associates)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LOC) P-1 81,265
-----------------------------------------------------
3,300,000 New York City, NY IDA Weekly VRDNs (Mindel
Associates)/(Chemical Bank, New York LOC) A-1 3,300,000
-----------------------------------------------------
1,900,000 New York City, NY IDA, Special Facility Revenue Bonds
(Series 1990) Weekly VRDNs (Air France)/(Societe
Generale, Paris LOC) A-1+ 1,900,000
-----------------------------------------------------
5,000,000 New York State Dormitory Authority, (Series 1989B),
3.60% CP (Sloan-Kettering Memorial Cancer Center)/
(Chemical Bank, New York LOC), Mandatory Tender
11/17/1995 P-1 5,000,000
-----------------------------------------------------
5,475,000 (a) New York State Dormitory Authority, PA-60 (Series
1993) Weekly VRDNs (Rochester General Hospital)/(FHA
INS)/(Merrill Lynch Capital Services, Inc. LIQ) A-1+ 5,475,000
-----------------------------------------------------
2,700,000 New York State Energy Research & Development
Authority Weekly VRDNs (Long Island Lighting
Co.)/(Toronto-Dominion Bank LOC) VMIG1 2,700,000
-----------------------------------------------------
3,285,000 New York State Energy Research & Development
Authority, (Series 1985), 4.40% TOBs (Rochester Gas &
Electric Corp)/(Credit Suisse, Zurich LOC), Optional
Tender 11/15/1995 A-1+ 3,285,000
-----------------------------------------------------
2,000,000 New York State Energy Research & Development
Authority, (Series 1985A), 4.70% TOBs (Long Island
Lighting Co.)/(Deutsche Bank, AG LOC), Mandatory
Tender 3/1/1996 A-1+ 2,000,000
-----------------------------------------------------
</TABLE>
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ------------ ----------------------------------------------------- -------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
NEW YORK--CONTINUED
-----------------------------------------------------
$ 3,000,000 New York State Energy Research & Development
Authority, (Series 1993A) Weekly VRDNs (Long Island
Lighting Co.)/(Toronto-Dominion Bank LOC) VMIG1 $ 3,000,000
-----------------------------------------------------
2,000,000 New York State Energy Research & Development
Authority, 4.65% TOBs (New York State Electric and
Gas Corp.)/(J.P. Morgan Delaware, Wilmington LOC),
Optional Tender 3/15/1996 A-1+ 2,000,000
-----------------------------------------------------
2,500,000 New York State HFA Weekly VRDNs (Special Surgery
Hospital)/(Chemical Bank, New York LOC) VMIG1 2,500,000
-----------------------------------------------------
4,000,000 New York State HFA, Housing Revenue Bonds (1985
Series A) Weekly VRDNs (Liberty View Apartments)/
(Chemical Bank, New York LOC) A-1 4,000,000
-----------------------------------------------------
1,290,000 New York State Job Development Authority Weekly VRDNs
(Sumitomo Bank Ltd., Osaka LOC) VMIG1 1,290,000
-----------------------------------------------------
1,590,000 New York State Job Development Authority Weekly VRDNs
(Sumitomo Bank Ltd., Osaka LOC) VMIG1 1,590,000
-----------------------------------------------------
4,625,000 (a) New York State Medical Care Facilities Finance
Agency, Hospital & Nursing Home Mortgage Revenue
Bonds (1994 Series C) Weekly VRDNs (FHA INS)/(Merrill
Lynch Capital Services, Inc. LIQ) A-1+ 4,625,000
-----------------------------------------------------
3,700,000 (a) New York State Mortgage Agency, (Series PA-29) Weekly
VRDNs (Merrill Lynch Capital Services, Inc. LIQ) VMIG1 3,700,000
-----------------------------------------------------
4,945,000 (a) New York State Mortgage Agency, Homeowner Mortgage
Revenue Bonds (PA-87) Weekly VRDNs (Merrill Lynch
Capital Services, Inc. LIQ) VMIG1 4,945,000
-----------------------------------------------------
2,640,000 (a) New York State Mortgage Agency, Homeowner Mortgage
Revenue Bonds (Series PT-15B) Weekly VRDNs (Dai-Ichi
Kangyo Bank Ltd., Tokyo LIQ) VMIG1 2,640,000
-----------------------------------------------------
6,500,000 Niagara County, NY IDA Weekly VRDNs (Allegheny Ludlum
Corp.)/(PNC Bank, N.A. LOC) A-1 6,500,000
-----------------------------------------------------
</TABLE>
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ------------ ----------------------------------------------------- -------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
NEW YORK--CONTINUED
-----------------------------------------------------
$ 6,000,000 Niagara County, NY IDA, Solid Waste Disposal Facility
Revenue Bonds (Series 1994B), 4.00% CP (American Ref-
Fuel Company)/(Air Products & Chemicals, Inc. and
Browning-Ferris Industries, Inc. GTDs), Mandatory
Tender 12/8/1995 A-1 $ 6,000,000
-----------------------------------------------------
9,900,000 Niagara County, NY IDA, Solid Waste Disposal Facility
Revenue Bonds (Series 1994C), 3.90% CP (American
Ref-Fuel Company)/(Air Products & Chemicals, Inc. and
Browning-Ferris Industries, Inc. GTDs), Mandatory
Tender 2/13/1996 A-1 9,900,000
-----------------------------------------------------
6,000,000 Niagara County, NY IDA, Solid Waste Disposal Facility
Revenue Bonds (Series 1994C), 4.00% CP (American
Ref-Fuel Company)/(Air Products & Chemicals, Inc. and
Browning-Ferris Industries, Inc. GTDs), Mandatory
Tender 1/11/1996 A-1 6,000,000
-----------------------------------------------------
1,010,000 North Hempstead, NY, (1995 Series B), 4.75% BANs,
4/25/1996 NR(3) 1,012,093
-----------------------------------------------------
820,000 Onondaga County, NY IDA Weekly VRDNs (Beverage
Corp.)/(Marine Midland Bank N.A., Buffalo, NY LOC) P-2 820,000
-----------------------------------------------------
1,075,000 Onondaga County, NY IDA, (Series 1987) Weekly VRDNs
(Southern Container Corp.)/(Chemical Bank, New York
LOC) VMIG1 1,075,000
-----------------------------------------------------
1,725,000 Onondaga County, NY Weekly VRDNs (Grainger (W.W.),
Inc.) A-1+ 1,725,000
-----------------------------------------------------
1,500,000 Ontario, NY IDA Weekly VRDNs (Hillcrest
Enterprises/Buckeye Corrugated)/(National City Bank,
Cleveland, OH LOC) P-1 1,500,000
-----------------------------------------------------
5,700,000 Oswego County, NY IDA Weekly VRDNs (Copperweld
Corp.)/(Credit Lyonnais, North America LOC) P-1 5,700,000
-----------------------------------------------------
1,525,000 Perry Central School District, NY, 4.125% BANs,
6/21/1996 NR(3) 1,528,971
-----------------------------------------------------
15,000,000 Port Authority of New York and New Jersey Weekly
VRDNs A-1+ 15,000,000
-----------------------------------------------------
15,000,000 Port Authority of New York and New Jersey Weekly
VRDNs A-1+ 15,000,000
-----------------------------------------------------
</TABLE>
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ------------ ----------------------------------------------------- -------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
NEW YORK--CONTINUED
-----------------------------------------------------
$ 1,000,000 Port Authority of New York and New Jersey, (Series 3)
Weekly VRDNs (KIAC Partners)/(Deutsche Bank, AG LOC) P-1 $ 1,000,000
-----------------------------------------------------
1,000,000 Rotterdam, NY IDA, (Series 1993A) Weekly VRDNs
(Rotterdam Industrial Park)/(Chemical Bank, New York
LOC) P-1 1,000,000
-----------------------------------------------------
4,000,000 Saranac Central School District, NY, 4.50% BANs,
6/28/1996 NR(2) 4,016,394
-----------------------------------------------------
650,817 Schenectady, NY IDA Weekly VRDNs (McClellan Street
Associates)/(Ford Motor Credit Corp. 1994-A LIQ)/
(Dai-Ichi Kangyo Bank Ltd., Tokyo LOC) P-1 650,817
-----------------------------------------------------
3,000,000 Suffolk County, NY IDA Weekly VRDNs (C & J Realty
Corp.)/(Ford Motor Credit Corp. 1994-A LIQ)/(Dai-Ichi
Kangyo Bank Ltd., Tokyo LOC) P-1 3,000,000
-----------------------------------------------------
509,167 Suffolk County, NY IDA Weekly VRDNs (CS Property/
Tara Toy, Inc.)/(Ford Motor Credit Corp. 1994-A
LIQ)/(Dai-Ichi Kangyo Bank Ltd., Tokyo LOC) P-1 509,167
-----------------------------------------------------
432,000 Suffolk County, NY IDA Weekly VRDNs (D.A.
Yaron)/(Ford Motor Credit Corp. 1994-A LIQ)/(Dai-Ichi
Kangyo Bank Ltd., Tokyo LOC) P-1 432,000
-----------------------------------------------------
1,050,000 Suffolk County, NY IDA Weekly VRDNs (Poly Research
Corp.)/(Marine Midland Bank N.A., Buffalo, NY LOC) P-2 1,050,000
-----------------------------------------------------
1,800,000 Suffolk County, NY IDA, 5.6875% TOBs (Grainger
(W.W.), Inc.), Optional Tender 12/1/1995 P-1 1,800,000
-----------------------------------------------------
5,000,000 (a) VRDC/IVRC Trust, (Series 1992A) Weekly VRDNs (New
York City Municipal Water Finance Authority)/(MBIA
Insurance Corporation INS)/(HongKong & Shanghai
Banking Corp. LIQ) A-1 5,000,000
-----------------------------------------------------
7,000,000 (a) VRDC/IVRC Trust, (Series 1993B) Weekly VRDNs (New
York Metropolitan Transportation Authority)/(AMBAC
INS)/(HongKong & Shanghai Banking Corp. LIQ) A-1 7,000,000
-----------------------------------------------------
7,500,000 Walden Village, NY IDA, IDRB (Series 1994) Weekly
VRDNs (Spence Engineering Co.)/(First Union National
Bank, Charlotte, N.C. LOC) P-1 7,500,000
-----------------------------------------------------
</TABLE>
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ------------ ----------------------------------------------------- -------- ------------
<C> <C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------
NEW YORK--CONTINUED
-----------------------------------------------------
$ 5,685,000 Warren & Washington Counties, NY IDA Weekly VRDNs
(Sandy Hill Corp.)/(First Union National Bank,
Charlotte, N.C. LOC) A-1 $ 5,685,000
-----------------------------------------------------
1,415,000 Yates County, NY IDA, (Series 1992A) Weekly VRDNs
(Clearplass Container)/(Fleet Bank of New York LOC) A-1 1,415,000
-----------------------------------------------------
2,300,000 Yonkers, NY IDA, (Series 1992A) Weekly VRDNs
(Consumers Union Facility)/(Industrial Bank of Japan
Ltd., Tokyo LOC) VMIG1 2,300,000
----------------------------------------------------- ------------
TOTAL 278,470,214
----------------------------------------------------- ------------
PUERTO RICO--3.4%
-----------------------------------------------------
10,000,000 (a) Commonwealth of Puerto Rico, Public Improvement
Refunding Bonds TOC (Series 1995B) Weekly VRDNs (MBIA
Insurance Corporation INS)/(Dai-Ichi Kangyo Bank
Ltd., Tokyo LIQ) A-1 10,000,000
----------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST(B) $288,470,214
----------------------------------------------------- ------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 34% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. These securities have been determined to be
liquid under criteria established by the Board of Trustees. At the end of
the period, these securities amounted to ($43,385,000) which represents 15%
of net assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($290,587,984) at October 31, 1995.
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronym(s) are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC -- American Municipal Bond Assurance Corporation
BANs -- Bond Anticipation Notes
CP -- Commercial Paper
FHA -- Federal Housing Administration
GTDs -- Guarantees
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDRB -- Industrial Development Revenue Bond
INS -- Insured
LIQ -- Liquidity Agreement
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance
PLC -- Public Limited Company
TANs -- Tax Anticipation Notes
TOBs -- Tender Option Bonds
TOC -- Tender Option Certificate
VRDNs -- Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW YORK MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $288,470,214
- ------------------------------------------------------------------------------
Cash 388,388
- ------------------------------------------------------------------------------
Income receivable 2,534,760
- ------------------------------------------------------------------------------
Receivable for shares sold 266
- ------------------------------------------------------------------------------ ------------
Total assets 291,393,628
- ------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------------
Payable for shares redeemed $183,571
- -------------------------------------------------------------------
Income distribution payable 585,672
- -------------------------------------------------------------------
Accrued expenses 36,401
- ------------------------------------------------------------------- --------
Total liabilities 805,644
- ------------------------------------------------------------------------------ ------------
NET ASSETS for 290,593,593 shares outstanding $290,587,984
- ------------------------------------------------------------------------------ ------------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------
Paid in capital $290,593,593
- ------------------------------------------------------------------------------
Accumulated net realized loss on investments (5,609)
- ------------------------------------------------------------------------------ ------------
Total Net Assets $290,587,984
- ------------------------------------------------------------------------------ ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES:
- ------------------------------------------------------------------------------
$276,149,176/276,155,517 shares outstanding $1.00
- ------------------------------------------------------------------------------ ------------
CASH II SHARES:
- ------------------------------------------------------------------------------
$14,438,808/14,438,076 shares outstanding $1.00
- ------------------------------------------------------------------------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW YORK MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------
Interest $13,386,966
- ----------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------
Investment advisory fee $ 1,335,835
- -------------------------------------------------------------------------
Administrative personnel and services fee 252,807
- -------------------------------------------------------------------------
Custodian fees 88,001
- -------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 53,726
- -------------------------------------------------------------------------
Directors'/Trustees' fees 5,982
- -------------------------------------------------------------------------
Auditing fees 19,781
- -------------------------------------------------------------------------
Legal fees 2,827
- -------------------------------------------------------------------------
Portfolio accounting fees 64,263
- -------------------------------------------------------------------------
Distribution services fee--Institutional Service Shares 690,979
- -------------------------------------------------------------------------
Distribution services fee--Cash II Shares 143,918
- -------------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 690,979
- -------------------------------------------------------------------------
Shareholder services fee--Cash II Shares 143,918
- -------------------------------------------------------------------------
Share registration costs 19,808
- -------------------------------------------------------------------------
Printing and postage 26,828
- -------------------------------------------------------------------------
Insurance premiums 8,298
- -------------------------------------------------------------------------
Miscellaneous 4,914
- ------------------------------------------------------------------------- -----------
Total expenses 3,552,864
- -------------------------------------------------------------------------
Waivers--
- -------------------------------------------------------------------------
Waiver of investment advisory fee $(351,948)
- -------------------------------------------------------------
Waiver of distribution services fee--Institutional Service
Shares (690,979)
- -------------------------------------------------------------
Waiver of distribution services fee--Cash II Shares (130,887)
- -------------------------------------------------------------
Waiver of shareholder services fee--Institutional Service
Shares (477,927)
- -------------------------------------------------------------
Waiver of shareholder services fee--Cash II Shares (13,031)
- ------------------------------------------------------------- ---------
Total waivers (1,664,772)
- ------------------------------------------------------------------------- -----------
Net expenses 1,888,092
- ---------------------------------------------------------------------------------------- -----------
Net investment income 11,498,874
- ---------------------------------------------------------------------------------------- -----------
Net realized gain on investments 12,000
- ---------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $11,510,874
- ---------------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW YORK MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------
1995 1994
--------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 11,498,874 $ 7,881,134
- ------------------------------------------------------------ --------------- -------------
Net realized gain (loss) on investments 12,000 322
- ------------------------------------------------------------ --------------- -------------
Change in net assets resulting from operations 11,510,874 7,881,456
- ------------------------------------------------------------ --------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------
Distributions from net investment income
- ------------------------------------------------------------
Institutional Service Shares (9,657,797) (5,630,675)
- ------------------------------------------------------------
Cash II Shares (1,841,077) (2,250,459)
- ------------------------------------------------------------ --------------- -------------
Change in net assets resulting from distributions to
shareholders (11,498,874) (7,881,134)
- ------------------------------------------------------------ --------------- -------------
SHARE TRANSACTIONS--
- ------------------------------------------------------------
Proceeds from sale of Shares 1,236,075,244 918,756,952
- ------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment
of distributions declared 3,314,165 2,705,999
- ------------------------------------------------------------
Cost of Shares redeemed (1,319,444,545) (884,074,127)
- ------------------------------------------------------------ --------------- -------------
Change in net assets resulting from share transactions (80,055,136) 37,388,824
- ------------------------------------------------------------ --------------- -------------
Change in net assets (80,043,136) 37,389,146
- ------------------------------------------------------------ --------------- -------------
NET ASSETS:
- ------------------------------------------------------------
Beginning of period 370,631,120 333,241,974
- ------------------------------------------------------------ --------------- -------------
End of period $ 290,587,984 $ 370,631,120
- ------------------------------------------------------------ --------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NEW YORK MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of New York Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
Fund offers two classes of shares: Institutional Service Shares and Cash II
Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
At October 31, 1995, the Fund, for federal tax purposes, had a capital loss
carryforward of $5,609, which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
--------------------------------- ---------------------------------
<S> <C>
1996 $5,609
</TABLE>
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers in that
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
state than would be a comparable tax-exempt mutual fund that invests
nationally. In order to reduce the credit risk associated with such
factors, at October 31, 1995, 61% of the securities in the portfolio of
investments are backed by letters of credit or bond insurance of various
financial institutions and financial guaranty assurance agencies. The value
of investments insured by or supported (backed) by a letter of credit for
any one institution or agency do not exceed 7.6% of total investments.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. Many restricted securities may
be resold in the secondary market in transactions exempt from registration.
In some cases, the restricted securities may be resold without registration
upon exercise of a demand feature. Such restricted securities may be
determined to be liquid under criteria established by the Board of
Trustees. The Fund will not incur any registration costs upon such resales.
Restricted securities are valued at amortized cost in accordance with Rule
2a-7 under the Investment Company Act of 1940.
Additional information on each restricted security held at October 31, 1995
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
---------------------------------------------------- ---------------- ----------------
<S> <C> <C>
New York State Dormitory Authority PA-60 (Series March 13, 1995 $ 5,475,000
1989B)
New York State Medical Care Facilities Finance July 5, 1995 4,625,000
Agency
New York State Mortgage Agency (Series PA-29) April 3, 1995 3,700,000
New York State Mortgage Agency (Series PA-87) July 5, 1995 4,945,000
New York State Mortgage Agency (Series PT-15B) July 5, 1995 2,640,000
VRDC/IVRC Trust (Series 1992A) New York City July 5, 1995 5,000,000
Municipal Water Finance Authority
VRDC/IVRC Trust (Series 1993B) New York Metropolitan May 19, 1995 7,000,000
Transportation Authority
Commonwealth of Puerto Rico, Public Improvement May 25, 1995 10,000,000
Refunding Bonds TOC (Series 1995b)
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $290,593,593.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
INSTITUTIONAL SERVICE SHARES 1995 1994
- ------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Shares sold 1,002,966,036 548,493,561
- -------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 1,484,402 758,005
- -------------------------------------------------------------
Shares redeemed (964,892,684) (587,029,347)
- ------------------------------------------------------------- ------------- -------------
Net change resulting from Institutional Service share
transactions 39,557,754 (37,777,781)
- ------------------------------------------------------------- ------------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------
CASH II SHARES 1995 1994
- ------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Shares sold 233,109,208 370,263,391
- -------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 1,829,763 1,947,994
- -------------------------------------------------------------
Shares redeemed (354,551,861) (297,044,780)
- ------------------------------------------------------------- ------------- -------------
Net change resulting from Cash II share transactions (119,612,890) 75,166,605
- ------------------------------------------------------------- ------------- -------------
Net change resulting from share transactions (80,055,136) 37,388,824
- ------------------------------------------------------------- ------------- -------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
reimburse Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's Institutional Service Shares and Cash II Shares. The Plan provides
that the Fund may incur distribution expenses up to .25 of 1% of the average
daily net assets of the Institutional Service Shares and Cash II Shares,
annually, to reimburse FSC.
NEW YORK MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund shares for the period. This fee is to
obtain certain services for shareholders and to maintain shareholder accounts.
FSS may voluntarily choose to waive a portion of its fee. FSS can modify or
terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ")serves as transfer and dividend disbursing agent for
the Fund. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common Officers. These
transactions were made at current market value pursuant to rule 17a-7 under the
Act amounting to $518,060,000 and $576,715,000 respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(New York Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of New York
Municipal Cash Trust (an investment portfolio of Federated Municipal Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of October 31, 1995, the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights (see pages 2 and 15 of the
prospectus) for the periods presented. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights for the period ended October 31,
1993, and prior were audited by other auditors whose report dated December 17,
1993, expressed an unqualified opinion on those financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian and broker. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Minnesota Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended, and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
New York Municipal Cash Trust
Institutional Service Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
- ----------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- ----------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- ----------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NEW YORK MUNICIPAL
CASH TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated December 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229741
G00208-01 (12/95)
NEW YORK MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
CASH II SHARES
INSTITUTIONAL SERVICE SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectuses of New York Municipal Cash Trust (the "Fund"), a
portfolio of Federated Municipal Trust ( the "Trust") dated December
31, 1995. This Statement is not a prospectus. You may request a copy
of a prospectus or a paper copy of this Statement, if you have
received it electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated December 31, 1995
Federated Securities Corp.
DISTRIBUTOR
A SUBSIDIARY OF FEDERATED INVESTORS
INVESTMENT POLICIES 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
Ratings 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 2
Credit Enhancement 2
NEW YORK INVESTMENT RISKS 2
INVESTMENT LIMITATIONS 3
FEDERATED MUNICIPAL TRUST
MANAGEMENT 5
The Funds 9
Share Ownership 9
Trustees Compensation 10
Trustee Liability 10
INVESTMENT ADVISORY SERVICES 10
Investment Adviser 10
Advisory Fees 11
BROKERAGE TRANSACTIONS 11
OTHER SERVICES 11
Fund Administration 12
Custodian and Portfolio
Recordkeeper 12
Transfer Agent 12
Independent Public Accountants12
SHAREHOLDER SERVICES AGREEMENT12
DETERMINING NET ASSET VALUE 12
REDEMPTION IN KIND 13
MASSACHUSETTS PARTNERSHIP LAW 13
THE FUND'S TAX STATUS 13
PERFORMANCE INFORMATION 13
Yield 13
Effective Yield 13
Tax-Equivalent Yield 13
Tax-Equivalency Table 14
Total Return 14
Performance Comparisons 15
ABOUT FEDERATED INVESTORS 15
Mutual Fund Market 15
Institutional Clients 15
Trust Organizations 15
Broker/Dealers and Bank
Broker/Dealer
Subsidiaries 16
APPENDIX 17
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed
by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the security, the issuer of any demand feature applicable to the
security, or any guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right
to demand payment of the principal amounts of the participation interests
plus accrued interest on short notice (usually within seven days). The
municipal securities subject to the participation interests are not
limited to the Fund's maximum maturity requirements so long as the
participation interests include the right to demand payment from the
issuers of those interests. By purchasing participation interests having
a seven day demand feature, the Fund is buying a security meeting the
maturity and quality requirements of the Fund and also is receiving the
tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the nature of the appropriation for the lease. Furthermore, a lease may
provide that the participants cannot accelerate lease obligations upon
default. The participants would only be able to enforce lease payments as
they became due. In the event of a default or failure of appropriation,
unless the participation interests are credit enhanced, it is unlikely
that the participants would be able to obtain an acceptable substitute
source of payment.
In determining the liquidity of municipal lease securities, the
investment adviser, under the authority delegated by the Board of
Trustees, will base its determination on the following factors: whether
the lease can be terminated by the lessee; the potential recovery, if
any, from a sale of the leased property upon termination of the lease;
the lessee's general credit strength (e.g., its debt, administrative,
economic and financial characteristics and prospects); the likelihood
that the lessee will discontinue appropriating funding for the leased
property because the property is no longer deemed essential to its
operations (e.g., the potential for an "event of non-appropriation"); and
any credit enhancement or legal recourse provided upon an event of non-
appropriation or other termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations ("NRSROs") or be of comparable quality
to securities having such ratings. An NRSRO's two highest rating
categories are determined without regard for sub-categories and
gradations. For example, securities rated SP-1+, SP-1, or SP-2 by
Standard & Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by Moody's
Investors Service, Inc. ("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch
Investors Service, Inc. ("Fitch") are all considered rated in one of the
two highest short-term rating categories. The Fund will follow applicable
regulations in determining whether a security rated by more than one
NRSRO can be treated as being in one of the two highest short-term rating
categories; currently, such securities must be rated by two NRSROs in one
of their two highest rating categories. See "Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other than normal transaction costs, are incurred. However, liquid
assets of the Fund sufficient to make payment for the securities to be
purchased are segregated on the Fund`s records at the trade date. These
assets are marked to market daily and are maintained until the
transaction has been settled. The Fund does not intend to engage in
when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which
banks, brokers/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them
at a mutually agreed upon time and price. To the extent that the seller
does not repurchase the securities from the Fund, the Fund could receive
less than the repurchase price on any sale of such securities. The Fund
or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market
daily. In the event that a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be
delayed pending court action. The Fund believes that under the regular
procedures normally in effect for custody of the Fund's portfolio
securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such
as broker/dealers, which are deemed by the Fund's adviser to be
creditworthy pursuant to guidelines established by the Trustees.
CREDIT ENHANCEMENT
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.
NEW YORK INVESTMENT RISKS
The Fund invests in obligations of New York (the "State") issuers which
result in the Fund's performance being subject to risks associated with
the overall conditions present within the State. The following
information is a general summary of the State's financial condition and a
brief summary of the prevailing economic conditions. This information is
based on official statements relating to securities that are believed to
be reliable but should not be considered as a complete description of all
relevant information.
The State has achieved fiscal balance for the last few years after large
deficits in the middle and late 1980's. Growing social service needs,
education and Medicare expenditures have been the areas of largest growth
while prudent program cuts and increases in revenues through service fees
has enabled the state's budget to remain within balance for the last few
years. While the state still has a large accumulated deficit as a
percentage of its overall budget, the fiscal performance in recent years
has demonstrated a changed political environment that has resulted in
realistic revenue and expenditure projections to achieve financially
favorable results. The state also benefits from a high level of per
capita income that is well above the national average and from
significant amounts of international trade.
New York's economy is large and diverse. While several upstate counties
benefit from agriculture, manufacturing and high technology industries,
New York City nonetheless still dominates the State's economy through its
international importance in economic sectors such as advertising,
finance, and banking. The State's economy is projected to be weak through
1996, with state jobs growth of 0.4% well below the national level of
1.7%. State personal income growth is projected to be 4.2% while the
U.S. projected growth rate is 5.0%. These numbers reflect an economic
slowdown from 1995.
New York's budget process has been historically characterized by
contentious and protracted budget debates. New York State's fiscal 1996
budget, adopted 68 days late, distinguishes itself by reducing the actual
level of General Fund expenditures, not merely reducing the rate of
expenditure growth. In addition, tax reductions are phased in over the
next three years. Balancing the budget in the wake of tax cuts makes
the spending reduction plan even more critical. The plan faces serious
implementation risks which leave it vulnerable to delays and shortfalls.
Key to balancing this year's budget will be the coordination and timely
implementation of substantive program changes within a complicated and
geographically dispersed bureaucracy.
The overall credit quality of the State is further demonstrated by its
debt ratings. New York State maintains an A rating Moody's Investors
Service, Inc. and Standard & Poor's Ratings Group rates the State A-.
The Fund's concentration in municipal securities issued by the state and
its political subdivisions provides a greater level of risk than a fund
which is diversified across numerous states and municipal entities. The
ability of the state or its municipalities to meet their obligations will
depend on the availability of tax and other revenues; economic,
political, and demographic conditions within the state; and the
underlying fiscal condition of the state, its counties, and its
municipalities.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of transactions.
BORROWING MONEY
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in
excess of 5% of its total assets or in an amount up to one-third of the
value of its total assets, including the amount borrowed, in order to
meet redemption requests without immediately selling portfolio
instruments. This borrowing provision is not for investment leverage but
solely to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio instruments
would be inconvenient or disadvantageous. Interest paid on borrowed funds
will serve to reduce the Fund's income. The Fund will liquidate any such
borrowings as soon as possible and may not purchase any portfolio
instruments while any borrowings are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings. In those cases, it may pledge
assets having a market value not exceeding 10% of the value of its total
assets at the time of the pledge.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, although it may invest in
New York municipal securities secured by real estate or interests in real
estate.
INVESTING IN COMMODITIES AND MINERALS
The Fund will not purchase or sell commodities, commodity contracts, or
oil, gas, or other mineral exploration or development programs.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
MAKING LOANS
The Fund will not make loans except that it may acquire publicly or non-
publicly issued New York municipal securities, in accordance with its
investment objective, policies, and limitations, and the Trust's
Declaration of Trust.
ACQUIRING SECURITIES
The Fund will not acquire the voting securities of any issuer, except as
part of a merger, consolidation, reorganization, or acquisition of
assets.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not invest in securities issued by any other investment
company or investment trust.
INVESTMENTS IN ANY ONE ISSUER
With respect to securities comprising 75% of its assets, the Fund will
not invest more than 10% of its total assets in the securities of any one
issuer.
Under this limitation, each governmental subdivision, including states,
territories, possessions of the United States, or their political
subdivisions, agencies, authorities, instrumentalitites, or similar
entities, will be considered a separate issuer if its assets and revenues
are separate from those of the government body creating it and the
security is backed only by its own assets and revenues.
Industrial development bonds backed only by the assets and revenues of a
nongovernmental user are considered to be issued solely by that user. If
in the case of an industrial development bond or government issued
security, a governmental or other entity guarantees the security, such
guarantee would be considered a separate security issued by the
guarantor, as well as the other issuer, subject to limited exclusions
allowed by the Investment Company Act of 1940.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers (or in the alternative, guarantors, where
applicable) which have records of less than three years of continuous
operations, including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES
OF THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
Officers and Trustees of the Trust or its investment adviser, owning
individually more than .50 of 1% of the issuer's securities, together own
more than 5% of the issuer's securities.
INVESTING IN OPTIONS
The Fund will not purchase puts, calls, straddles, spreads, or any
combination of them, except that the Fund may purchase municipal
securities accompanied by agreements of sellers to repurchase them at the
Fund's option.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its total assets
in illiquid securities, including repurchase agreements maturing in more
than seven days.
ISSUING SENIOR SECURITIES
The Fund will not issue senior securities, except as permitted by the
investment objective and policies and limitations of the Fund.
The above limitations cannot be changed without shareholder approval.
For purposes of the above limitations, the Fund considers instruments
issued by a U.S. branch of a domestic bank or savings and loan having
capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items." Except with respect to borrowing
money, if a percentage limitation is adhered to at the time of
investment, a later increase or decrease in percentage resulting from any
change in value or net assets will not result in a violation of such
limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
the prospectus and this Statement of Additional Information, in order to
comply with applicable laws and regulations, including the provisions of
and regulations under the Investment Company Act of 1940. In particular,
the Fund will comply with the various requirements of Rule 2a-7, 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
ability to participate in volume transactions will be to the benefit of
the Fund.
FEDERATED MUNICIPAL TRUST MANAGEMENT
OFFICERS AND TRUSTEES ARE LISTED WITH THEIR ADDRESSES, BIRTHDATES,
PRESENT POSITIONS WITH FEDERATED MUNICIPAL TRUST, AND PRINCIPAL
OCCUPATIONS.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Executive Vice President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty;
Director, Eat'N Park Restaurants, Inc., and Statewide Settlement Agency,
Inc.; Director, Trustee, or Managing General Partner of the Funds;
formerly, Counsel, Horizon Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty;
Chairman, Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.;
Director, Trustee, or Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner,
Mollica, Murray and Hogue; Director, Trustee or Managing General Partner
of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman,
Czecho Management Center; Director, Trustee, or Managing General Partner
of the Funds; President Emeritus, University of Pittsburgh; founding
Chairman, National Advisory Council for Environmental Policy and
Technology and Federal Emergency Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global 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
of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport
Research, Ltd.; Executive Vice President and Director, Federated
Securities Corp.; Trustee, Federated Services Company; Chairman,
Treasurer, and Trustee, Federated Administrative Services; Trustee or
Director of some of the Funds; President, Executive Vice President and
Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice
President, Federated Shareholder Services; Vice President, Federated
Administrative Services; Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee,
Federated Investors; Trustee, Federated Advisers, Federated Management,
and Federated Research; Director, Federated Research Corp. and Federated
Global Research Corp.; Trustee, Federated Services Company; Executive
Vice President, Secretary, and Trustee, Federated Administrative
Services; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
THE FUNDS
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; Automated Government Money Trust; Blanchard Funds;
Blanchard Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust
Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport
Cash Trust; Federated ARMs Fund; Federated Equity Funds; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated Government Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Master Trust; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated
Stock Trust; Federated Tax-Free Trust; Federated Total Return Series,
Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund: 3-
5 Years; Federated U.S. Government Securities Fund: 5-10 Years; First
Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate
U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.;
Fortress Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash Trust; Insurance
Management Series; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty
Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty
Municipal Securities Fund, Inc.; Liberty U.S. Government Money Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.;
Liquid Cash Trust; Managed Series Trust; Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Trust; Municipal Securities
Income Trust; Newpoint Funds; 111 Corcoran Funds; Peachtree Funds; The
Planters Funds; RIMCO Monument Funds; Star Funds; The Starburst Funds;
The Starburst Funds II; Stock and Bond Fund, Inc.; Targeted Duration
Trust; Tax-Free Instruments Trust; Trust for Financial Institutions;
Trust For Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; The Virtus Funds; World
Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees own less than 1% of the Trust`s outstanding shares.
As of December 4, 1995, the following shareholder(s) of record owned 5%
or more of the outstanding Institutional Service Shares of New York
Municipal Cash Trust: Fiduciary Trust Company International, New York,
New York, owned approximately 51,028,500 shares (19.05%); Fleet
Securities Corp., Rochester, New York, owned approximately 43,275,119
shares (15.06%); Society National Bank, Cleveland, Ohio, owned
approximately 15,476,158 shares (5.38%); WESCO, Schenectady, New York,
owned approximately 15,895,333 shares (5.53%) and Schneider Mills Inc.,
owned approximately 18,803,509 shares (6.54%).
As of December 4, 1995, the following shareholder(s) of record owned 5%
or more of the outstanding Cash II Shares of New York Municipal Cash
Trust: Saul R. and Marion Klein Kramer, Garden City, New York, owned
approximately 20,000,000 shares (52.25%); North Fork Bank and Trust Co,
Mattituck, New York, owned approximately 3,178,564 shares (8.30%); Wayne
D. Thornbrough, New York, New York, owned approximately 2,410,162 shares
(6.29%); and Barrons Educational Series Inc., Hauppa, New York, owned
approximately 2,153,572 shares (5.62%).
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION*# FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Fund and
Chairman and Director 68 other investment companies in the Fund
Complex
Thomas G. Bigley,$2,458 $20,688 for the Fund and
Director 49 other investment companies in the Fund
Complex
John T. Conroy, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund
Complex
William J. Copeland, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund
Complex
James E. Dowd, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D., $3,266 $106,460 for the Fund and
Director 64 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr., $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund
Complex
Peter E. Madden, $2,757 $90,563 for the Fund and
Director 64 other investment companies in the Fund
Complex
Gregor F. Meyer, $3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,762 $0 for the Fund and
Director 64 other investment companies in the Fund
Complex
Wesley W. Posvar,$3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund
Complex
Marjorie P. Smuts, $3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund
Complex
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised
of 15 portfolios.
+The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
INVESTMENT ADVISER
The Fund's investment adviser is Federated Management. It is a
subsidiary of Federated Investors. All the voting securities of
Federated Investors are owned by a trust, the trustees of which are John
F. Donahue, his wife and his son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding,
or sale of any security or for anything done or omitted by it, except
acts or omissions involving willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed upon it by its
contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
For the fiscal years ended October 31, 1995, 1994, and 1993, the adviser
earned $1,335,835, $1,383,576, and $1,065,970, respectively, of which
$351,948, $364,783, and $460,455, respectively, was voluntarily waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fee, but not
including brokerage commissions, interest, taxes, and extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets, the
adviser will reimburse the Fund for its expenses over the
limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the
expense limitation is exceeded, the amount to be reimbursed by the
adviser will be limited, in any single fiscal year, by the amount of
the investment advisory fees.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order at a favorable price. In working with dealers, the adviser will
generally use those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can be
obtained elsewhere. The adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to guidelines
established by the Board of Trustees. The adviser may select brokers and
dealers who offer brokerage and research services. These services may be
furnished directly to the Fund or to the adviser and may include: advice
as to the advisability of investing in securities; security analysis and
reports; economic studies; industry studies; receipt of quotations for
portfolio evaluations; and similar services. Research services provided
by brokers and dealers may be used by the adviser or its affiliates in
advising the Trust and other accounts. To the extent that receipt of
these services may supplant services for which the adviser or its
affiliates might otherwise have paid, it would tend to reduce their
expenses. The adviser and its affiliates exercise reasonable business
judgment in selecting brokers who offer brokerage and research services
to execute securities transactions. They determine in good faith that
commissions charged by such persons are reasonable in relationship to the
value of the brokerage and research services provided. During the fiscal
years ended October 31, 1995, 1994, and 1993, the Trust paid no brokerage
commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type the Fund may make may also be made by those other accounts. When
the Fund and one or more other accounts managed by the adviser are
prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated in a
manner believed by the adviser to be equitable to each. In some cases,
this procedure may adversely affect the price paid or received by the
Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred to
as the "Administrators".) For the fiscal years ended October 31, 1995,
1994, and 1993, the Administrators earned $252,807, $292,612, and
$329,428, respectively. Dr. Henry J. Gailliot, an officer of Federated
Management, the adviser to the Fund, holds approximately 20% of the
outstanding common stock and serves as a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
TRANSFER AGENT
As transfer agent, Federated Services Company maintains all necessary
shareholder records. For its services, the transfer agent receives a fee
based on size, type, and number of accounts and transactions made by
shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT
These arrangements permit the payment of fees to financial institutions,
the distributor, and Federated Shareholder Services, to stimulate
distribution activities and to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may
include, but are not limited to: marketing efforts; providing office
space, equipment, telephone facilities, and various clerical,
supervisory, computer, and other personnel as necessary or beneficial to
establish and maintain shareholder accounts and records; processing
purchase and redemption transactions and automatic investments of client
account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and
addresses.
By adopting the Distribution Plan, the Directors expect that the Fund
will be able to achieve a more predictable flow of cash for investment
purposes and to meet redemptions. This will facilitate more efficient
portfolio management and assist the Fund in pursuing its investment
objectives. By identifying potential investors whose needs are served by
the Fund's objectives, and properly servicing these accounts, it may be
possible to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning their
accounts.
For the fiscal period ended October 31, 1995, payments in the amount of
$143,918 and $690,979, respectively, were made pursuant to the
Distribution Plan, on behalf of Cash II Shares and Institutional Service
Shares, respectively, of which $130,887and $690,979, respectively, was
waived. In addition, for this period, the Fund paid shareholder service
fees in the amount of $143,918 and $690,979, respectively, on behalf of
Cash II Shares and Institutional Service Shares, respectively, 13,031 and
477,927, respectively, was waived.
DETERMINING NET ASSET VALUE
The Trustees have decided that the best method for determining the value
of portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than at
current market value. Accordingly, neither the amount of daily income nor
the net asset value is affected by any unrealized appreciation or
depreciation of the portfolio. In periods of declining interest rates,
the indicated daily yield on shares of the Fund computed by dividing the
annualized daily income on the Fund's portfolio by the net asset value
computed as above may tend to be higher than a similar computation made
by using a method of valuation based upon market prices and estimates. In
periods of rising interest rates, the opposite may be true.
The Fund's use of the amortized cost method of valuing portfolio
instruments depends on its compliance with certain conditions in Rule 2a-
7 (the "Rule") promulgated by the Securities and Exchange Commission
under the Investment Company Act of 1940. Under the Rule, the Trustees
must establish procedures reasonably designed to stabilize the net asset
value per share, as computed for purposes of distribution and redemption,
at $1.00 per share, taking into account current market conditions and the
Fund's investment objective. The procedures include monitoring the
relationship between the amortized cost value per share and the net asset
value per share based upon available indications of market value. The
Trustees will decide what, if any, steps should be taken if there is a
difference of more than 0.5 of 1% between the two values. The Trustees
will take any steps they consider appropriate (such as redemption in kind
or shortening the average portfolio maturity) to minimize any material
dilution or other unfair results arising from differences between the two
methods of determining net asset value.
REDEMPTION IN KIND
The Fund is obligated to redeem shares solely in cash up to $250,000 or
1% of the Fund's net asset value, whichever is less, for any one
shareholder within a 90-day period. Any redemption beyond this amount
will also be in cash unless the Trustees determine that further payments
should be in kind. In such cases, the Fund will pay all or a portion of
the remainder of the redemption in portfolio instruments valued in the
same way as the Fund determines net asset value. The portfolio
instruments will be selected in a manner that the Trustees deem fair and
equitable. Redemption in kind is not as liquid as a cash redemption. If
redemption is made in kind, shareholders who sell these securities could
receive less than the redemption value and could incur certain
transaction costs.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90%
of its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain statutory limits; and distribute to its shareholders at least 90%
of its net income earned during the year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested; changes in interest rates; changes in expenses; and the
relative amount of cash flow. To the extent that financial institutions
and broker/dealers charge fees in connection with services provided in
conjunction with an investment in shares of the Fund, the performance
will be reduced for those shareholders paying those fees.
YIELD
The Fund calculates its yield based upon the seven days ending on the day
of the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional shares purchased with dividends earned from the original one
share and all dividends declared on the original and any purchased
shares; dividing the net change in the account's value by the value of
the account at the beginning of the base period to determine the base
period return; and multiplying the base period return by 365/7.
For the seven-day period ended October 31, 1995, the yields for
Institutional Service Shares and Cash II Shares were 3.52%, and
3.34%, respectively.
EFFECTIVE YIELD
The Fund calculates its effective yield by compounding the unannualized
base period return by: adding 1 to the base period return; raising the
sum to the 365/7th power; and subtracting 1 from the result.
For the seven-day period ended October 31, 1995, the effective yields for
Institutional Service Shares and Cash II Shares were 3.58% and 3.39%,
respectively.
TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Fund is calculated similarly to the yield
but is adjusted to reflect the taxable yield that the Fund would have had
to earn to equal its actual yield, assuming a 39.6% tax rate (the maximum
effective federal rate for individuals) and assuming that income is 100%
exempt.
For the seven-day period ended October 31, 1995, the tax-equivalent
yields for Institutional Service Shares and Cash II Shares were 6.82% and
6.45%, respectively.
TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often
free from state and local taxes as well. As the table below indicates, a
"tax-free" investment can be an attractive choice for investors,
particularly in times of narrow spreads between tax-free and taxable
yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF NEW YORK
TAX BRACKET:
Combined Federal
and State:22.875% 35.875% 38.875% 43.875% 47.475%
Joint Return$1-39,000$39,001-94,250 $94,251-143,600$143,601-256,500
OVER $256,500
Single Return$1-23,350 $23,351-56,550$56,551-117,950$117,951-
256,500OVER $256,500
Tax-Exempt Yield Taxable Yield Equivalent
1.50% 1.94% 2.34% 2.45% 2.67% 2.86%
2.00 2.59 3.12 3.27 3.56 3.81
2.50 3.24 3.90 4.09 4.45 4.76
3.00 3.89 4.68 4.91 5.35 5.71
3.50 5.54 5.46 5.73 6.24 6.66
4.00 5.19 6.24 6.54 7.13 7.62
4.50 5.83 7.02 7.36 8.02 8.57
5.00 6.48 7.80 8.18 8.91 9.52
5.50 7.13 8.58 9.00 9.80 10.47
6.00 7.78 9.36 9.82 10.69 11.42
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were not
used to increase federal deductions. If you itemize deductions, your
taxable yield equivalent will be lower.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for
a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value
is compounded by multiplying the number of shares owned at the end of the
period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number of
shares purchased at the beginning of the period with $1,000, adjusted
over the period by any additional shares, assuming the monthly
reinvestment of all dividends and distributions.
The Fund's Institutional Service Shares average annual total returns for
the one-year period ended October 31, 1995 and for the period from
November 24, 1982 (date of initial public investment) through October 31,
1995 were 3.56% and 4.24%, respectively.
The Fund's Cash II Shares average annual total returns for the one-year
period ended October 31, 1995 and for the period from April 25, 1991
(date of initial public investment) through October 31, 1995 were 3.37%
and 2.79%, respectively.
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
O LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories based on total return, which assumes the reinvestment of
all income dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money
market funds weekly. Donoghue's Money Market Insight publication
reports monthly and 12-month-to-date investment results for the same
money funds.
o MONEY, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day effective
yield.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making-structured, straightforward,
and consistent. This has resulted in a history of competitive
performance with a range of competitive investment products that have
gained the confidence of thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio
managers, analysts, and traders dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market
funds, a principal means used by money managers today to value money
market fund shares. Other innovations include the first institutional
tax-free money market fund. As of December 31, 1994, Federated Investors
managed more than $31 billion in assets across approximately 43 money
market funds, including 17 government, 8 prime and 18 municipal with
assets approximating $17 billion, $7.4 billion and $6.6 billion,
respectively.
J. Thomas Madden, Executive Vice President, oversees Federated
Investors's equity and high yield corporate bond management while William
D. Dawson, Executive Vice President, oversees Federated Investors's
domestic fixed income management. Henry A. Frantzen, Executive Vice
President, oversees the management of Federated Investors's international
portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $2 trillion to the more than 5,500
funds available.*
Federated Investors Investors, through its subsidiaries, distributes
mutual funds for a variety of investment applications. Specific markets
include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and mutual
funds for a variety of applications, including defined benefit and
defined contribution programs, cash management, and asset/liability
management. Institutional clients include corporations, pension funds,
tax-exempt entities, foundations/endowments, insurance companies, and
investment and financial advisors. The marketing effort to these
institutional clients is headed by John B. Fisher, President,
Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than
1,500 banks and trust organizations. Virtually all of the trust
divisions of the top 100 bank holding companies use Federated Investors
funds in their clients' portfolios. The marketing effort to trust
clients is headed by Mark R. Gensheimer, Executive Vice President, Bank
Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Investors mutual funds are available to consumers through major
brokerage firms nationwide--including 200 New York Stock Exchange firms--
supported by more wholesalers than any other mutual fund distributor.
The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Division.
*Source: Investment Company Institute
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the
liquidity concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS)
RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part
of their provisions a variable rate demand feature. The first rating
(long-term rating) addresses the likelihood of repayment of principal and
interest when due, and the second rating (short-term rating) describes
the demand characteristics. Several examples are AAA/A-1+, AA/A-1+, A/A-
1. (The definitions for the long-term and the short-term ratings are
provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365
days.
A-1 This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign
(+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high
as for issues designated A-1.
LONG-TERM DEBT RATINGS
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
FLORIDA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
CASH II SHARES
PROSPECTUS
The Cash II Shares of Florida Municipal Cash Trust (the "Fund") offered by this
prospectus represent interests in a non-diversified portfolio of Federated
Municipal Trust (the "Trust"), an open-end management investment company (a
mutual fund). The Fund invests primarily in short-term Florida municipal
securities, as well as securities of states, territories, and possessions of the
United States which are not issued by or on behalf of Florida, or its political
subdivisions and financing authorities, but which provide current income exempt
from federal regular income tax and which will enable the Fund to maintain an
investment portfolio that will cause its shares to be exempt from the Florida
intangibles tax, consistent with stability of principal and liquidity.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
INVESTMENT INFORMATION 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Florida Municipal Securities 5
Investment Risks 5
Non-Diversification 6
Investment Limitations 6
FUND INFORMATION 6
- ------------------------------------------------------
Management of the Fund 6
Distribution of Cash II Shares 7
Administration of the Fund 8
Expenses of the Fund 8
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 9
- ------------------------------------------------------
Special Purchase Features 10
HOW TO REDEEM SHARES 10
- ------------------------------------------------------
Special Redemption Features 11
ACCOUNT AND SHARE INFORMATION 12
- ------------------------------------------------------
TAX INFORMATION 12
- ------------------------------------------------------
Federal Income Tax 12
State and Local Taxes 13
Florida Intangibles Tax 13
Florida State Municipal Taxation 13
OTHER CLASSES OF SHARES 14
- ------------------------------------------------------
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 15
- ------------------------------------------------------
FINANCIAL STATEMENTS 16
- ------------------------------------------------------
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS 28
- ------------------------------------------------------
ADDRESSES 29
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CASH II SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).......................... None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee (after waiver) (1)...................................................................... 0.00%
12b-1 Fee (after waiver) (2)........................................................................... 0.14%
Total Other Expenses................................................................................... 0.51%
Shareholder Services Fee.................................................................. 0.25%
Total Fund Operating Expenses (3)............................................................ 0.65%
</TABLE>
- ------------
(1) The management fee has been reduced to reflect the anticipated voluntary
waiver of the management fee. The adviser can terminate this anticipated
voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.40%.
(2) The maximum 12b-1 fee is 0.25%.
(3) The total operating expenses are estimated to be 1.16% absent the
anticipated voluntary waivers of the management fee and a portion of the
12b-1 fee.
*Total operating expenses are estimated based on average expenses expected to be
incurred during the period ending October 31, 1996. During the course of this
period, expenses may be more or less than the average amount shown.
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 "Fund Information." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period................................................ $7 $21
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR CASH II SHARES FISCAL YEAR ENDING OCTOBER
31, 1996.
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 retail customers of financial institutions
as a convenient means of accumulating an interest in a professionally managed,
non-diversified portfolio investing primarily in short-term Florida municipal
securities. The Fund may not be a suitable investment for retirement plans or
for non-Florida taxpayers because it invests in municipal securities of that
state. A minimum initial investment of $10,000 within a 90-day period is
required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax consistent with stability of principal and liquidity and to
maintain an investment portfolio that will cause its shares to be exempt from
the Florida intangibles tax. This investment objective cannot be changed without
shareholder approval. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by complying with the various
requirements of Rule 2a-7 under the Investment Company Act of 1940 which
regulates money market mutual funds and by following the investment policies
described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of Florida
municipal securities (as defined below) maturing in 13 months or less. As a
matter of investment policy, which cannot be changed without shareholder
approval, the Fund will invest so that at least 80% of its annual interest
income will be exempt from federal regular income tax. (Federal regular income
tax does not include the federal individual alternative minimum tax or the
federal alternative minimum tax for corporations.) The average maturity of the
securities in the Fund's portfolio, computed on a dollar-weighted basis, will be
90 days or less. Unless indicated otherwise, the investment policies may be
changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of Florida and its political subdivisions and financing
authorities, as well as obligations of other states, territories, and
possessions of the United States, including the District of Columbia, and any
political subdivision or financing authority of any of these, the income from
which is, in the opinion of qualified legal counsel, exempt from federal regular
income tax ("Florida Municipal Securities "). Examples of Florida Municipal
Securities include, but are not limited to:
. tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
. bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
. municipal commercial paper and other short-term notes;
. variable rate demand notes;
. municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
. participation, trust, and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Florida
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests, or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Florida Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; obligations issued or guaranteed by
the U.S. government, its agencies, or instrumentalities; instruments issued by a
U.S. branch of a domestic bank or other deposit institution having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment; and repurchase agreements (arrangements in which the organization
selling the Fund a temporary investment agrees at the time of sale to repurchase
it at a mutually agreed upon time and price).
Although the Fund is permitted to make taxable temporary investments, there is
no current intention to do so. However, the interest from certain Florida
Municipal Securities is subject to the federal alternative minimum tax.
FLORIDA MUNICIPAL SECURITIES
Florida Municipal Securities are generally issued to finance public works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
Florida Municipal Securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Florida Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Florida Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of Florida Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of Florida
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Florida Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Florida Municipal Securities could involve an increased risk to the Fund should
any of these related projects or facilities experience financial difficulties.
Obligations of issuers of Florida Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge assets to secure such borrowings. These investment limitations
cannot be changed without shareholder approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund, up to the amount of the advisory fee, for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF CASH II SHARES
Federated Securities Corp. is the principal distributor for Cash II Shares of
the Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the distributor may be paid a fee in an amount computed at an annual rate of .25
of 1% of the average daily net assets of Cash II Shares to finance any activity
which is principally intended to result in the sale of Cash II Shares subject to
the Distribution Plan. The distributor may select financial institutions such as
banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales services or distribution-related support
services as agents for their clients or customers.
The Distribution Plan is a compensation-type Plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by Cash II
Shares under the Distribution Plan.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to .25 of 1% of the average daily net asset value
of Cash II Shares to obtain certain personal services for shareholders and the
maintenance of shareholder accounts. Under the Shareholder Services Agreement,
Federated Shareholders Services will either perform shareholder services
directly or will select financial institutions to perform shareholder services.
Financial institutions will receive fees based upon Cash II Shares owned by
their clients or customers. The schedules of such fees and the basis upon which
such fees will be paid will be determined from time to time by the Fund and
Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to payments made
pursuant to the Distribution Plan and Shareholder Services Agreement, Federated
Securities Corp. and Federated Shareholder Services, from their own assets, may
pay financial institutions supplemental fees for the performance of substantial
sales services, distribution-related support services, or shareholder services.
The support may include sponsoring sales, educational and training seminars for
their employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support furnished by
the financial institution. Any payments made by the distributor may be
reimbursed by the Fund's investment adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
----------- ----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of Trust expenses.
These expenses include, but are not limited to, the cost of: organizing the
Trust and continuing its existence; Trustees' fees; investment advisory and
administrative services; printing prospectuses and other documents for
shareholders; registering the Trust, the Fund, and shares of the Fund; taxes and
commissions; issuing, purchasing, repurchasing and redeeming shares; fees for
custodians, transfer agents, dividend disbursing agents, shareholder servicing
agents, and registrars; printing, mailing,
auditing, accounting, and legal expenses; reports to shareholders and government
agencies; meetings of Trustees and shareholders and proxy solicitations
therefore; insurance premiums; association membership dues; and such
non-recurring and extraordinary items as may arise.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Cash II Shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting 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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is 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 or more within a 90-day period. Financial institutions may impose
different minimum investment requirements on their customers.
In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before shares can be purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may purchase
shares through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives payment by
wire or converts payment by check from the financial institution into federal
funds. It is the financial institution's responsibility to transmit orders
promptly. Financial institutions may charge additional fees for their services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling the Fund
before 1:00 p.m. (Eastern time). The order is considered received immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern time) in
order to begin earning dividends that same day. Federal funds should be wired as
follows: Federated Services Company, c/o State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: Florida Municipal Cash Trust,
Cash II Shares ; Fund Number (this number can be found on the account statement
or by contacting the Fund.); Group Number or Order Number; Nominee or
Institution Name; and ABA Number 011000028. Shares cannot be purchased by wire
on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to Florida Municipal Cash Trust--Cash II Shares. Please
include an account number on the check. 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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. Shareholder accounts will continue to
receive the daily dividned declared on the shares to be redeemed until the check
is presented to UMB Bank, N.A., the bank responsible for administering the check
writing program, for payment. However, checks should never be made payable or
sent to UMB Bank, N.A. or the Fund to redeem shares, and a check may not be
written to close an account.
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 AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$10,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has 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. 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 election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax
Reform Act of 1986, dividends representing net interest earned on certain
"private activity" bonds issued after August 7, 1986, may be included in
calculating the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations. The Fund may purchase all types of
municipal bonds, including private activity bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than
Florida. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
FLORIDA INTANGIBLES TAX
Shareholders of the Fund that are subject to the Florida intangibles tax will
not be required to include the value of their Fund shares in their taxable
intangible property if all of the Fund's investments on the annual assessment
date are obligations that would be exempt from such tax if held directly by such
shareholders, such as Florida and U.S. government obligations. As described
earlier, the Fund will normally attempt to invest substantially all of its
assets in securities which are exempt from the Florida intangibles tax.
Accordingly, the value of the Fund shares held by a shareholder should under
normal circumstances be exempt from the Florida intangibles tax.
However, if the portfolio consists of any assets which are not so exempt on the
annual assessment date, only the portion of the shares of the Fund which relate
to securities issued by the United States and its possessions and territories
will be exempt from the Florida intangibles tax, even if they partly relate to
Florida tax exempt securities.
FLORIDA STATE MUNICIPAL TAXATION
In a majority of states that have an income tax, dividends paid by a mutual fund
attributable to investments in a particular state's municipal obligations are
exempt from both federal and such state's income tax. If Florida were to adopt
an income tax in the future, and assuming that its income tax policy with
respect to mutual funds investing in Florida state and local municipal
obligations would be similar to the general tax policy of other states,
dividends paid by the Fund would be exempt from Florida state income tax. A
constitutional amendment approved by referendum would be required before an
individual tax could be imposed.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares. These shares are sold at net asset
value primarily to financial institutions acting in an agency or fiduciary
capacity and are subject to a minimum initial investment of $10,000 over a
90-day period.
All classes are subject to certain of the same expenses.
The shares are distributed under a 12b-1 Plan adopted by the Fund and also are
subject to shareholder services fees.
Expense differences between classes may affect the performance of each class.
To obtain more information and a prospectus for any other class, investors may
call 1-800-235-4669.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the Fund's tax exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
FLORIDA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 28.
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, OCTOBER 31,
1995 1994(A)
----------- ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.000
- --------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------
Net investment income 0.04 0.004
- --------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------
Distributions from net investment income (0.04) (0.004)
- -------------------------------------------------------------------------- ------ -------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.000
- -------------------------------------------------------------------------- ------ -------
TOTAL RETURN (b) 3.60% 0.35%
- --------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------
Expenses 0.45% 0.28%*
- --------------------------------------------------------------------------
Net investment income 3.58% 3.28%*
- --------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.42% 1.03%*
- --------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------
Net assets, end of period (000 omitted) $153,347 $53,966
- --------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 21, 1994 (date of initial
public investment) to October 31, 1994. For the period from September 12,
1994 (start of business) to September 21, 1994 the Fund had no investment
activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FLORIDA MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------- ---------------------------------------------------------------------- --------- --------------
SHORT-TERM MUNICIPAL SECURITIES--99.4%
- -------------------------------------------------------------------------------------
FLORIDA--96.4%
----------------------------------------------------------------------
$ 2,400,000 Alachua County, FL Health Facilities Authority, Health Facility
Revenue Bonds (Series 1991) Weekly VRDNs (North Florida Retirement
Village)/(Kredietbank N.V., Brussels LOC) A-1 $ 2,400,000
----------------------------------------------------------------------
780,000 Broward County, FL Health Facility Authority, Revenue Bonds Weekly
VRDNs (John Knox Village of Florida)/(First Union National Bank,
Charlotte, N.C. LOC) P-1 780,000
----------------------------------------------------------------------
8,000,000 Charlotte County, FL School District, TANS (Series 1995), 3.90% TANs,
6/30/1996 MIG1 8,007,668
----------------------------------------------------------------------
3,000,000 Clay County, FL Development Authority, IDRB (Series 1994) Weekly VRDNs
(Carlisle Corporation Project)/(Trust Company Bank, Atlanta LOC) P-1 3,000,000
----------------------------------------------------------------------
2,000,000 Dade County, FL IDA, IDRB (Series 1995) Weekly VRDNs (June Leasing Co.
Project (FL))/(First Union National Bank of Florida LOC) A-1 2,000,000
----------------------------------------------------------------------
11,500,000 Dade County, FL Water & Sewer System Weekly VRDNs (FGIC
INS)/(Industrial Bank of Japan Ltd., Tokyo LIQ) A-1 11,500,000
----------------------------------------------------------------------
4,000,000 Florida Municipal Loan Council, (Series 1985-1), 3.90% CP (Florida
League of Cities)/(Sumitomo Bank Ltd., Osaka LOC), Mandatory Tender
12/1/1995 A-1 4,000,000
----------------------------------------------------------------------
5,375,000 Florida State Board of Education Administration, (CR55D), 4.00% TOBs
(Citibank NA, New York LIQ), Optional Tender 12/1/1995 AA 5,375,000
----------------------------------------------------------------------
6,000,000 Greater Orlando (FL) Aviation Authority, Airport Facilities
Subordinated CP Notes (Series B), 3.90% CP, Mandatory Tender
11/28/1995 P-1 6,000,000
----------------------------------------------------------------------
$ 3,000,000 Hillsborough County, FL Aviation Authority, Bond Anticipation
Commercial Paper Notes, 3.85% CP (Tampa International
Airport)/(National Westminster Bank, PLC, London LOC), Mandatory
Tender 12/7/1995 A-1+ $ 3,000,000
----------------------------------------------------------------------
</TABLE>
FLORIDA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------- ---------------------------------------------------------------------- --------- --------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
FLORIDA--CONTINUED
----------------------------------------------------------------------
2,000,000 Hillsborough County, FL IDA Weekly VRDNs (Ringhager Equipment
Co.)/(Mellon Bank NA, Pittsburgh LOC) P-1 2,000,000
----------------------------------------------------------------------
2,300,000 Hillsborough County, FL IDA, (Series 1992) Weekly VRDNs (SIFCO Turbine
Component Service)/(National City Bank, Cleveland, OH LOC) P-1 2,300,000
----------------------------------------------------------------------
2,250,000 Indian River County School District, FL, TANS (Series 1995), 4.00%
TANs, 6/30/1996 NR 2,252,780
----------------------------------------------------------------------
1,100,000 Jacksonville, FL Weekly VRDNs (Metal Sales)/(National City Bank,
Kentucky LOC) P-1 1,100,000
----------------------------------------------------------------------
1,000,000 Jacksonville, FL, Hospital Revenue Bonds (Series 1989) Weekly VRDNs
(Baptist Medical Center, AL)/(First Union National Bank, Charlotte,
N.C. LOC) VMIG1 1,000,000
----------------------------------------------------------------------
4,300,000 Key West, FL Community Redevelopment Authority Weekly VRDNs (Pier
House Joint Venture)/(PNC Bank, N.A. LOC) P-1 4,300,000
----------------------------------------------------------------------
4,000,000 Lake Shore, FL Hospital Authority, Health Facilities Revenue Bonds
(Series 1991) Weekly VRDNs (Lake Shore Hospital)/(Kredietbank N.V.,
Brussels LOC) P-1 4,000,000
----------------------------------------------------------------------
2,860,000 Lee County, FL IDA, (Series 1985) Weekly VRDNs (Christian & Missionary
Alliance Foundation)/(Banque Paribas, Paris LOC) P-1 2,860,000
----------------------------------------------------------------------
1,000,000 Lee County, FL IDA, Health Care Facilities Revenue Bonds Weekly VRDNs
(Hope Hospice Project)/(Sun Bank NA, Orlando LOC) VMIG1 1,000,000
----------------------------------------------------------------------
1,000,000 Lee County, FL IDA, IDRB (Series 1994) Weekly VRDNs (Baader North
America Corporation)/(Deutsche Bank, AG LOC) VMIG1 1,000,000
----------------------------------------------------------------------
$ 300,000 Manatee County, FL HFA Weekly VRDNs (Carriage Club)/ (Mellon Bank NA,
Pittsburgh LOC) VMIG1 $ 300,000
----------------------------------------------------------------------
</TABLE>
FLORIDA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------- ---------------------------------------------------------------------- --------- --------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
FLORIDA--CONTINUED
----------------------------------------------------------------------
1,000,000 Marion County, FL Health Facility Authority, Floating Rate Demand
Multifamily Revenue Bonds (1985 Series F) Weekly VRDNs (Paddock Place
Project)/(Trust Company Bank, Atlanta LOC) A-1 1,000,000
----------------------------------------------------------------------
3,250,000 Marion County, FL IDA, IDRB (Series 1989) Weekly VRDNs (Charter
Springs Hospital, Inc.)/(Bankers Trust Co., New York LOC) A1 3,250,000
----------------------------------------------------------------------
4,500,000 Martin County, FL School District, District Operating Millage Tax
Anticipation Notes (Series 1995), 4.25% TANs, 6/8/1996 NR 4,510,414
----------------------------------------------------------------------
4,000,000 Miami, FL, TANS, (Series 1995), 4.50% TANs, 9/27/1996 SP-1+ 4,024,380
----------------------------------------------------------------------
2,000,000 Ocean Highway and Port Authority, Adjustable Demand Revenue Bonds
(Series 1990) Weekly VRDNs (ABN AMRO Bank N.V., Amsterdam LOC) Aa1 2,000,000
----------------------------------------------------------------------
2,000,000 Orange County, FL HFA, Multifamily Housing Revenue Bonds Weekly VRDNs
(Sutton Place. Ltd. Project)/ (Nationsbank of Maryland, N.A. LOC) A-1+ 2,000,000
----------------------------------------------------------------------
8,000,000 Orange County, FL School District, TANS (Series 1995), 4.50% TANs,
10/16/1996 SP-1+ 8,051,563
----------------------------------------------------------------------
1,000,000 Orange County, FL, Health Facilities Authority Weekly VRDNs (Mayflower
Retirement Community)/(Rabobank Nederland, Utrecht LOC) A-1 1,000,000
----------------------------------------------------------------------
4,500,000 Palm Beach County, FL, Variable Rate Demand Revenue Bonds, (Series
1995) Weekly VRDNs (Norton Gallery and School of Art, Inc.
Project)/(Northern Trust Co., Chicago, IL LOC) AA- 4,500,000
----------------------------------------------------------------------
5,500,000 Pasco County, FL School District, TANS (Series 1995), 3.90% TANs,
6/30/1996 MIG1 5,503,535
----------------------------------------------------------------------
$ 3,500,000 Pinellas County Industry Council, FL, IDRB (Series 1994) Weekly VRDNs
(Genca Corporation Project)/(PNC Bank, Ohio, N.A. LOC) A-1 $ 3,500,000
----------------------------------------------------------------------
</TABLE>
FLORIDA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------- ---------------------------------------------------------------------- --------- --------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
FLORIDA--CONTINUED
----------------------------------------------------------------------
1,700,000 Pinellas County, FL Health Facility Authority Daily VRDNs (Chemical
Bank, New York LOC) A-1 1,700,000
----------------------------------------------------------------------
1,000,000 Pinellas County, FL Health Facility Authority, (Series 1987) Weekly
VRDNs (St. Mark Village Project)/(Nationsbank of Florida, N.A. LOC) A-1 1,000,000
----------------------------------------------------------------------
3,200,000 Pinellas County, FL Health Facility Authority, Single Family Mortgage
Revnue Bonds (Series PA-92) Weekly VRDNs (GNMA COL)/(Merrill Lynch
Capital Services, Inc. LIQ) A-1+ 3,200,000
----------------------------------------------------------------------
3,800,000 Sarasota County, FL IDRB, (Series 1994) Monthly VRDNs (Resource
Recovery Systems of Sarasota Project)/(Fleet National Bank,
Providence, R.I. LOC) A-1 3,800,000
----------------------------------------------------------------------
4,800,000 Seminole County, FL Health Facility Authority IDA, (Series 1991)
Weekly VRDNs (Florida Living Nursing Center)/ (Barnett Bank of Central
Florida, Orlando LOC) VMIG1 4,800,000
----------------------------------------------------------------------
4,500,000 Southeast Volusia Hospital District, Revenue Bonds (Series 1995)
Weekly VRDNs (Bert Fish Medical Center (FL))/ (SouthTrust Bank of
Alabama, Birmingham LOC) A-1 4,500,000
----------------------------------------------------------------------
4,000,000 St. Lucie County, FL PCR, (Series 94A), 3.70% CP (Florida Power &
Light Co.), Mandatory Tender 11/21/1995 A-1 4,000,000
----------------------------------------------------------------------
845,000 St. Lucie County, FL, IDR Bonds (Series 1985) Weekly VRDNs (Savannahs
Hospital)/(Nationsbank of Georgia, N.A. LOC) P-1 845,000
----------------------------------------------------------------------
1,450,000 Sumter County, FL IDA Weekly VRDNs (Great Southern Wood of
Florida)/(SouthTrust Bank of Alabama, Birmingham LOC) VMIG1 1,450,000
----------------------------------------------------------------------
7,500,000 Suwannee County, FL, (Series 1989) Weekly VRDNs (Advent Christian
Village Project)/(Barnett Bank of Jacksonville LOC) VMIG1 7,500,000
----------------------------------------------------------------------
$ 4,000,000 Titusville, FL, Multi-Purpose Revenue Bonds, Installment 1995A Weekly
VRDNs (Banque Paribas, Paris LOC) VMIG1 $ 4,000,000
----------------------------------------------------------------------
1,675,000 Volusia County, FL IDA Weekly VRDNs (Crane Cams)/ (First Interstate
Bank of Arizona, NA LOC) P-1 1,675,000
----------------------------------------------------------------------
</TABLE>
FLORIDA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------- ---------------------------------------------------------------------- --------- --------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------------
FLORIDA--CONTINUED
----------------------------------------------------------------------
1,900,000 Volusia County, FL IDA, (Series 1994) Weekly VRDNs (Southern States
Utilities, Inc.)/(Sun Bank NA, Orlando LOC) VMIG1 1,900,000
---------------------------------------------------------------------- --------------
Total 147,885,340
---------------------------------------------------------------------- --------------
ALABAMA--2.3%
----------------------------------------------------------------------
3,500,000 Mobile, AL IDB, (1994 Series A), 4.05% TOBs (International Paper Co.),
Mandatory Tender 12/1/1995 A-2 3,500,138
---------------------------------------------------------------------- --------------
PUERTO RICO--0.7%
----------------------------------------------------------------------
1,000,000 Puerto Rico Government Development Bank Weekly VRDNs (Credit Suisse,
Zurich LOC) A-1+ 1,000,000
---------------------------------------------------------------------- --------------
TOTAL INVESTMENTS, AT AMORTIZED COST(A) $ 152,385,478
---------------------------------------------------------------------- --------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 22.5% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($153,346,518) at October 31, 1995.
The following acronym(s) are used throughout this portfolio:
COL--Collateralized
CP--Commercial Paper
FGIC--Financial Guaranty Insurance Company
GNMA--Government National Mortgage Association
HFA--Housing Finance Authority
IDA--Industrial Development Authority
IDB--Industrial Development Bond
IDR--Industrial Development Revenue
IDRB--Industrial Development Revenue Bond
INS--Insured
LIQ--Liquidity Agreement
FLORIDA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
LOC--Letter of Credit
PCR--Pollution Control Revenue
PLC--Public Limited Company
TANs--Tax Anticipation Notes
TOBs--Tender Option Bonds
VRDNs--Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
FLORIDA MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $ 152,385,478
- -------------------------------------------------------------------------------------------------
Cash 344,475
- -------------------------------------------------------------------------------------------------
Income receivable 855,048
- -------------------------------------------------------------------------------------------------
Deferred expenses 32,212
- ------------------------------------------------------------------------------------------------- --------------
Total assets 153,617,213
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------------
Income distribution payable $ 202,994
- ---------------------------------------------------------------------------------
Accrued expenses 67,701
- --------------------------------------------------------------------------------- --------------
Total liabilities 270,695
- ------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 153,346,518 shares outstanding $ 153,346,518
- ------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------------------------
$153,346,518 / 153,346,518 shares outstanding $ 1.00
- ------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FLORIDA MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest $ 5,271,986
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------------
Investment advisory fee $ 522,992
- --------------------------------------------------------------------------------------
Administrative personnel and services fee 125,000
- --------------------------------------------------------------------------------------
Custodian fees 27,209
- --------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 12,115
- --------------------------------------------------------------------------------------
Directors'/Trustees' fees 1,280
- --------------------------------------------------------------------------------------
Auditing fees 9,750
- --------------------------------------------------------------------------------------
Legal fees 2,290
- --------------------------------------------------------------------------------------
Portfolio accounting fees 39,547
- --------------------------------------------------------------------------------------
Shareholder services fee 326,870
- --------------------------------------------------------------------------------------
Share registration costs 35,917
- --------------------------------------------------------------------------------------
Printing and postage 20,880
- --------------------------------------------------------------------------------------
Insurance premiums 5,295
- --------------------------------------------------------------------------------------
Miscellaneous 2,341
- -------------------------------------------------------------------------------------- ------------
Total expenses 1,131,486
- --------------------------------------------------------------------------------------
Waivers--
- --------------------------------------------------------------------------------------
Waiver of investment advisory fee $ (480,076)
- -------------------------------------------------------------------------
Waiver of shareholder services fee (62,831)
- ------------------------------------------------------------------------- -----------
Total waivers (542,907)
- -------------------------------------------------------------------------------------- ------------
Net expenses 588,579
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income $ 4,683,407
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FLORIDA MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994(A)
- --------------------------------------------------------------------- -------------------- ----------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------
Net investment income $ 4,683,407 $ 165,156
- --------------------------------------------------------------------- -------------------- ----------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------
Distributions from net investment income (4,683,407) (165,156)
- --------------------------------------------------------------------- -------------------- ----------------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------------
Proceeds from sale of shares 1,361,774,097 134,110,437
- ---------------------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 2,166,363 92,846
- ---------------------------------------------------------------------
Cost of shares redeemed (1,264,560,129) (80,237,096)
- --------------------------------------------------------------------- -------------------- ----------------------
Change in net assets resulting from share
transactions 99,380,331 53,966,187
- --------------------------------------------------------------------- -------------------- ----------------------
Change in net assets 99,380,331 53,966,187
- ---------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------
Beginning of period 53,966,187 --
- --------------------------------------------------------------------- -------------------- ----------------------
End of period $ 153,346,518 $ 53,966,187
- --------------------------------------------------------------------- -------------------- ----------------------
</TABLE>
(a) For the period from September 12, 1994 (start of business) to October 31,
1994.
(See Notes which are an integral part of the Financial Statements)
FLORIDA MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Florida Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
66.4% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or supported (backed) by a letter of credit for any one institution or
agency does not exceed 7.5% of total investments.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
October 31, 1995, capital paid-in aggregated $153,346,518. Transactions in
shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994(A)
- -------------------------------------------------------------------- -------------------- ----------------------
<S> <C> <C>
Shares sold 1,361,774,097 134,110,437
- --------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 2,166,363 92,846
- --------------------------------------------------------------------
Shares redeemed (1,264,560,129) (80,237,096)
- -------------------------------------------------------------------- -------------------- ----------------------
Net change resulting from share transactions 99,380,331 53,966,187
- -------------------------------------------------------------------- -------------------- ----------------------
</TABLE>
(a) For the period from September 12, 1994 (start of business) to October 31,
1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's shares. The Plan provides that the Fund may
incur distribution expenses up to .25 of 1% of the average daily net assets of
the Fund shares, annually, to compensate FSC.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive a portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $15,374 were borne initially
by the Adviser. The Fund has agreed to reimburse the Adviser for the
organizational expenses during the five year period following the effective
date. For the period ended October 31, 1995, the Fund paid $1,110 pursuant to
this agreement.
INTERFUND TRANSACTIONS--During the year ended October 31, 1995, the Fund engaged
in purchase and sale transactions with funds that have a common investment,
common Directors/Trustees, and/ or common Officers. These transactions were made
at current market value pursuant to Rule 17a-7 under the Act amounting to
$788,505,000 and $785,600,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) SUBSEQUENT EVENT
Effective November 17, 1995 the Fund added an additional class of shares called
Cash II Shares.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Florida Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of Florida
Municipal Cash Trust (an investment portfolio of Federated Municipal Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of October 31, 1995, the related statement of operations for the year then
ended, and the statement of changes in net assets and the financial highlights
(see page 15 of the prospectus) for the periods presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Florida Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Florida Municipal Cash Trust
Cash II Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- ---------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
FLORIDA MUNICIPAL
CASH TRUST
CASH II SHARES
PROSPECTUS
A Non-Diversified Portfolio of
Federated Municipal Trust,
an Open-End Management
Investment Company
Prospectus dated December 31, 1995
[LOGO]FEDERATED SECURITIES CORP.
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
CUSIP 314229683
- --------------------------------------------------------------------------------
FLORIDA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares of Florida Municipal Cash Trust (the "Fund") offered by
this prospectus represent interests in a non-diversified portfolio of Federated
Municipal Trust (the "Trust"), an open-end management investment company (a
mutual fund). The Fund invests primarily in short-term Florida municipal
securities, including securities of states, territories, and possessions of the
United States which are not issued by or on behalf of Florida, or its political
subdivisions and financing authorities, but which provide income exempt from
federal regular income tax and which will enable the Fund to maintain an
investment portfolio that will cause its shares to be exempt from the Florida
intangibles tax consistent with stability of principal and liquidity.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SUMMARY OF FUND EXPENSES 1
- --------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SHARES 2
- --------------------------------------------------
GENERAL INFORMATION 3
- --------------------------------------------------
INVESTMENT INFORMATION 3
- --------------------------------------------------
Investment Objective 3
Investment Policies 3
Florida Municipal Securities 6
Investment Risks 6
Non-Diversification 7
Investment Limitations 7
FUND INFORMATION 7
- --------------------------------------------------
Management of the Fund 7
Distribution of Institutional Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- --------------------------------------------------
HOW TO PURCHASE SHARES 10
- --------------------------------------------------
Special Purchase Features 10
HOW TO REDEEM SHARES 11
- --------------------------------------------------
Special Redemption Features 12
ACCOUNT AND SHARE INFORMATION 12
- --------------------------------------------------
TAX INFORMATION 13
- --------------------------------------------------
Federal Income Tax 13
State and Local Taxes 14
Florida Intangibles Tax 14
Florida State Municipal Taxation 14
OTHER CLASSES OF SHARES 14
- --------------------------------------------------
PERFORMANCE INFORMATION 15
- --------------------------------------------------
FINANCIAL STATEMENTS 16
- --------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 28
- --------------------------------------------------
ADDRESSES 29
- --------------------------------------------------
</TABLE>
I
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Charge 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
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver) (1)................................................................ 0.00%
12b-1 Fee (2).................................................................................... 0.00%
Total Other Expenses............................................................................. 0.49%
Shareholder Services Fee (after waiver) (3)......................................... 0.20%
Total Operating Expenses (4)............................................................. 0.49%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of the
management fee. The adviser can terminate this voluntary waiver at any time
at its sole discretion. The maximum management fee is 0.40%.
(2) The Fund has no present intention of paying or accruing the 12b-1 fee during
the fiscal year ending October 31, 1996. If the Fund were paying or accruing
the 12b-1 fee, the Fund would be able to pay up to 0.25% of its average
daily net assets for the 12b-1 fee. See "Fund Information".
(3) The maximum shareholder services fee is 0.25%.
(4) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending October 31, 1996. The total operating
expenses were 0.45% for the fiscal year ended October 31, 1995 and would
have been 0.87% absent the voluntary waivers of a portion of the management
fee and a portion of the shareholder services fee.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Fund Information." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period................................................. $5 $16 $27 $62
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1
FLORIDA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 28.
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, OCTOBER 31,
1995 1994(a)
- ----------------------------------------------------- ------------ -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.000
- -----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------
Net investment income 0.04 0.004
- -----------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------
Distributions from net investment income (0.04) (0.004)
- ----------------------------------------------------- ------------ -------------
NET ASSET VALUE, END OF PERIOD $1.00 $1.000
- ----------------------------------------------------- ------------ -------------
------------ -------------
TOTAL RETURN (b) 3.60% 0.35%
- -----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------
Expenses 0.45% 0.28%*
- -----------------------------------------------------
Net investment income 3.58% 3.28%*
- -----------------------------------------------------
Expense waiver/reimbursement (c) 0.42% 1.03%*
- -----------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------
Net assets, end of period (000 omitted) $153,347 $53,966
- -----------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 21, 1994 (date of initial
public investment) to October 31, 1994. For the period from September 12,
1994 (start of business) to September 21, 1994 the Fund had no investment
activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
2
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established two classes of shares known as Institutional Shares and Cash II
Shares. This prospectus relates only to Institutional Shares of the Fund, which
are designed for financial institutions acting in an agency or fiduciary
capacity as a convenient means of accumulating an interest in a professionally
managed, non-diversified portfolio investing primarily in short-term Florida
municipal securities. The Fund may not be a suitable investment for retirement
plans or for non-Florida taxpayers because it invests in municipal securities of
that state. A minimum initial investment of $10,000 within a 90-day period is
required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax consistent with stability of principal and liquidity and to
maintain an investment portfolio that will cause its shares to be exempt from
the Florida intangibles tax. This investment objective cannot be changed without
shareholder approval. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by complying with the various
requirements of Rule 2a-7 under the Investment Company Act of 1940 which
regulates money market mutual funds and by following the investment policies
described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of Florida
municipal securities (as defined below) maturing in 13 months or less. As a
matter of investment policy, which cannot be changed without shareholder
approval, the Fund will invest so that at least 80% of its annual interest
income will be exempt from federal regular income tax. (Federal regular income
tax does not include the federal individual alternative minimum tax or the
federal alternative minimum tax for corporations.) The average maturity of the
securities in the Fund's portfolio, computed on a dollar-weighted basis, will be
90 days or less. Unless indicated otherwise, the investment policies may be
changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of Florida and its political subdivisions and financing
authorities, 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
3
qualified legal counsel, exempt from federal regular income tax. ("Florida
Municipal Securities"). Examples of Florida Municipal Securities include, but
are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and pre-refunded
bonds) and leases; and
- participation, trust, and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at par.
The interest rate may float or be adjusted at regular intervals (ranging
from daily to annually), and is normally based on a published interest rate
or interest rate index. Most variable rate demand notes allow the Fund to
demand the repurchase of the security on not more than seven days prior
notice. Other notes only permit the Fund to tender the security at the time
of each interest rate adjustment or at other fixed intervals. See "Demand
Features." The Fund treats variable rate demand notes as maturing on the
later of the date of the next interest rate adjustment or the date on which
the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Florida
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Florida Municipal
Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment and
facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
4
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality to other
securities in which the Fund invests, such as: obligations issued by or on
behalf of municipal or corporate issuers; 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).
5
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain Florida
Municipal Securities is subject to the federal alternative minimum tax.
FLORIDA MUNICIPAL SECURITIES
Florida Municipal Securities are generally issued to finance public works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
Florida Municipal Securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of Florida Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Florida Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of Florida Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of Florida
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Florida Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Florida Municipal Securities could involve an increased risk to the Fund should
any of these related projects or facilities experience financial difficulties.
Obligations of issuers of Florida Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
6
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge assets to secure such borrowings. These investment limitations
cannot be changed without shareholder approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .40 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
7
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. With over $72 billion invested across more
than 260 funds under management and/or administration by its subsidiaries,
as of December 31, 1994, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 1,750
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,000
financial institutions nationwide. More than 100,000 investment
professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for Institutional Shares
of the Fund. It is a Pennsylvania corporation organized on November 14, 1969,
and is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the distributor may be paid a fee in an amount computed at an annual rate of .25
of 1% of the average daily net assets of Institutional Shares to finance any
activity which is principally intended to result in the sale of Institutional
Shares subject to the Distribution Plan. The distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide sales services or distribution-related
support services as agents for their clients or customers.
The Distribution Plan is a compensation-type Plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by
Institutional Shares under the Distribution Plan.
8
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to .25 of 1% of the average daily net asset value
of Institutional Shares to obtain certain personal services for shareholders and
the maintenance of shareholder accounts. Under the Shareholder Services
Agreement, Federated Shareholders Services will either perform shareholder
services directly or will select financial institutions to perform shareholder
services. Financial institutions will receive fees based upon Institutional
Shares owned by their clients or customers. The schedules of such fees and the
basis upon which such fees will be paid will be determined from time to time by
the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to payments made
pursuant to the Distribution Plan and Shareholder Services Agreement, Federated
Securities Corp. and Federated Shareholder Services, from their own assets, may
pay financial institutions supplemental fees for the performance of substantial
sales services, distribution-related support services, or shareholder services.
The support may include sponsoring sales, educational and training seminars for
their employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support furnished by
the financial institution. Any payments made by the distributor may be
reimbursed by the Fund's investment adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
-------------------- ------------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its Institutional Shares
at $1.00 by valuing the portfolio securities using the amortized cost method.
The net asset value per share is determined by subtracting 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.
9
The net asset value is determined at 12:00 noon, 1:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is 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 or more within a 90-day period. Financial institutions may impose
different minimum investment requirements on their customers.
In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before shares can be purchased.
PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may purchase
shares through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives payment by
wire or converts payment by check from the financial institution into federal
funds. It is the financial institution's responsibility to transmit orders
promptly. Financial institutions may charge additional fees for their services.
PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling the Fund
before 1:00 p.m. (Eastern time). The order is considered received immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern time) in
order to begin earning dividends that same day. Federal funds should be wired as
follows: Federated Services Company, c/o State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: Florida Municipal Cash Trust ;
Fund Number (this number can be found on the account statement or by contacting
the Fund.); Group Number or Order Number; Nominee or Institution Name; and ABA
Number 011000028. Shares cannot be purchased by wire on holidays when wire
transfers are restricted. Questions on wire purchases should be directed to your
shareholder services representative at the telephone number listed on your
account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to Florida Municipal Cash Trust. Please include an
account number on the check. 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
10
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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the
11
dollar amount requested. All owners of the account must sign the request exactly
as the shares are registered. Normally, a check for the proceeds is mailed
within one business day, but in no event more than seven days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. Shareholder accounts will continue to
receive the daily dividend declared on the shares to be redeemed until the check
is presented to UMB Bank, N.A., the bank responsible for administering the
checkwriting program, for payment. However, checks should never be made payable
or sent to UMB Bank, N.A. or the Fund to redeem shares, and a check may not be
written to close an account.
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
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
12
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$10,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has 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. 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 election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
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.
13
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other than
Florida. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
FLORIDA INTANGIBLES TAX
Shareholders of the Fund that are subject to the Florida intangibles tax will
not be required to include the value of their Fund shares in their taxable
intangible property if all of the Fund's investments on the annual assessment
date are obligations that would be exempt from such tax if held directly by such
shareholders, such as Florida and U.S. government obligations. As described
earlier, the Fund will normally attempt to invest substantially all of its
assets in securities which are exempt from the Florida intangibles tax.
Accordingly, the value of the Fund shares held by a shareholder should under
normal circumstances be exempt from the Florida intangibles tax.
However, if the portfolio consists of any assets which are not so exempt on the
annual assessment date, only the portion of the shares of the Fund which relate
to securities issued by the United States and its possessions and territories
will be exempt from the Florida intangibles tax, even if they partly relate to
Florida tax exempt securities.
FLORIDA STATE MUNICIPAL TAXATION
In a majority of states that have an income tax, dividends paid by a mutual fund
attributable to investments in a particular state's municipal obligations are
exempt from both federal and such state's income tax. If Florida were to adopt
an income tax in the future, and assuming that its income tax policy with
respect to mutual funds investing in Florida state and local municipal
obligations would be similar to the general tax policy of other states,
dividends paid by the Fund would be exempt from Florida state income tax. A
constitutional amendment approved by referendum would be required before an
individual tax could be imposed.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called Cash II Shares. Cash II
Shares are sold at net asset value primarily to retail customers of financial
institutions and are subject to a minimum initial investment of $10,000 over a
90-day period.
All classes are subject to certain of the same expenses.
Cash II Shares are distributed under a 12b-1 Plan adopted by the Fund and also
are subject to shareholder services fees.
Expense differences between classes may affect the performance of each class.
To obtain more information and a prospectus for any other class, investors may
call 1-800-235-4669.
14
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the Fund's tax exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
15
FLORIDA MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--99.4%
- -------------------------------------------------------------------------------
FLORDIA--96.4%
------------------------------------------------------------
$2,400,000 Alachua County, FL Health Facilities Authority, Health
Facility Revenue Bonds (Series 1991) Weekly VRDNs (North
Florida Retirement Village)/(Kredietbank, N.V., Brussels
LOC) A-1 $ 2,400,000
------------------------------------------------------------
780,000 Broward County, FL Health Facility Authority, Revenue Bonds
Weekly VRDNs (John Knox Village of Florida)/(First Union
National Bank, Charlotte, N.C. LOC) P-1 780,000
------------------------------------------------------------
8,000,000 Charlotte County, FL School District, TANS (Series 1995),
3.90% TANs, 6/30/1996 MIG1 8,007,668
------------------------------------------------------------
3,000,000 Clay County, FL Development Authority, IDRB (Series 1994)
Weekly VRDNs (Carlisle Corporation Project)/(Trust Company
Bank, Atlanta LOC) P-1 3,000,000
------------------------------------------------------------
2,000,000 Dade County, FL IDA, IDRB (Series 1995) Weekly VRDNs (June
Leasing Co. Project (FL))/(First Union National Bank of
Florida LOC) A-1 2,000,000
------------------------------------------------------------
11,500,000 Dade County, FL Water & Sewer System Weekly VRDNs (FGIC
INS)/(Industrial Bank of Japan Ltd., Tokyo LIQ) A-1 11,500,000
------------------------------------------------------------
4,000,000 Florida Municipal Loan Council, (Series 1985-1), 3.90% CP
(Florida League of Cities)/(Sumitomo Bank Ltd., Osaka LOC),
Mandatory Tender 12/1/1995 A-1 4,000,000
------------------------------------------------------------
5,375,000 Florida State Board of Education Administration, (CR55D),
4.00% TOBs (Citibank NA, New York LIQ), Optional Tender
12/1/1995 AA 5,375,000
------------------------------------------------------------
6,000,000 Greater Orlando (FL) Aviation Authority, Airport Facilities
Subordinated CP Notes (Series B), 3.90% CP, Mandatory Tender
11/28/1995 P-1 6,000,000
------------------------------------------------------------
</TABLE>
16
FLORIDA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
FLORIDA--CONTINUED
------------------------------------------------------------
$3,000,000 Hillsborough County, FL Aviation Authority, Bond
Anticipation Commercial Paper Notes, 3.85% CP (Tampa
International Airport)/(National Westminster Bank, PLC,
London LOC), Mandatory Tender 12/7/1995 A-1+ $ 3,000,000
------------------------------------------------------------
2,000,000 Hillsborough County, FL IDA Weekly VRDNs (Ringhager
Equipment Co.)/(Mellon Bank NA, Pittsburgh LOC) P-1 2,000,000
------------------------------------------------------------
2,300,000 Hillsborough County, FL IDA, (Series 1992) Weekly VRDNs
(SIFCO Turbine Component Service)/(National City Bank,
Cleveland, OH LOC) P-1 2,300,000
------------------------------------------------------------
2,250,000 Indian River County School District, FL, TANS (Series 1995),
4.00% TANs, 6/30/1996 NR 2,252,780
------------------------------------------------------------
1,100,000 Jacksonville, FL Weekly VRDNs (Metal Sales)/(National City
Bank, Kentucky LOC) P-1 1,100,000
------------------------------------------------------------
1,000,000 Jacksonville, FL, Hospital Revenue Bonds (Series 1989)
Weekly VRDNs (Baptist Medical Center, AL)/(First Union
National Bank, Charlotte, N.C. LOC) VMIG1 1,000,000
------------------------------------------------------------
4,300,000 Key West, FL Community Redevelopment Authority Weekly VRDNs
(Pier House Joint Venture)/(PNC Bank, N.A. LOC) P-1 4,300,000
------------------------------------------------------------
4,000,000 Lake Shore, FL Hospital Authority, Health Facilities Revenue
Bonds (Series 1991) Weekly VRDNs (Lake Shore
Hospital)/(Kredietbank N.V., Brussels LOC) P-1 4,000,000
------------------------------------------------------------
2,860,000 Lee County, FL IDA, (Series 1985) Weekly VRDNs (Christian &
Missionary Alliance Foundation)/(Banque Paribas, Paris LOC) P-1 2,860,000
------------------------------------------------------------
1,000,000 Lee County, FL IDA, Health Care Facilities Revenue Bonds
Weekly VRDNs (Hope Hospice Project)/(Sun Bank NA, Orlando
LOC) VMIG1 1,000,000
------------------------------------------------------------
</TABLE>
17
FLORIDA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
FLORIDA--CONTINUED
------------------------------------------------------------
$1,000,000 Lee County, FL IDA, IDRB (Series 1994) Weekly VRDNs (Baader
North America Corporation)/(Deutsche Bank, AG LOC) VMIG1 $ 1,000,000
------------------------------------------------------------
300,000 Manatee County, FL HFA Weekly VRDNs (Carriage Club)/(Mellon
Bank NA, Pittsburgh LOC) VMIG1 300,000
------------------------------------------------------------
1,000,000 Marion County, FL Health Facility Authority, Floating Rate
Demand Multifamily Revenue Bonds (1985 Series F) Weekly
VRDNs (Paddock Place Project)/(Trust Company Bank, Atlanta
LOC) A-1 1,000,000
------------------------------------------------------------
3,250,000 Marion County, FL IDA, IDRB (Series 1989) Weekly VRDNs
(Charter Springs Hospital, Inc.)/(Bankers Trust Co., New
York LOC) A-1 3,250,000
------------------------------------------------------------
4,500,000 Martin County, FL School District, District Operating
Millage Tax Anticipation Notes (Series 1995), 4.25% TANs,
6/8/1996 NR 4,510,414
------------------------------------------------------------
4,000,000 Miami, FL, TANS, (Series 1995), 4.50% TANs, 9/27/1996 SP-1+ 4,024,380
------------------------------------------------------------
2,000,000 Ocean Highway and Port Authority, Adjustable Demand Revenue
Bonds (Series 1990) Weekly VRDNs (ABN AMRO Bank N.V.,
Amsterdam LOC) Aa1 2,000,000
------------------------------------------------------------
2,000,000 Orange County, FL HFA, Multifamily Housing Revenue Bonds
Weekly VRDNs (Sutton Place Ltd. Project)/(Nationsbank of
Maryland, N.A. LOC) A-1+ 2,000,000
------------------------------------------------------------
8,000,000 Orange County, FL School District, TANS (Series 1995), 4.50%
TANs, 10/16/1996 SP-1+ 8,051,563
------------------------------------------------------------
1,000,000 Orange County, FL, Health Facilities Authority Weekly VRDNs
(Mayflower Retirement Community)/(Rabobank Nederland,
Utrecht LOC) A-1 1,000,000
------------------------------------------------------------
4,500,000 Palm Beach County, FL, Variable Rate Demand Revenue Bonds,
(Series 1995) Weekly VRDNs (Norton Gallery and School of
Art, Inc. Project)/(Northern Trust Co., Chicago, IL LOC) AA- 4,500,000
------------------------------------------------------------
</TABLE>
18
FLORIDA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
FLORIDA--CONTINUED
------------------------------------------------------------
$5,500,000 Pasco County, FL School District, TANS (Series 1995), 3.90%
TANs, 6/30/1996 MIG1 $ 5,503,535
------------------------------------------------------------
3,500,000 Pinellas County Industry Council, FL, IDRB (Series 1994)
Weekly VRDNs (Genca Corporation Project)/(PNC Bank, Ohio,
N.A. LOC) A-1 3,500,000
------------------------------------------------------------
1,700,000 Pinellas County, FL Health Facility Authority Daily VRDNs
(Chemical Bank, New York LOC) A-1 1,700,000
------------------------------------------------------------
1,000,000 Pinellas County, FL Health Facility Authority, (Series 1987)
Weekly VRDNs (St. Mark Village Project)/(Nationsbank of
Florida, N.A. LOC) A-1 1,000,000
------------------------------------------------------------
3,200,000 Pinellas County, FL Health Facility Authority, Single Family
Mortgage Revenue Bonds (Series PA-92) Weekly VRDNs (GNMA
COL)(Merrill Lynch Capital Services, Inc. LIQ) A-1+ 3,200,000
------------------------------------------------------------
3,800,000 Sarasota County, FL IDRB, (Series 1994) Monthly VRDNs
(Resource Recovery Systems of Sarasota Project)/(Fleet
National Bank, Providence R.I. LOC) A-1 3,800,000
------------------------------------------------------------
4,800,000 Seminole County, FL Health Facility Authority IDA, (Series
1991) Weekly VRDNs (Florida Living Nursing Center)/(Barnett
Bank of Central Florida, Orlando LOC) VMIG1 4,800,000
------------------------------------------------------------
4,500,000 Southeast Volusia Hospital District, Revenue Bonds (Series
1995) Weekly VRDNs (Bert Fish Medical Center (FL))/(South
Trust Bank of Alabama, Birmingham LOC) A-1 4,500,000
------------------------------------------------------------
4,000,000 St. Lucie County, FL PCR, (Series 94A), 3.70% CP (Florida
Power & Light Co.), Mandatory Tender 11/21/1995 A-1 4,000,000
------------------------------------------------------------
845,000 St. Lucie County, FL, IDR Bonds (Series 1985) Weekly VRDNs
(Savannahs Hospital)/(Nationsbank of Georgia, N.A. LOC) P-1 845,000
------------------------------------------------------------
</TABLE>
19
FLORIDA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
FLORIDA--CONTINUED
------------------------------------------------------------
$1,450,000 Sumter County, FL IDA Weekly VRDNs (Great Southern Wood of
Florida)/(South Trust Bank of Alabama, Birmingham LOC) VMIG1 $ 1,450,000
------------------------------------------------------------
7,500,000 Suwannee County, FL, (Series 1989) Weekly VRDNs (Advent
Christian Village Project)/(Barnett Bank of Jacksonville
LOC) VMIG1 7,500,000
------------------------------------------------------------
4,000,000 Titusville, FL, Multi-Purpose Revenue Bonds, Installment
1995A Weekly VRDNs (Banque Paribas, Paris LOC) VMIG1 4,000,000
------------------------------------------------------------
1,675,000 Volusia County, FL IDA Weekly VRDNs (Crane Cams)/(First
Interstate Bank of Arizona, NA LOC) P-1 1,675,000
------------------------------------------------------------
1,900,000 Volusia County, FL IDA, (Series 1994) Weekly VRDNs (Southern
States Utilities, Inc.)/(Sun Bank NA, Orlando LOC) VMIG1 1,900,000
------------------------------------------------------------ ------------
Total 147,885,340
------------------------------------------------------------ ------------
ALABAMA--2.3%
------------------------------------------------------------
3,500,000 Mobile, AL IDB, (1994 Series A), 4.05% TOBs (International
Paper Co.), Mandatory Tender 12/1/1995 A-2 3,500,138
------------------------------------------------------------ ------------
PUERTO RICO--0.7%
------------------------------------------------------------
1,000,000 Puerto Rico Government Development Bank Weekly VRDNs (Credit
Suisse, Zurich LOC) A-1+ 1,000,000
------------------------------------------------------------ ------------
TOTAL INVESTMENTS, (AT AMORTIZED COST)(a) $152,385,478
------------------------------------------------------------ ------------
------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 22.5% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($153,346,518) at October 31, 1995.
20
FLORIDA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronym(s) are used throughout this portfolio:
COL --Collateralized
CP --Commercial Paper
FGIC --Financial Guaranty Insurance Company
GNMA --Government National Mortgage Association
HFA --Housing Finance Authority
IDA --Industrial Development Authority
IDB --Industrial Development Bond
IDR --Industrial Development Revenue
IDRB --Industrial Development Revenue Bond
INS --Insured
LIQ --Liquidity Agreement
LOC --Letter of Credit
PCR --Pollution Control Revenue
PLC --Public Limited Company
TANs --Tax Anticipation Notes
TOBs --Tender Option Bonds
VRDNs --Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
21
FLORIDA MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------
Total investments in securities, at amortized cost and value $152,385,478
- ------------------------------------------------------------------
Cash 344,475
- ------------------------------------------------------------------
Income receivable 855,048
- ------------------------------------------------------------------
Deferred expenses 32,212
- ------------------------------------------------------------------ ------------
Total assets 153,617,213
- ------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------
Income distribution payable $202,994
- --------------------------------------------------------
Accrued expenses 67,701
- -------------------------------------------------------- --------
Total liabilities 270,695
- ------------------------------------------------------------------ ------------
NET ASSETS for 153,346,518 shares outstanding $153,346,518
- ------------------------------------------------------------------ ------------
------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------
$153,346,518 DIVIDED BY 153,346,518 shares outstanding $ 1.00
- ------------------------------------------------------------------ ------------
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
22
FLORIDA MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------
Interest $5,271,986
- --------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------
Investment advisory fee $ 522,992
- --------------------------------------------------------
Administrative personnel and services fee 125,000
- --------------------------------------------------------
Custodian fees 27,209
- --------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 12,115
- --------------------------------------------------------
Directors'/Trustees' fees 1,280
- --------------------------------------------------------
Auditing fees 9,750
- --------------------------------------------------------
Legal fees 2,290
- --------------------------------------------------------
Portfolio accounting fees 39,547
- --------------------------------------------------------
Shareholder services fee 326,870
- --------------------------------------------------------
Share registration costs 35,917
- --------------------------------------------------------
Printing and postage 20,880
- --------------------------------------------------------
Insurance premiums 5,295
- --------------------------------------------------------
Miscellaneous 2,341
- -------------------------------------------------------- ----------
Total expenses 1,131,486
- --------------------------------------------------------
Waivers--
- ---------------------------------------------
Waiver of investment advisory fee $(480,076)
- ---------------------------------------------
Waiver of shareholder services fee (62,831)
- --------------------------------------------- ---------
Total waivers (542,907)
- -------------------------------------------------------- ----------
Net expenses 588,579
- -------------------------------------------------------------------- ----------
Net investment income $4,683,407
- -------------------------------------------------------------------- ----------
----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
23
FLORIDA MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1995 OCTOBER 31, 1994(a)
----------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------
OPERATIONS--
- -------------------------------------------------
Net investment income $ 4,683,407 $ 165,156
- ------------------------------------------------- ----------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------
Distributions from net investment income (4,683,407) (165,156)
- ------------------------------------------------- ----------------- -------------------
SHARE TRANSACTIONS--
- -------------------------------------------------
Proceeds from sale of shares 1,361,774,097 134,110,437
- -------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 2,166,363 92,846
- -------------------------------------------------
Cost of shares redeemed (1,264,560,129) (80,237,096)
- ------------------------------------------------- ----------------- -------------------
Change in net assets resulting from share
transactions 99,380,331 53,966,187
- ------------------------------------------------- ----------------- -------------------
Change in net assets 99,380,331 53,966,187
- -------------------------------------------------
NET ASSETS:
- -------------------------------------------------
Beginning of period 53,966,187 --
- ------------------------------------------------- ----------------- -------------------
End of period $ 153,346,518 $ 53,966,187
- ------------------------------------------------- ----------------- -------------------
----------------- -------------------
</TABLE>
(a) For the period from September 12, 1994 (start of business) to October 31,
1994.
(See Notes which are an integral part of the Financial Statements)
24
FLORIDA MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Florida Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
66.4% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or supported (backed) by a letter of credit for any one institution or
agency does not exceed 7.5% of total investments.
25
FLORIDA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
October 31, 1995, capital paid-in aggregated $153,346,518. Transactions in
shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED OCTOBER
OCTOBER 31, 1995 31, 1994(a)
--------------------------------------- ---------------- --------------------
<S> <C> <C>
Shares sold 1,361,774,097 134,110,437
---------------------------------------
Shares issued to shareholders in
payment of distributions declared 2,166,363 92,846
---------------------------------------
Shares redeemed (1,264,560,129) (80,237,096)
--------------------------------------- ---------------- -----------
Net change resulting from share
transactions 99,380,331 53,966,187
--------------------------------------- ---------------- -----------
---------------- -----------
</TABLE>
(a) For the period from September 12, 1994 (start of business) to October 31,
1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services, under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's shares. The Plan provides that the Fund may incur distribution
26
FLORIDA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
expenses up to .25 of 1% of the average daily net assets of the Fund shares,
annually, to compensate FSC.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive a portion of its fees. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $15,374 were borne initially
by the Adviser. The Fund has agreed to reimburse the Adviser for the
organizational expenses during the five year period following the effective
date. For the period ended October 31, 1995, the Fund paid $1,110 pursuant to
this agreement.
INTERFUND TRANSACTIONS--During the year ended October 31, 1995, the Fund engaged
in purchase and sale transactions with funds that have a common investment,
common Directors/Trustees, and/or common Officers. These transactions were made
at current market value pursuant to Rule 17a-7 under the Act amounting to
$788,505,000 and $785,600,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) SUBSEQUENT EVENT
Effective November 17, 1995 the Fund added an additional class of shares called
Cash II Shares.
27
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Florida Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of Florida
Municipal Cash Trust (an investment portfolio of Federated Municipal Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of October 31, 1995, the related statement of operations for the year then
ended, and the statement of changes in net assets and the financial highlights
(see page 2 of the prospectus) for the periods presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Florida Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations for the year then
ended, and the changes in its net assets and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
28
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Florida Municipal Cash Trust
Institutional Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- --------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
- --------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- --------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
</TABLE>
29
- --------------------------------------------------------------------------------
FLORIDA MUNICIPAL
CASH TRUST
INSTITUTIONAL SHARES
PROSPECTUS
A Non-Diversified
Portfolio of
Federated Municipal
Trust,
an Open-End Management
Investment Company
Prospectus dated December
31, 1995
[FEDERATED SECURITIES CORP. LOGO]
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 314229758
005392 (12/95) [RECYCLED PAPER LOGO]
RECYCLED
MASSACHUSETTS MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares of Massachusetts Municipal Cash Trust (the
"Fund") offered by this prospectus represent interests in a non-diversified
portfolio of Federated Municipal Trust (the "Trust"), an open-end management
investment company (a mutual fund). The Fund invests primarily in short-term
Massachusetts municipal securities, including securities of states, territories,
and possessions of the United States which are not issued by or on behalf of
Massachusetts, or its political subdivisions and financing authorities, but
which provide income exempt from federal regular income tax and Massachusetts
state income tax consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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 or
a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 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
Acceptable Investments 3
Variable Rate Demand Notes 4
Participation Interests 4
Municipal Leases 4
Credit Enhancement 4
Demand Features 5
When-Issued and Delayed
Delivery Transactions 5
Restricted and Illiquid Securities 5
Temporary Investments 5
Massachusetts Municipal Securities 6
Investment Risks 6
Non-Diversification 7
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Board of Trustees 7
Investment Adviser 7
Advisory Fees 7
Adviser's Background 7
Distribution of Institutional
Service Shares 8
Shareholder Services 8
Supplemental Payments to
Financial Institutions 9
Administration of the Fund 9
Administrative Services 9
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 10
- ------------------------------------------------------
Purchasing Shares Through a
Financial Institution 10
Purchasing Shares By Wire 10
Purchasing Shares By Check 10
Special Purchase Features 10
Systematic Investment Program 10
HOW TO REDEEM SHARES 11
- ------------------------------------------------------
Redeeming Shares Through a
Financial Institution 11
Redeeming Shares By Telephone 11
Redeeming Shares By Mail 11
Special Redemption Features 12
Check Writing 12
Debit Card 12
Systematic Withdrawal Program 12
ACCOUNT AND SHARES INFORMATION 12
- ------------------------------------------------------
Dividends 12
Capital Gains 12
Certificates and Conformations 12
Accounts with Low Balances 12
Voting Rights 13
TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
State and Local Taxes 14
Massachusetts Taxes 14
OTHER CLASSES OF SHARES 14
- ------------------------------------------------------
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
BAYFUNDS SHARES 16
- ------------------------------------------------------
FINANCIAL STATEMENTS 17
- ------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 29
- ------------------------------------------------------
ADDRESSES 30
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)............................ None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)........................................................................ 0.30%
12b-1 Fee................................................................................................ None
Total Other Expenses..................................................................................... 0.25%
Shareholder Services Fee (after waiver) (2)................................................. 0.00%
Total Operating Expenses (3)................................................................... 0.55%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.50%.
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 1.00% absent the voluntary
waivers of a portion of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Institutional Services Shares of the
Fund will bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Fund Information". Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period............................................................... $ 6 $ 18 $ 31 $ 69
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
MASSACHUSETTS MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 29.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991 1990(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.05 0.03
- ----------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------
Dividends from net investment income (0.03) (0.02) (0.02) (0.03) (0.05) (0.03)
- ---------------------------------------------------------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (B) 3.34% 2.14% 1.99% 2.87% 4.63% 2.59%
- ----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------
Expenses 0.55% 0.55% 0.53% 0.34% 0.30% 0.17%*
- ----------------------------------------------------------
Net investment income 3.30% 2.12% 1.97% 2.82% 4.48% 5.66%*
- ----------------------------------------------------------
Expense waiver/reimbursement (c) 0.45% 0.35% 0.43% 0.55% 0.69% 0.57%*
- ----------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------
Net assets, end of period (000 omitted) $99,628 $90,013 $84,524 $85,570 $81,681 $63,483
- ----------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 18, 1990 (date of initial
public investment) to October 31, 1990.
(b) Based on net asset value which does not reflect sales charge or contingent
deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to the Fund, as of the date of this prospectus, the Trustees have
established two classes of shares known as Institutional Service Shares and
BayFunds Shares. This prospectus relates only to Institutional Service Shares of
the Fund, which are designed primarily for financial institutions acting in an
agency capacity as a convenient means of accumulating an interest in a
professionally managed, non-diversified portfolio investing primarily in
short-term Massachusetts municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Massachusetts taxpayers because it
invests in municipal securities of that state. A minimum initial investment of
$25,000 within a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and Massachusetts state income tax consistent with stability
of principal. This investment objective cannot be changed without shareholder
approval. While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by complying with the various requirements of
Rule 2a-7 under the Investment Company Act of 1940 which regulates money market
funds and by following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Massachusetts municipal securities (as defined below) maturing in 13 months or
less. As a matter of investment policy, which cannot be changed without
shareholder approval, at least 80% of the Fund's annual interest income will be
exempt from federal regular income tax and Massachusetts state income tax.
(Federal regular income tax does not include the federal individual alternative
minimum tax or the federal alternative minimum tax for corporations.) The
average maturity of the securities in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies may be changed by the Trustees without shareholder approval.
Shareholders will be notified before any material change in these policies
becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of Massachusetts and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and Massachusetts state income tax imposed upon non-corporate taxpayers
("Massachusetts Municipal Securities"). Examples of Massachusetts Municipal
Securities include, but are not limited to:
tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
municipal commercial paper and other short-term notes;
variable rate demand notes;
municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and
participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Massachusetts
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Massachusetts
Municipal Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; 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 Massachusetts
Municipal Securities is subject to the federal alternative minimum tax.
MASSACHUSETTS MUNICIPAL SECURITIES
Massachusetts Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
Massachusetts Municipal Securities include industrial development bonds issued
by or on behalf of public authorities to provide financing aid to acquire sites
or construct and equip facilities for privately or publicly owned corporations.
The availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local employment.
The two principal classifications of Massachusetts Municipal Securities are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed by
the bond or other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or charge against the general revenues of
a municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
INVESTMENT RISKS
Yields on Massachusetts Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of Massachusetts Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of Massachusetts
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Massachusetts Municipal Securities which are repayable
out of revenue streams generated from economically related projects or
facilities and/or whose issuers are located in the same state. Sizable
investments in these Massachusetts Municipal Securities could involve an
increased risk to the Fund should any of these related projects or facilities
experience financial difficulties.
Obligations of issuers of Massachusetts Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of
any issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge up to 15% of the value of total assets to secure such
borrowings. This investment limitation cannot be changed without shareholder
approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors. All of the Class A (voting) shares of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, Chairman and
Trustee of Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son,
J. Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund will make payments up to .25 of 1% of the
average daily net asset value of the Institutional Service Shares, computed at
an annual rate, to obtain certain personal services for shareholders and to
provide the maintenance of shareholder accounts (shareholder services). From
time to time and for such periods as deemed appropriate, the amount stated above
may be reduced voluntarily. Federated Shareholder Services will either perform
shareholder services directly or will select financial institutions to perform
shareholder services. Financial institutions will receive fees based upon shares
owned by their clients or customers. The schedules of such fees and the basis
upon which such fees will be paid will be determined from time to time by the
Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. With respect to Institutional
Service Shares, in addition to payments made pursuant to the Shareholder
Services Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions supplemental
fees for the performance of substantial sales services, distribution-related
support services, or shareholder services. The support may include sponsoring
sales, educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's investment
adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30.000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of Insitutional Service
Shares at $1.00 by valuing the portfolio securities using the amortized cost
method. The net asset value per share is determined by subtracting liabilities
attributable to shares from the value of Fund assets attributable to shares, 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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days which the New York Stock Exchange
is 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 within a
90-day period. 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 of State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: Massachusetts Municipal Cash
Trust, Institutional Service Shares; (Fund Number) (This number can be found on
the account statement or by contacting the Fund.); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to Massachusetts Municipal Cash Trust--Institutional
Service Shares. 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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. 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 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If shares certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event
more than seven days, after the 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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. The check writing service allows
shareholders to receive the daily dividend declared on the shares to be redeemed
until the check is presented to UMB Bank, N.A., the bank responsible for
administering the check writing program, for payment. However, checks should
never be made payable or sent to UMB Bank, N.A. or the Fund to redeem shares,
and a check may not be written to close an account.
DEBIT CARD. Upon request, a debit account will be established. This account
allows shareholders to redeem shares by using a debit card. A fee will be
charged to the account for this service.
SYSTEMATIC WITHDRAWAL PROGRAM. If a shareholder's account has a value of at
least $25,000, a systematic withdrawal program may be established whereby
automatic redemptions are made from the account and transferred electronically
to any commercial bank, savings bank, or credit union that is an ACH member.
Shareholders may apply for participation in this program through their financial
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$25,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to
purchase additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has one vote in Trustee elections and other
matters submitted to shareholders for vote. All shares of all classes of each
portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.
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
Massachusetts. Shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.
MASSACHUSETTS TAXES. Under existing Massachusetts laws, distributions made by
the Fund will not be subject to Massachusetts personal income taxes to the
extent that such dividends qualify as exempt interest dividends under the
Internal Revenue Code, and represent (i) interest or gain on obligations issued
by the Commonwealth of Massachusetts, its political subdivisions or agencies; or
(ii) interest on obligations of the United States, its territories or
possessions to the extent exempt from taxation by the states pursuant to federal
law. Conversely, to the extent that the distributions made by the Fund are
derived from other types of obligations, such dividends will be subject to
Massachusetts personal income taxes.
Shareholders subject to the Massachusetts corporate excise tax must include all
dividends paid by the Fund in their net income, and the value of their shares of
stock in the Fund in their net worth, when computing the Massachusetts corporate
excise tax.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called BayFunds Shares that are
sold primarily to retail customers of the banking subsidiaries of BayFunds, Inc.
Investments. BayFund Shares are sold at net asset value and are subject to a
Shareholder Services Agreement. Investments in BayFund Shares are subject to a
minimum initial investment of $2,500.
Institutional Service Shares and BayFund Shares are subject to certain of the
same expenses. Expense differences, however, between Institutional Service
Shares and BayFund Shares may affect the performance of each class.
To obtain more information and a prospectus for BayFund Shares, investors may
call 1-800-235-4669.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield for shares. The performance figures will be calculated
separately for each class of shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the shares' tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
MASSACHUSETTS MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--BAYFUNDS SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 29.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C> <C>
1995 1994 1993(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------
Net investment income 0.03 0.02 0.01
- ---------------------------------------------------------- ------- ------- -------
LESS DISTRIBUTIONS
- ----------------------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.01)
- ---------------------------------------------------------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------- ------- ------- -------
TOTAL RETURN (B) 3.30% 2.05% 1.25%
- ----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------
Expenses 0.60% 0.64% 0.65%*
- ----------------------------------------------------------
Net investment income 3.25% 2.09% 1.85%*
- ----------------------------------------------------------
Expense waiver/reimbursement (c) 0.45% 0.35% 0.43%*
- ----------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------
Net assets, end of period (000 omitted) $46,580 $41,912 $18,143
- ----------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from March 8, 1993 (date of initial
public investment) to October 31, 1993.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
MASSACHUSETTS MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------ -------------------------------------------------------------------------- ----------- --------------
SHORT-TERM MUNICIPAL SECURITIES--99.3%
- ----------------------------------------------------------------------------------------
MASSACHUSETTS--99.3%
--------------------------------------------------------------------------
$ 3,535,000 Attleboro, MA, (Lot A), 4.10% BANs, 12/14/1995 NR(3) $ 3,535,408
--------------------------------------------------------------------------
2,000,000 Attleboro, MA, (Lot B), 5.25% BANs, 2/14/1996 NR(3) 2,000,817
--------------------------------------------------------------------------
1,250,000 Attleboro, MA, (Lot B), 5.50% BANs, 2/14/1996 NR(3) 1,251,366
--------------------------------------------------------------------------
1,500,000 Attleboro, MA, 4.10% BANs, 12/14/1995 NR(3) 1,500,347
--------------------------------------------------------------------------
620,000 Billerica, MA, LT GO Bonds, 7.25% (MBIA Insurance Corporation INS),
10/15/1996 NR(1) 638,493
--------------------------------------------------------------------------
2,000,000 Boston, MA Water & Sewer Commission, General Revenue Bonds (1994 Series A)
Weekly VRDNs (State Street Bank and Trust Co. LOC) VMIG1 2,000,000
--------------------------------------------------------------------------
5,000,000 (a) Clipper, MA Tax Exempt Trust Weekly VRDNs (State Street Bank and Trust Co.
LIQ) VMIG1 5,000,000
--------------------------------------------------------------------------
3,465,000 (a) Clipper, MA Tax Exempt Trust, (Series 1993-1) Weekly VRDNs (State Street
Bank and Trust Co. LIQ) VMIG1 3,465,000
--------------------------------------------------------------------------
3,000,000 Commonwealth of Massachusetts Weekly VRDNs (AMBAC INS)/(Citibank NA, New
York LIQ) NR(1) 3,000,000
--------------------------------------------------------------------------
3,500,000 Commonwealth of Massachusetts, (Series A), 3.75% CP (Union Bank of
Switzerland, Zurich LIQ), Mandatory Tender 11/8/1995 P-1 3,500,000
--------------------------------------------------------------------------
3,200,000 Framingham, MA IDA Weekly VRDNs (Perini Corp)/(Barclays Bank PLC, London
LOC) A-1+ 3,200,000
--------------------------------------------------------------------------
3,093,000 Greenfield, MA, 4.25% BANs, 9/13/1996 NR(3) 3,099,438
--------------------------------------------------------------------------
1,000,000 Haverhill, MA, 8.875% Bonds (United States Treasury PRF), 12/1/1995 (@102) NR(1) 1,023,454
--------------------------------------------------------------------------
300,000 Ludlow, MA Weekly VRDNs (Advanced Drainage System, Inc.)/(First National
Bank of Chicago LOC) P-1 300,000
--------------------------------------------------------------------------
4,000,000 Mashpee, MA, 4.22% BANs, 7/5/1996 NR(3) 4,001,572
--------------------------------------------------------------------------
1,500,000 Massachusetts Bay Transit Authority, (Series C), 3.70% CP (Westdeutsche
Landesbank Girozentrale LOC), Mandatory Tender 1/17/1996 SP-1+ 1,500,000
--------------------------------------------------------------------------
$ 4,000,000 Massachusetts HEFA Weekly VRDNs (Harvard University) A-1+ $ 4,000,000
--------------------------------------------------------------------------
</TABLE>
MASSACHUSETTS MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------ ------------------------------------------------------------------------ ----------- --------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------------------------
MASSACHUSETTS--CONTINUED
--------------------------------------------------------------------------
3,460,000 Massachusetts HEFA Weekly VRDNs (Newbury College)/ (Barclays Bank PLC,
London LOC) P-1 3,460,000
--------------------------------------------------------------------------
200,000 Massachusetts HEFA, (Series A) Weekly VRDNs (Brigham & Women's
Hospital)/(Sanwa Bank Ltd, Osaka LOC) P-1 200,000
--------------------------------------------------------------------------
3,410,000 Massachusetts HEFA, (Series A) Weekly VRDNs (New England Home For Little
Wanderers)/(First National Bank of Boston, MA LOC) P-1 3,410,000
--------------------------------------------------------------------------
2,900,000 Massachusetts HEFA, (Series B) Weekly VRDNs (Clark University)/(Sanwa Bank
Ltd, Osaka LOC) VMIG1 2,900,000
--------------------------------------------------------------------------
1,500,000 Massachusetts HEFA, (Series D) Weekly VRDNs (Capital Asset Program)/(MBIA
Insurance Corporation INS)/(Sanwa Bank Ltd, Osaka LIQ) VMIG1 1,500,000
--------------------------------------------------------------------------
2,400,000 Massachusetts HEFA, (Series E) Weekly VRDNs (Williams College, MA) A-1+ 2,400,000
--------------------------------------------------------------------------
400,000 Massachusetts HEFA, (Series E) Weekly VRDNs (Capital Asset Program)/(First
National Bank of Chicago LIQ)/(Sanwa Bank Ltd, Osaka LOC) VMIG1 400,000
--------------------------------------------------------------------------
6,300,000 Massachusetts HEFA, (Series F) Weekly VRDNs (Children's Hospital of
Boston) A-1+ 6,300,000
--------------------------------------------------------------------------
2,500,000 Massachusetts HEFA, (Series G) Weekly VRDNs (Massachusetts Institute of
Technology) NR(1) 2,500,000
--------------------------------------------------------------------------
4,000,000 Massachusetts HEFA, 3.75% CP (Fallon Heathcare System)/ (Sanwa Bank Ltd,
Osaka LOC), Mandatory Tender 2/22/1996 A-1+ 4,000,000
--------------------------------------------------------------------------
5,000,000 Massachusetts HEFA, 3.80% CP (Harvard University), Mandatory Tender
1/26/1996 A-1+ 5,000,000
--------------------------------------------------------------------------
3,000,000 Massachusetts HEFA, 3.90% CP (Fallon Heathcare System)/ (Sanwa Bank Ltd,
Osaka LOC), Mandatory Tender 11/28/1995 A-1+ 3,000,000
--------------------------------------------------------------------------
800,000 Massachusetts Municipal Wholesale Electric Company, Variable Rate Power
Supply System Revenue Bonds (1994 Series C) Weekly VRDNs (Canadian
Imperial Bank of Commerce, Toronto LOC) A-1+ 800,000
--------------------------------------------------------------------------
</TABLE>
MASSACHUSETTS MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------ ------------------------------------------------------------------------ ----------- --------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------------------------
MASSACHUSETTS--CONTINUED
--------------------------------------------------------------------------
$ 2,400,000 Massachusetts Port Authority, (Series 1995A) Daily VRDNs (Landesbank
Hessen-Thueringen, Frankfurt LOC) A-1+ $ 2,400,000
--------------------------------------------------------------------------
3,270,000 Massachusetts State HFA, Multi-Family Housing Refunding Bonds (1995 Series
A), 5.00% (MBIA Insurance Corporation INS), 7/1/1996 NR(1) 3,287,798
--------------------------------------------------------------------------
4,000,000 Massachusetts Water Resources Authority, (Series 1994), 3.80% CP (Morgan
Guaranty Trust Co., New York LOC), Mandatory Tender 12/13/1995 A-1+ 4,000,000
--------------------------------------------------------------------------
1,000,000 Massachusetts, IFA Weekly VRDNs (Berkshire, MA School)/ (National
Westminster Bank, PLC, London LOC) VMIG1 1,000,000
--------------------------------------------------------------------------
1,300,000 Massachusetts, IFA Weekly VRDNs (Groton School)/(National Westminster
Bank, PLC, London LOC) VMIG1 1,300,000
--------------------------------------------------------------------------
8,000,000 Massachusetts, IFA Weekly VRDNs (Kendall Square Entity)/ (State Street
Bank and Trust Co. LOC) P-1 8,000,000
--------------------------------------------------------------------------
500,000 Massachusetts, IFA Weekly VRDNs (New England Deaconess Associates)/(Banque
Paribas, Paris LOC) A-1 500,000
--------------------------------------------------------------------------
1,100,000 Massachusetts, IFA, (1991 Issue), 5.25% TOBs (St. Mark's School of
Southborough, Inc.)/(Barclays Bank PLC, London LOC), Mandatory Tender
1/9/1996 VMIG1 1,100,000
--------------------------------------------------------------------------
300,000 Massachusetts, IFA, (Series 1992) Weekly VRDNs (Holyoke Water Power
Co.)/(Canadian Imperial Bank of Commerce, Toronto LOC) VMIG1 300,000
--------------------------------------------------------------------------
2,000,000 Massachusetts, IFA, (Series 1992B), 3.75% CP (New England Power Co.),
Mandatory Tender 11/27/1995 A-1 2,000,000
--------------------------------------------------------------------------
5,000,000 Massachusetts, IFA, (Series 1992B), 3.80% CP (New England Power Co.),
Mandatory Tender 2/13/1996 A-1 5,000,000
--------------------------------------------------------------------------
5,800,000 Massachusetts, IFA, (Series 1995) Weekly VRDNs (Whitehead Institute for
Biomedical Research) VMIG1 5,800,000
--------------------------------------------------------------------------
925,000 Massachusetts, IFA, (Series A) Weekly VRDNs (Hockomock YMCA)/(Bank of Nova
Scotia, Toronto LOC) P-1 925,000
--------------------------------------------------------------------------
</TABLE>
MASSACHUSETTS MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------ ------------------------------------------------------------------------ ----------- --------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------------------------
MASSACHUSETTS--CONTINUED
--------------------------------------------------------------------------
$ 4,000,000 Massachusetts, IFA, (Series B) Weekly VRDNs (Williston North Hampton
School)/(National Westminster Bank, PLC, London LOC) A-1+ $ 4,000,000
--------------------------------------------------------------------------
6,000,000 Massachusetts, IFA, Variable Rate Demand Revenue Bonds (Series 1995)
Weekly VRDNs (Emerson College Issue)/ (Baybank, Burlington, MA LOC) P-2 6,000,000
--------------------------------------------------------------------------
1,000,000 Massachusetts, IFA, Variable Rate Refunding Revenue Bonds 1994 Project
Daily VRDNs (Showa Womens Institute Boston, Inc.)/(Fuji Bank, Ltd., Tokyo
LOC) VMIG1 1,000,000
--------------------------------------------------------------------------
5,600,000 New Bedford, MA, 4.60% BANs (Fleet National Bank, Providence, R.I. LOC),
3/15/1996 P-1 5,614,145
--------------------------------------------------------------------------
2,500,000 North Adams, MA, 4.24% BANs, 6/30/1996 NR(3) 2,501,422
--------------------------------------------------------------------------
2,297,900 North Attleborough, MA, 4.65% BANs, 4/19/1996 NR(3) 2,299,886
--------------------------------------------------------------------------
5,300,000 Springfield, MA , 4.40% BANs (Fleet National Bank, Providence, R.I. LOC),
2/9/1996 P-1 5,308,469
--------------------------------------------------------------------------
4,000,000 Springfield, MA , 4.50% BANs (Fleet National Bank, Providence, R.I. LOC),
2/9/1996 P-1 4,006,426
-------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $ 145,229,041
-------------------------------------------------------------------------- --------------
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Denotes a restricted security which is subject to restrictions or resale
under Federal Securities laws. These securities have been determined to be
liquid under criteria established by the Board of Trustees at the end of
the period, these securities amounted to $8,465,000 which represents 5.8%
of net assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($146,207,706) at October 31, 1995.
MASSACHUSETTS MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
BANs--Bond Anticipation Notes
CP--Commercial Paper
GO--General Obligation
HEFA--Health and Education Facilities Authority
HFA--Housing Finance Authority
IDA--Industrial Development Authority
IFA--Industrial Finance Authority
INS--Insured
LIQ--Liquidity Agreement
LOC--Letter of Credit
LT--Limited Tax
MBIA--Municipal Bond Investors Assurance
PLC--Public Limited Company
PRF--Prerefunded
TOBs--Tender Option Bonds
VRDNs--Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
MASSACHUSETTS MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $ 145,229,041
- ------------------------------------------------------------------------------------------------------
Cash 181,475
- ------------------------------------------------------------------------------------------------------
Income receivable 1,052,777
- ------------------------------------------------------------------------------------------------------
Receivable for shares sold 958
- ------------------------------------------------------------------------------------------------------
Deferred expenses 1,248
- ------------------------------------------------------------------------------------------------------ --------------
Total assets 146,465,499
- ------------------------------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------------------------
Income distribution payable $ 219,077
- ------------------------------------------------------------------------------------------
Accrued expenses 38,716
- ------------------------------------------------------------------------------------------ ----------
Total liabilities 257,793
- ------------------------------------------------------------------------------------------------------ --------------
NET ASSETS for 146,207,706 shares outstanding $ 146,207,706
- ------------------------------------------------------------------------------------------------------ --------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES:
- ------------------------------------------------------------------------------------------------------
($99,627,788 / 99,627,788 shares outstanding) $1.00
- ------------------------------------------------------------------------------------------------------ --------------
BAYFUNDS SHARES:
- ------------------------------------------------------------------------------------------------------
($46,579,918 / 46,579,918 shares outstanding) $1.00
- ------------------------------------------------------------------------------------------------------ --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MASSACHUSETTS MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------------------------------
Interest $ 5,286,218
- --------------------------------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------------------
Investment advisory fee $ 686,918
- --------------------------------------------------------------------------------------------
Administrative personnel and services fee 155,000
- --------------------------------------------------------------------------------------------
Custodian fees 36,851
- --------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 47,328
- --------------------------------------------------------------------------------------------
Sub-transfer agent fees--BayFunds Shares 20,832
- --------------------------------------------------------------------------------------------
Directors'/Trustees' fees 1,447
- --------------------------------------------------------------------------------------------
Auditing fees 14,671
- --------------------------------------------------------------------------------------------
Legal fees 2,692
- --------------------------------------------------------------------------------------------
Portfolio accounting fees 40,267
- --------------------------------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 232,505
- --------------------------------------------------------------------------------------------
Shareholder services fee--BayFunds Shares 110,936
- --------------------------------------------------------------------------------------------
Share registration costs 17,284
- --------------------------------------------------------------------------------------------
Printing and postage 16,615
- --------------------------------------------------------------------------------------------
Insurance premiums 5,740
- --------------------------------------------------------------------------------------------
Miscellaneous 9,888
- -------------------------------------------------------------------------------------------- ----------
Total expenses 1,398,974
- --------------------------------------------------------------------------------------------
Waivers--
- -------------------------------------------------------------------------------
Waiver of investment advisory fee $ (276,299)
- -------------------------------------------------------------------------------
Waiver of shareholder services fee--Institutional Service Shares (232,505)
- -------------------------------------------------------------------------------
Waiver of shareholder services fee--BayFunds Shares (110,936)
- ------------------------------------------------------------------------------- -----------
Total waivers (619,740)
- -------------------------------------------------------------------------------------------- ----------
Net expenses 779,234
- -------------------------------------------------------------------------------------------------------- ------------
Net investment income $ 4,506,984
- -------------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MASSACHUSETTS MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C>
1995 1994
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------------
Net investment income $ 4,506,984 $ 2,717,161
- -------------------------------------------------------------------------------- ------------------ ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------------------------
Distributions from net investment income
- --------------------------------------------------------------------------------
Institutional Service Shares (3,066,535) (2,037,982)
- --------------------------------------------------------------------------------
BayFunds Shares (1,440,449) (679,179)
- -------------------------------------------------------------------------------- ------------------ ---------------
Change in net assets resulting from distributions to shareholders (4,506,984) (2,717,161)
- -------------------------------------------------------------------------------- ------------------ ---------------
SHARE TRANSACTIONS--
- --------------------------------------------------------------------------------
Proceeds from sale of shares 371,068,422 349,831,127
- --------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions
declared 2,255,146 1,275,493
- --------------------------------------------------------------------------------
Cost of shares redeemed (359,040,754) (321,848,920)
- -------------------------------------------------------------------------------- ------------------ ---------------
Change in net assets resulting from share transactions 14,282,814 29,257,700
- -------------------------------------------------------------------------------- ------------------ ---------------
Change in net assets 14,282,814 29,257,700
- --------------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------------
Beginning of period 131,924,892 102,667,192
- -------------------------------------------------------------------------------- ------------------ ---------------
End of period $ 146,207,706 $ 131,924,892
- -------------------------------------------------------------------------------- ------------------ ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MASSACHUSETTS MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Massachusetts
Municipal Cash Trust (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The Fund offers two classes of shares: Institutional Service Shares and
BayFund Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
55.1% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments
insured by or supported (backed) by a letter of credit for any one
institution or agency does not exceed 10.3% of total investments.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. Many restricted securities may
be resold in the secondary market in transactions exempt from registration.
In some cases, the restricted securities may be resold without registration
upon exercise of a demand feature. Such restricted securities may be
determined to be liquid under criteria established by the Board of
Trustees. The Fund will not incur any registration costs upon such resales.
Restricted securities are valued at amortized cost in accordance with Rule
2a-7 under the Investment Company Act of 1940.
Additional information on each restricted security held at October 31, 1995
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Clipper, MA, Tax Exempt Trust, Weekly
VRDNs (State Street Bank and Trust Co. LIQ) 5/15/95 $ 5,000,000
Clipper, MA, Tax Exempt Trust, (Series
1993-1) Weekly VRDNs (State Street Bank
and Trust Co. LIQ) 6/30/95 $ 3,465,000
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $146,207,706.
MASSACHUSETTS MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C>
1995 1994
INSTITUTIONAL SERVICE SHARES
- ----------------------------------------------------------------------------------
Shares sold 337,436,671 298,784,520
- ----------------------------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 814,368 594,441
- ----------------------------------------------------------------------------------
Shares redeemed (328,636,637) (293,889,923)
- ---------------------------------------------------------------------------------- -------------- --------------
Net change resulting from
Institutional Service share transactions 9,614,402 5,489,038
- ---------------------------------------------------------------------------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C>
1995 1994
BAYFUNDS SHARES
- ----------------------------------------------------------------------------------
Shares sold 33,631,751 51,046,608
- ----------------------------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 1,440,778 681,051
- ----------------------------------------------------------------------------------
Shares redeemed (30,404,117) (27,958,997)
- ---------------------------------------------------------------------------------- -------------- --------------
Net change resulting from
BayFunds share transactions 4,668,412 23,768,662
- ---------------------------------------------------------------------------------- -------------- --------------
Net change resulting from share transactions 14,282,814 29,257,700
- ---------------------------------------------------------------------------------- -------------- --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment
adviser, (the "Adviser"), receives for its services an annual investment
advisory fee equal to .50 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement at any time at its
sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. This fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period
of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay
FSS up to .25 of 1% of average daily net assets for Institutional Service
Shares for the period. Under the terms of a Shareholder Services Agreement
with BayBank Systems, Inc., the Fund will pay BayBank Systems, Inc. up to
.25 of 1% of average daily net assets for BayFunds Shares for the period.
These fees are to obtain certain services for shareholders and to maintain
shareholder accounts. FSS may voluntarily choose to waive a portion of its
fee. FSS can modify or terminate this voluntarily waiver at any time at its
sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent
for the Fund. This fee is based on the size, type, and number of accounts
and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's
average daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $44,840 and start-up
administrative service expenses of $43,014 were borne initially by the
Adviser. The Fund has agreed to reimburse the Adviser for the
organizational and start-up administrative expenses during the five year
period following May 18, 1990 (the date the Fund became effective). For the
period ended October 31, 1995, the Fund paid $3,869 and $4,291,
respectively, pursuant to this agreement. During the period, the Fund
completed its obligation for organizational and start-up administrative
expenses pursuant to this agreement.
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common Officers.
These transactions were made at current market value pursuant to rule 17a-7
under the Act amounting to $189,150,000 and $215,560,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Massachusetts Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of
Massachusetts Municipal Cash Trust (an investment portfolio of Federated
Municipal Trust, a Massachusetts business trust), including the schedule of
portfolio investments, as of October 31, 1995, the related statement of
operations for the year then ended, and the statement of changes in net assets
for each of the two years in the period then ended and the financial highlights
(see pages 2 and 16 of the prospectus) for the periods presented. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Massachusetts Municipal Cash Trust (an investment portfolio of Federated
Municipal Trust) as of October 31, 1995, the results of its operations for the
year then ended, and the changes in its net assets for each of the two years in
the period then ended and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Massachusetts Municipal Cash Trust
Institutional Service Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- -----------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- -----------------------------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- -----------------------------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
- -----------------------------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- -----------------------------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
MASSACHUSETTS
MUNICIPAL CASH TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated December 31, 1995
FEDERATED SECURITIES CORP.
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
CUSIP 314229303
0032603A-ISS (12/95)
MASSACHUSETTS MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus for Institutional Service Shares of Massachusetts Municipal
Cash Trust (the "Fund") a portfolio of Federated Municipal Trust ( the
"Trust") dated December 31, 1995. This Statement is not a prospectus. You
may request a copy of a prospectus or a paper copy of this Statement, if
you have received it electronically, free of charge by calling 1-800-235-
4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated December 31, 1995
Federated Securities Corp.
DISTRIBUTOR
A SUBSIDIARY OF FEDERATED INVESTORS
INVESTMENT POLICIES 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
Ratings 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 2
Credit Enhancement 2
MASSACHUSETTS INVESTMENT RISKS 2
INVESTMENT LIMITATIONS 3
FEDERATED MUNICIPAL TRUST
MANAGEMENT 5
The Funds 9
Share Ownership 9
Trustees Compensation 10
Trustee Liability 10
INVESTMENT ADVISORY SERVICES 11
Investment Adviser 11
Advisory Fees 11
BROKERAGE TRANSACTIONS 11
OTHER SERVICES 12
Fund Administration 12
Custodian and Portfolio
Recordkeeper 12
Transfer Agent 12
Independent Public Accountants 12
SHAREHOLDER SERVICES AGREEMENT 12
DETERMINING NET ASSET VALUE 12
REDEMPTION IN KIND 13
MASSACHUSETTS PARTNERSHIP LAW 13
THE FUND'S TAX STATUS 13
PERFORMANCE INFORMATION 13
Yield 13
Effective Yield 13
Tax-Equivalent Yield 14
Tax-Equivalency Table 14
Total Return 14
Performance Comparisons 15
ABOUT FEDERATED INVESTORS 15
Mutual Fund Market 15
Institutional Clients 15
Trust Organizations 15
Broker/Dealers and Bank
Broker/Dealer
Subsidiaries 16
APPENDIX 17
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by the
Trustees without shareholder approval. Shareholders will be notified before
any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or any
guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation interests
include the right to demand payment from the issuers of those interests. By
purchasing participation interests having a seven day demand feature, the Fund
is buying a security meeting the maturity and quality requirements of the Fund
and also is receiving the tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments
by a governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the
appropriation for the lease. Furthermore, a lease may provide that the
participants cannot accelerate lease obligations upon default. The
participants would only be able to enforce lease payments as they became due.
In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Board of Trustees, will base its
determination on the following factors: whether the lease can be terminated by
the lessee; the potential recovery, if any, from a sale of the leased property
upon termination of the lease; the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and prospects);
the likelihood that the lessee will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to its
operations (e.g., the potential for an "event of non-appropriation"); and any
credit enhancement or legal recourse provided upon an event of non-
appropriation or other termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations ("NRSROs") or be of comparable quality to
securities having such ratings. An NRSRO's two highest rating categories are
determined without regard for sub-categories and gradations. For example,
securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Ratings Group
("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or
FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all
considered rated in one of the two highest short-term rating categories. The
Fund will follow applicable regulations in determining whether a security
rated by more than one NRSRO can be treated as being in one of the two highest
short-term rating categories; currently, such securities must be rated by two
NRSROs in one of their two highest rating categories. See "Regulatory
Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund
sufficient to make payment for the securities to be purchased are segregated
on the Fund`s records at the trade date. These assets are marked to market
daily and are maintained until the transaction has been settled. The Fund
does not intend to engage in when-issued and delayed delivery transactions to
an extent that would cause the segregation of more than 20% of the total value
of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
brokers/dealers, and other recognized financial institutions sell securities
to the Fund and agree at the time of sale to repurchase them at a mutually
agreed upon time and price. To the extent that the seller does not repurchase
the securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. The Fund or its custodian will take
possession of the securities subject to repurchase agreements, and these
securities will be marked to market daily. In the event that a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of
the Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.
CREDIT ENHANCEMENT
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.
MASSACHUSETTS INVESTMENT RISKS
The Fund invests in obligations of Massachusetts issuers which results in the
Fund's performance being subject to risks associated with the overall economic
conditions present within Massachusetts (the "Commonwealth"). The following
information is a brief summary of the recent prevailing economic conditions
and a general summary of the Commonwealth's financial status. This information
is based on official statements relating to securities that have been offered
by Massachusetts issuers and from other sources believed to be reliable but
should not be relied upon as a complete description of all relevant
information.
The Commonwealth has a diverse economy with manufacturing, education, health
care, computers and financial services all being significant contributors.
Massachusetts is generally considered the leader in research and development
within the biotechnology, software and robotics industries as well as having
many highly prestigious universities. In addition to a highly skilled and
educated workforce, the Commonwealth has one of the higher average per capita
incomes in this country.
Beginning in the late 1980's, economic growth in the New England region and
Massachusetts, in particular, slowed and showed pronounced deterioration in
the construction, real estate, financial and manufacturing sectors. Between
1988 and 1992, there were extensive job losses that resulted in a 10%
reduction in the work force. Also, over the same period, property values in
the region experienced a similar decline. More recently, the Massachusetts
economy has experienced a slight recovery, however, at a slower pace than the
nation and there are signs that this recovery may be slowing. In addition,
after years of above average property value growth, property values have
decreased an estimated 6% over the same period.
The two major revenue sources available to cities and towns in Massachusetts
are local property taxes and local aid from the Commonwealth. Property taxes
are subject to limitations imposed by a state-wide initiative approved by the
voters in November, 1980 (commonly known as Proposition 2-1/2), which limits
the property taxes that may be levied by any city or town in any fiscal year
to the lesser of (i) 2.5% of the full valuation of the real estate and
personal property therein or (ii) 2.5% over the previous year's levy limit
plus any growth in the tax base from new construction. In recent years the
decrease in property values due to the recession and the limitations of tax
levy growth imposed by Proposition 2-1/2 have resulted in budget constraints
for many cities and towns.
The overall financial condition of the Commonwealth can also be illustrated by
the changes of its debt ratings. During the period in which the Commonwealth
has experienced its financial difficulties beginning in 1988, its general
obligation long-term debt ratings as determined by Moody's Investors Service,
Inc. and Standard & Poor's Ratings Group decreased from Aa and AA+,
respectively, to Baa and BBB. Since then the Commonwealth has had its debt
ratings raised by the two rating agencies to A1 and A+ by Moody's and S&P,
respectively, reflecting its improved fiscal performance.
The Fund's concentration in securities issued by the Commonwealth and its
political subdivisions provides a greater level of risk than a fund which is
diversified across numerous states and municipal entities. The ability of the
Commonwealth or its municipalities to meet their obligations will depend on
the availability of tax and other revenues; economic, political, and
demographic conditions within the Commonwealth; and the underlying fiscal
condition of the Commonwealth and its municipalities.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for the
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money in amounts up to one-third of the value of its total assets, including
the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate management of
the portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while borrowings
in excess of 5% of the value of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings. In those cases, it may pledge
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may acquire publicly
or non-publicly issued Massachusetts municipal securities or temporary
investments or enter into repurchase agreements, in accordance with its
investment objective, policies, and limitations or Declaration of Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate or real estate limited
partnerships, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are
secured by real estate or interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its net assets in securities
subject to restrictions on resale under the Securities Act of 1933.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase, 25%
or more of the value of its total assets would be invested in any one
industry, or in industrial development bonds or other securities the interest
upon which is paid from revenues of similar types of projects. However, the
Fund may invest as temporary investments more than 25% of the value of its
assets in cash or 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.
DIVERSIFICATION OF INVESTMENTS
With regard to at least 50% of its total assets, no more than 5% of its total
assets are to be invested in the securities of a single issuer, and no more
than 25% of its total assets are to be invested in the securities of a single
issuer at the close of each quarter of each fiscal year.
Under this limitation, each governmental subdivision, including states,
territories, possessions of the United States, or their political
subdivisions, agencies, authorities, instrumentalitites, or similar entities
will be considered a separate issuer if its assets and revenues are separate
from those of the 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.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies, except
as part of a merger, consolidation, or other acquisition.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers (including companies responsible for paying principal
and interest on industrial development bonds) which have records of less than
three years of continuous operations, including the operation of any
predecessor.
INVESTING FOR CONTROL
The Fund will not invest in securities of a company for the purpose of
exercising control or management.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
Officers and Trustees of the Trust or its investment adviser, owning
individually more than .50 of 1% of the issuer's securities, together own
more than 5% of the issuer's securities.
INVESTING IN OPTIONS
The Fund will not invest in puts, calls, straddles, spreads, or any
combination of them.
INVESTING IN MINERALS
The Fund will not purchase or sell interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase the
securities of issuers which invest in or sponsor such programs.
For purposes of the above limitations, the Fund considers instruments issued
by a U.S. branch of a domestic bank or savings and loan having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items." Except with respect to borrowing money, if a
percentage limitation is adhered to at the time of investment, a later
increase or decrease in percentage resulting from any change in value or net
assets will not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the
value of its net assets during the last fiscal year and has no present intent
to do so during the coming fiscal year.
FEDERATED MUNICIPAL TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative
Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; founding Chairman, National Advisory
Council for Environmental Policy and Technology and Federal Emergency
Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global 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 of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Services Company; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice President,
Federated Shareholder Services; Vice President, Federated Administrative
Services; Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; President and
Trustee, Federated Shareholder Services; Director, Federated Securities Corp.;
Executive Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
THE FUNDS
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 3-5 Years; Federated U.S. Government Securities Fund: 5-10 Years; First
Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S.
Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility
Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc. - 1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; RIMCO Monument Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Targeted
Duration Trust; Tax-Free Instruments Trust; Trust for Financial Institutions;
Trust For Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; The Virtus Funds; World
Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees own less than 1% of the Trust`s outstanding shares.
As of December 4,1995, the following shareholders of record owned 5% or more
of the outstanding BayFunds Shares of the Fund: John & Co., Burlington, MA,
owned approximately 48,086,125 shares (100%).
As of December 4,1995, the following shareholders of record owned 5% or more
of the outstanding Institutional Service Shares of the Fund: State Street Bank
and Trust Company, North Quincy, Massachusetts, (as record owner holding
shares for its clients) owned approximately 17,899,399 shares (17,90%); John &
Company, Burlington, Massachusetts, owned approximately 19,517,012 shares
(19.52%); and State Street Bank and Trust Company, North Quincy,
Massachusetts, (as record owner holding shares for its clients) owned
approximately 16,017,266 shares (16.02%).
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
CORPORATION CORPORATION*# FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Fund and
Chairman and Director 68 other investment companies in the Fund
Complex
Thomas G. Bigley,$2,458 $20,688 for the Fund and
Director 49 other investment companies in the Fund Complex
John T. Conroy, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
William J. Copeland, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
James E. Dowd, $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D., $3,266 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Edward L. Flaherty, Jr., $3,520 $117,202 for the Fund and
Director 64 other investment companies in the Fund Complex
Peter E. Madden, $2,757 $90,563 for the Fund and
Director 64 other investment companies in the Fund Complex
Gregor F. Meyer, $3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
John E. Murray, Jr., $1,762 $0 for the Fund and
Director 64 other investment companies in the Fund Complex
Wesley W. Posvar,$3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
Marjorie P. Smuts, $3,166 $106,460 for the Fund and
Director 64 other investment companies in the Fund Complex
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of 15
portfolios.
+The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
INVESTMENT ADVISER
The Fund's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife and his
son, J. Christopher Donahue.
The adviser shall not be liable to Trust, the Fund, or any shareholder of the
Fund for any losses that may be sustained in the purchase, holding, or sale of
any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus.
For the fiscal years ended October 31, 1995, 1994, and 1993 the adviser earned
$686,918, $643,293, and $498,975 respectively, of which $276,299, $445,711,
and $427,232, and respectively, was voluntarily waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1-1/2% per
year of the remaining average net assets, the adviser will reimburse the
Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the adviser will generally use
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. The
adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to guidelines established by the Board of Trustees. The
adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services.
Research services provided by brokers and dealers may be used by the adviser
or its affiliates in advising the Trust and other accounts. To the extent
that receipt of these services may supplant services for which the adviser or
its affiliates might otherwise have paid, it would tend to reduce their
expenses. The adviser and its affiliates exercise reasonable business
judgment in selecting brokers who offer brokerage and research services to
execute securities transactions. They determine in good faith that
commissions charged by such persons are reasonable in relationship to the
value of the brokerage and research services provided. During the fiscal year
ended October 31, 1995, the Trust paid no brokerage commissions.
Although investment decisions for the Fund are made independently from those
of the other accounts managed by the adviser, investments of the type the Fund
may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by the adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated Administrative
Services, Inc., also a subsidiary of Federated Investors, served as the Fund's
Administrator. (For purposes of this Statement of Additional Information,
Federated Administrative Services and Federated Administrative Services, Inc.
may hereinafter collectively be referred to as the "Administrators".) For the
fiscal years ended October 31, 1995, 1994, and 1993, the Administrators earned
$155,000, $195,483, and $253,380, respectively. Dr. Henry J. Gailliot, an
officer of Federated Management, the adviser to the Fund, holds approximately
20% of the outstanding common stock and serves as a director of Commercial
Data Services, Inc., a company which provides computer processing services to
Federated Administrative Services.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
TRANSFER AGENT
As transfer agent, Federated Services Company maintains all necessary
shareholder records. For its services, the transfer agent receives a fee based
on size, type, and number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
SHAREHOLDER SERVICES AGREEMENT
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 Agreement, the Trustees expect that the Fund will benefit by:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts. For the fiscal
period ending October 31,1995, the Fund paid Shareholder Services fees in the
amount of $232,505, all of which was waived.
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.
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.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its net
income earned during the year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers charge
fees in connection with services provided in conjunction with an investment in
shares of the Fund, the performance will be reduced for those shareholders
paying those fees.
YIELD
The Fund calculates its yield based upon the seven days ending on the day of
the calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares; dividing the net change in
the account's value by the value of the account at the beginning of the base
period to determine the base period return; and multiplying the base period
return by 365/7.
For the seven-day period ended October 31, 1995, the yield for Institutional
Service Shares was 3.36%, and the yield for BayFunds shares was 3.32%.
EFFECTIVE YIELD
The Fund calculates its effective yield by compounding the unannualized base
period return by: adding 1 to the base period return; raising the sum to the
365/7th power; and subtracting 1 from the result.
For the seven-day period ended October 31, 1995, the effective yield for
Institutional Service was 3.41%, and the effective yield for BayFunds Shares
was 3.37%.
TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Fund is calculated similarly to the yield but
is adjusted to reflect the taxable yield that the Fund would have had to earn
to equal its actual yield, assuming a 39.6% tax rate (the maximum effective
federal rate for individuals) and assuming that income is 100% exempt.
For the seven-day period ended October 31, 1995, the tax-equivalent yield for
Institutional Service Shares was 6.94%, and the tax-equivalent yield for
BayFunds Shares was 6.86%.
TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature. The
interest earned by the municipal securities in the Fund's portfolio generally
remains free from federal regular income tax,* and is often free from state
and local taxes as well. As the table below indicates, a "tax-free"
investment can be an attractive choice for investors, particularly in times of
narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF MASSACHUSETTS
TAX BRACKET:
Combined Federal
and State:27.00% 40.00% 43.00% 48.00% 51.60%
Joint Return$1-39,000$39,001-94,250 $94,251-143,600$143,601-256,500
OVER $256,500
Single Return$1-23,350 $23,351-56,550$56,551-117,950$117,951-256,500
OVER $256,500
Tax-Exempt Yield Taxable Yield Equivalent
1.50% 2.05% 2.50% 2.63% 2.88% 3.10%
2.00 2.74 3.33 3.51 3.85 4.13
2.50 3.42 4.17 4.39 4.81 5.17
3.00 4.11 5.00 5.26 5.77 6.20
3.50 4.79 5.83 6.14 6.73 7.23
4.00 5.48 6.67 7.02 7.69 8.26
4.50 6.16 7.50 7.89 8.65 9.30
5.00 6.85 8.33 8.77 9.62 10.33
5.50 7.53 9.17 9.65 10.58 11.36
6.00 8.22 10.00 10.53 11.54 12.40
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state
and local taxes paid on comparable taxable investments were not used to
increase federal deductions. If you itemize deductions, your taxable
yield equivalent will be lower.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
compounded by multiplying the number of shares owned at the end of the period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, adjusted over the period
by any additional shares, assuming the monthly reinvestment of all dividends
and distributions.
The Fund's average annual total returns for the one-year period ended October
31, 1995 and for the period from May 18, 1990 (date of initial public
investment) through ended October 31, 1995 were 3.34% and 3.22%, respectively.
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
O LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports monthly
and 12-month-to-date investment results for the same money funds.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected
in its investment decision making-structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands
of clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market funds,
a principal means used by money managers today to value money market fund
shares. Other innovations include the first institutional tax-free money
market fund. As of December 31, 1994, Federated Investors managed more than
$31 billion in assets across approximately 43 money market funds, including 17
government, 8 prime and 18 municipal with assets approximating $17 billion,
$7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors's
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors's domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors's international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors Investors, through its subsidiaries, distributes mutual
funds for a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional
clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated Investors funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated Investors mutual funds are available to consumers through major
brokerage firms nationwide--including 200 New York Stock Exchange firms--
supported by more wholesalers than any other mutual fund distributor. The
marketing effort to these firms is headed by James F. Getz, President,
Broker/Dealer Division.
*Source: Investment Company Institute
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a variable rate demand feature. The first rating (long-term
rating) addresses the likelihood of repayment of principal and interest when
due, and the second rating (short-term rating) describes the demand
characteristics. Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The
definitions for the long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
LONG-TERM DEBT RATINGS
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the
relative investment qualities of short-term obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the
use of the VMIG symbol to reflect such characteristics as payment upon
periodic demand rather than fixed maturity dates and payment relying on
external liquidity. In this case, two ratings are usually assigned, (for
example, AAA/VMIG-1); the first representing an evaluation of the degree of
risk associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1 Issuers rated PRIME-1 (or related supporting institutions) have
a superior capacity for repayment of short-term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries,
high rates of return on funds employed, conservative capitalization
structure with moderate reliance on debt and ample asset protection,
broad margins in earning coverage of fixed financial charges and high
internal cash generation, well-established access to a range of financial
markets and assured sources of alternate liquidity
P-2 Issuers rated PRIME-2 (or related supporting institutions) have
a strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited
above, but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
LONG-TERM DEBT RATINGS
AAA Bonds which are rated AAA are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes is can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
AA Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in AAA securities or
fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term
indebtedness. However, management considers them to be of comparable
quality to securities rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "AAA" by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "AA" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.
314229303
0032603B-ISS (12/95)
BAYFUNDS SHARES
MASSACHUSETTS
MUNICIPAL
CASH TRUST
PROSPECTUS DECEMBER 31, 1995
ANNUAL REPORT TO SHAREHOLDERS
OCTOBER 31, 1995
BAYFUNDS
Federated Securities Corp.
Distributor
December 31, 1995
Printed on Recycled Paper
Z00403
Cusip 314229832
G00507-01 (12/95)
Mutual Funds At BayBank
MASSACHUSETTS MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
BAYFUNDS Shares
PROSPECTUS
The BayFunds Shares of Massachusetts Municipal Cash Trust (the "Fund") offered
by this prospectus represent interests in a non-diversified investment portfolio
of Federated Municipal Trust (the "Trust"), an open-end management investment
company (a mutual fund).
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. 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.
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax, and Massachusetts state income tax,
consistent with stability of principal. The Fund invests primarily in short-term
Massachusetts municipal securities, including securities of states, territories,
and possessions of the United States which are not issued by or on behalf of
Massachusetts or its political subdivisions and financing authorities, but which
are exempt from the federal regular and Massachusetts state income tax.
Shareholders can invest, reinvest, or redeem BayFunds Shares at any time with no
sales loads or contingent deferred sales charges imposed by the Fund.
Shareholders have access to other portfolios in BayFunds.
THE BAYFUNDS SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS
OF BAYBANK, N.A., OR ITS SUBSIDIARIES, ARE NOT ENDORSED OR GUARANTEED BY
BAYBANK, N.A., OR ITS SUBSIDIARIES, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT
AGENCY. INVESTING IN THESE SHARES INVOLVES INVESTMENT RISKS INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in BayFunds Shares. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information for BayFunds
Shares dated December 31, 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 or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-BAYFUND
(1-800-229-3863). To obtain other information or to make inquiries about the
Fund, contact the Fund at the address listed at 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 December 31, 1995
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
KEY FACTS
General Information........................................................... 1
Summary of Fund Expenses...................................................... 2
Financial Highlights--BayFunds Shares......................................... 3
- --------------------------------------------------------------------------------
MATCHING THE FUND TO YOUR INVESTMENT NEEDS
Investment Objective and Policies............................................. 4
Acceptable Investments........................................................ 4
Investment Limitations........................................................ 8
- --------------------------------------------------------------------------------
SHAREHOLDER MANUAL
Pricing of Shares............................................................. 8
How to Buy Shares............................................................. 9
By Phone..................................................................9
By Mail...................................................................9
By Wire..................................................................10
Through BayBanks Offices.................................................10
Corporate Customers/Capital
Markets Customers..................................................... 10
Automatic Investment Program..................................................10
How to Exchange Shares........................................................11
By Phone.................................................................11
By Mail..................................................................12
Through BayBanks Offices.................................................12
How to Redeem Shares..........................................................12
Signature Guarantees.....................................................12
By Phone.................................................................13
By Mail..................................................................13
By Wire..................................................................13
Through BayBanks Offices.................................................13
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION YOU SHOULD KNOW
Dividends and Distributions...................................................14
Tax Information...............................................................14
Performance Information.......................................................15
Management, Distribution and
Administration..............................................................18
Other Classes of Shares.......................................................20
Financial Highlights--Institutional
Service Shares..............................................................21
Financial Statements..........................................................22
Report of Independent
Public Accountants..........................................................34
- -------------------------------------------------------------------------------
KEY FACTS
GENERAL INFORMATION
As a shareholder of the BayFunds Shares class (the "Shares") of the Fund, you
have access to all of the portfolios of BayFunds, an open-end, management
investment company. BayFunds consists of five separate, professionally managed
investment portfolios with distinct investment objectives and policies.
As of the date of this prospectus, BayFunds offers shares in five portfolios:
BAYFUNDS MONEY MARKET
PORTFOLIO
SEEKS TO PROVIDE CURRENT INCOME CONSISTENT WITH STABILITY OF PRINCIPAL AND
LIQUIDITY, BY INVESTING IN A PORTFOLIO OF MONEY MARKET INSTRUMENTS WITH
REMAINING MATURITIES OF 397 DAYS OR LESS.
BAYFUNDS U.S. TREASURY MONEY MARKET PORTFOLIO
SEEKS TO PROVIDE CURRENT INCOME CONSISTENT WITH STABILITY OF PRINCIPAL AND
LIQUIDITY, BY INVESTING, UNDER NORMAL MARKET CONDITIONS, AT LEAST 65% OF
THE VALUE OF ITS TOTAL ASSETS IN U.S. TREASURY OBLIGATIONS WITH REMAINING
MATURITIES OF 397 DAYS OR LESS.
BAYFUNDS SHORT TERM YIELD PORTFOLIO
SEEKS A HIGH LEVEL OF CURRENT INCOME CONSISTENT WITH PRESERVATION OF
CAPITAL, BY INVESTING IN A DIVERSIFIED PORTFOLIO OF HIGH-GRADE DEBT
OBLIGATIONS. THIS FUND WILL MAINTAIN A DOLLAR-WEIGHTED AVERAGE MATURITY OF
THREE YEARS OR LESS.
BAYFUNDS BOND PORTFOLIO
SEEKS TO ACHIEVE HIGH CURRENT INCOME AND CAPITAL APPRECIATION, BY
INVESTING, UNDER NORMAL MARKET AND ECONOMIC CONDITIONS, AT LEAST 65% OF THE
VALUE OF ITS TOTAL ASSETS IN BONDS.
BAYFUNDS EQUITY PORTFOLIO
SEEKS TO PROVIDE LONG-TERM CAPITAL APPRECIATION, BY INVESTING, UNDER NORMAL
MARKET AND ECONOMIC CONDITIONS, AT LEAST 65% OF THE VALUE OF ITS TOTAL
ASSETS IN A BROADLY DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES, WITH
CURRENT INCOME AS A SECONDARY CONSIDERATION.
------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES
<TABLE>
<S> <C>
BAYFUNDS SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Charge 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 OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)............................................................... 0.30%
12b-1 Fee...................................................................................... None
Total Other Expenses............................................................................ 0.30%
Shareholder Services Fee (after waiver) (2).......................................... 0.00%
Total Operating Expenses (3)........................................................... 0.60%
</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 operating expenses would have been 1.05% absent the voluntary
waivers of a portion of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of BayFunds Shares of the Fund will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see "Management, Distribution and Administration."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS
<S> <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
<CAPTION>
EXAMPLE: 10 YEARS
<S> <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....... $ 75
</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.
- ------------------------------------------------------------------------------
MASSACHUSETTS MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--BAYFUNDS SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
REFERENCE IS MADE TO THE REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON PAGE 34.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C> <C>
1995 1994 1993(a)
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------
Net investment income 0.03 0.02 0.01
- ---------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.01)
- --------------------------------------------------------------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------- ------- ------- -------
TOTAL RETURN (b) 3.30% 2.05% 1.25%
- ---------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------
Expenses 0.60% 0.64% 0.65%*
- ---------------------------------------------------------------
Net investment income 3.25% 2.09% 1.85%*
- ---------------------------------------------------------------
Expense waiver/reimbursement (c) 0.45% 0.35% 0.43%*
- ---------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------
Net assets, end of period (000 omitted) $46,580 $41,912 $18,143
- ---------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from March 8, 1993 (date of initial
public investment) to October 31, 1993.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
------------------------------------------------------------------------------
MATCHING THE FUND TO
YOUR INVESTMENT NEEDS
IF YOU ARE SEEKING CURRENT INCOME WHICH IS EXEMPT FROM FEDERAL REGULAR
INCOME TAX AND MASSACHUSETTS STATE INCOME TAX CONSISTENT WITH LIQUIDITY AND
STABILITY OF PRINCIPAL, THEN THE FUND MAY BE A SUITABLE INVESTMENT.
THE FUND SEEKS TO MAINTAIN A STABLE $1.00 SHARE PRICE, REFERRED TO AS THE
NET ASSET VALUE PER SHARE, BY INVESTING IN A PORTFOLIO OF SHORT-TERM
MASSACHUSETTS MUNICIPAL SECURITIES. WHILE THE FUND CANNOT GUARANTEE A
STABLE SHARE PRICE, THE SHORT-TERM NATURE OF ITS INVESTMENTS HELPS TO
MINIMIZE PRICE FLUCTUATIONS.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax, and Massachusetts state income tax
consistent with stability of principal. The investment objective cannot be
changed without approval of shareholders. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by complying
with the various requirements of Rule 2a-7 under the Investment Company Act of
1940 which regulates money market mutual funds and by following the investment
policies described in this prospectus.
Interest income of the Fund that is exempt from the income taxes described above
retains its tax-free status when distributed to the Fund's shareholders.
However, income distributed by the Fund may not necessarily be exempt from state
or municipal taxes in states other than Massachusetts.
The Fund pursues its investment objective by investing primarily in a portfolio
of Massachusetts municipal securities with remaining maturities of 13 months or
less at the time of purchase by the Fund. As a matter of investment policy,
which cannot be changed without the approval of shareholders, the Fund invests
its assets so that at least 80% of its annual interest income is exempt from
federal regular income tax and Massachusetts state income tax. (Federal regular
income tax does not include the federal individual alternative minimum tax or
the federal alternative minimum tax for corporations.) The average maturity of
the securities in the Fund's portfolio, computed on a dollar-weighted basis,
will be 90 days or less. Unless indicated otherwise, the investment policies may
be changed by the Trustees without the approval of shareholders. Shareholders
will be notified before any material changes in these policies become effective.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in debt obligations issued by or on behalf of
Massachusetts and its political subdivisions and financing authorities, and
obligations of other states, territories and possessions of the United States,
including the District of Columbia, and any political subdivision or financing
authority of any of these, the income from which is, in the opinion of qualified
legal counsel, exempt from federal regular income tax and Massachusetts state
income tax imposed upon non-corporate taxpayers.
MASSACHUSETTS MUNICIPAL SECURITIES. Massachusetts municipal securities are
generally issued to finance public works, such as airports, bridges, highways,
housing, hospitals, mass transportation projects, schools, streets, and water
and sewer works. They are also issued to repay outstanding obligations, to raise
funds for general operating expenses, and to make loans to other public
institutions and facilities.
Massachusetts municipal securities include industrial development bonds issued
by or on behalf of public authorities to provide financing aid to acquire sites
or construct and equip facilities for privately or publicly owned corporations.
The availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local employment.
ISSUERS OF GENERAL OBLIGATION BONDS INCLUDE STATES, COUNTIES, CITIES,
TOWNS, AND OTHER GOVERNMENTAL UNITS.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
Examples of Massachusetts municipal securities include, but are not limited to:
tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
bond anticipation notes ("BANs") that are intended to be refinanced through a
later issuance of longer-term bonds;
municipal commercial paper and other short-term notes;
variable rate demand notes;
municipal bonds (including bonds having serial maturities and pre-refunded
bonds) and leases; and
participation, trust and partnership interests in any of the foregoing
obligations.
MASSACHUSETTS INVESTMENT RISKS. Yields on Massachusetts municipal securities
depend on a variety of factors, including: the general conditions of the
short-term municipal note market and of the municipal bond market; the size of
the particular offering; the maturity of the obligations; and the rating of the
issue. The ability of the Fund to achieve its investment objective also depends
on the continuing ability of the issuers of Massachusetts municipal securities
and participation interests, or the credit enhancers of either, to meet their
obligations for the payment of interest and principal when due. In addition,
from time to time, the supply of Massachusetts municipal securities acceptable
for purchase by the Fund could become limited.
The Fund may invest in Massachusetts municipal securities which are repayable
out of revenue streams generated from economically related projects or
facilities and/or whose issuers are located in the same state. Sizable
investments in these Massachusetts municipal securities could involve an
increased risk to the Fund should any of these related projects or facilities
experience financial difficulties.
Obligations of issuers of Massachusetts municipal securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION. The Fund is a non-diversified investment portfolio. As
such, there is no limit on the percentage of assets which can be invested in any
single issuer. An investment in the Fund, therefore, will entail greater risk
than would exist in a diversified investment portfolio 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.
The Fund intends to comply with Subchapter M of the Internal Revenue Code. This
undertaking requires that at the end of each quarter of the 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; beyond that, no more
than 25% of its total assets are invested in securities of a single issuer.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term municipal
securities that have variable or floating interest rates and provide the Fund
with the right to tender the security for repurchase at its stated principal
amount plus accrued interest. Such securities typically bear interest at a rate
that is intended to cause the securities to trade at par. The interest rate may
float or be adjusted at regular intervals (ranging from daily to annually), and
is normally based on a published interest rate or interest rate index. Most
variable rate demand notes allow the Fund to demand the repurchase of the
security on not more than seven days' prior notice. Other notes only permit the
Fund to tender the security at the time of each interest rate adjustment or at
other fixed intervals. See "Demand Features." The Fund treats variable rate
demand notes as maturing on the later of the date of the next interest rate
adjustment or the date on which the Fund may next tender the security for
repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in municipal securities
from financial institutions such as commercial and investment banks, savings
associations and insurance companies. These interests may take the form of
participations, beneficial interests in a trust, partnership interests or any
other form of indirect ownership that allows the Fund to treat the income from
the investment as exempt from federal income tax. The Fund invests in these
participation interests in order to obtain credit enhancement or demand features
that would not be available through direct ownership of the underlying municipal
securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales contract, or a
participation certificate on any of the above. Lease obligations may be subject
to periodic appropriation. Municipal leases are subject to certain specific
risks in the event of default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit or insurance. Any bankruptcy,
receivership or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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 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.
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 considered
liquid. To the extent restricted securities are deemed to be illiquid, the Fund
will limit their purchase, together with other securities considered to be
illiquid, to 10% of its net assets.
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/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.
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, all of comparable quality to other
securities in which the Fund invests such as: obligations issued by or on behalf
of municipal or corporate issuers; 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 Massachusetts municipal securities is subject to the
federal alternative minimum tax.
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.
- ------------------------------------------------------------------------------
SHAREHOLDER MANUAL
SHARES ARE SOLD "NO-LOAD"--WITHOUT A SALES CHARGE. YOUR MINIMUM INITIAL
INVESTMENT IS ONLY $2,500 OR $500 IF YOU PARTICIPATE IN THE AUTOMATIC
INVESTMENT PROGRAM.
PRICING OF SHARES
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 liabilities attributable to shares
from the value of Fund assets attributable to shares, and dividing the remainder
by the number of shares outstanding.
THE TERM "NET ASSET VALUE" PER SHARE REFERS TO THE VALUE OF ONE FUND
SHARE.
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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
The Fund offers Shares only on days on which the New York Stock Exchange and the
Federal Reserve Bank of Boston are open for business ("Business Days"). If
BayBank Systems, Inc. (the "Shareholder Servicing Agent") receives your purchase
order on a non-Business Day, the order will not be executed until the next
Business Day in accordance with the Distributor's procedures. The Fund and the
Distributor reserve the right to reject any purchase request.
HOW TO BUY SHARES
MINIMUM INVESTMENT. You can become a shareholder with an initial investment of
$2,500, or $500 if you participate in the Automatic Investment Program. You must
submit a completed application at the time of your initial purchase. Subsequent
investments must be in amounts of at least $100, or if you participate in the
Automatic Investment Program, the minimum for additional Share purchases is $50.
The Fund may waive any investment minimums from time to time. In addition, the
Fund may reduce or waive investment minimums for investors purchasing through
qualified BayBanks accounts.
If your purchase order is received in good order and accepted by the Fund from
Federated Services Company (the "Transfer Agent") by 1:00 p.m. (Eastern time) on
a Business Day, it will be executed at the net asset value next determined and
your Shares will begin earning dividends that day. The Transfer Agent will not
communicate your purchase order to the Fund until the Shareholder Servicing
Agent has received the purchase price in Federal funds or other immediately
available funds. If your purchase order is received in good order and accepted
by the Fund from the Transfer Agent after 1:00 p.m. (Eastern time), and prior to
4:00 p.m. (Eastern time), it will be executed at the net asset value next
determined and Shares will begin earning dividends the next Business Day. When
you purchase Shares by check, the order is considered received when the check is
converted into federal funds, normally within two Business Days.
The Shareholder Servicing Agent is responsible for the prompt transmission of
purchase orders received in good order to the Transfer Agent.
YOU MAY BUY SHARES BY TELEPHONE, MAIL, WIRE, OR IN PERSON THROUGH BAYBANKS
OFFICES.
BY PHONE. Once you are a shareholder, you may purchase additional Shares by
calling 1-800-BAYFUND (1-800-229-3863).
You must have previously authorized the Fund in writing to accept telephone
requests. If you have not done so, call 1-800-BAYFUND to receive the necessary
form and information on this Fund feature. The Fund uses reasonable procedures
(incuding a shareholder identity test and sending a written confirmation of each
telephone transaction) to confirm that instructions given by telephone are
genuine. However, the Fund is not responsible for the authenticity of telephone
instructions or for any losses caused by fraudulent or unauthorized telephone
instructions if the Fund reasonably believed that the instructions were genuine.
The establishment of certain types of deposit account relationships with
BayBanks may permit the direct deduction of your purchase price from your
BayBanks deposit account. Please call 1-800-BAYFUND to determine whether your
BayBanks deposit account qualifies.
For the protection of investors, all phone communications may be recorded where
not otherwise prohibited by law.
BY MAIL. If you make your initial Share purchase by mail, you must send a
completed application, and a check payable to the Fund, to:
BayFunds
P.O. Box 889
Burlington, MA 01803
You may obtain an application by calling
1-800-BAYFUND.
You may make subsequent investments in the Fund at any time by sending a check
for a minimum of $100 payable to the Fund at the following address:
BayFunds
P.O. Box 889
Burlington, MA 01803
along with either (a) the detachable form that regularly accompanies
confirmation of a prior transaction, (b) a subsequent order form that may be
enclosed in the Fund mailing or can be obtained by calling 1-800-BAYFUND, or (c)
a letter stating the amount of the investment, the name of the Fund, the exact
name and address of the account, and your account number.
If the check does not clear, your purchase order will be cancelled.
BY WIRE. If you are a shareholder, you may purchase additional Shares by wire to
BayBanks, as agent for the Shareholder Servicing Agent, as follows:
BayBanks
ABA Number: 0110-0174-2
Attention: Mutual Funds Services
For Credit to: BayFunds Shares, Massachusetts Municipal Cash Trust; Account
37153931
Further Credit to: shareholder name and account number
Shares cannot be purchased by wire on days on which the New York Stock Exchange
and the Federal Reserve Wire System are not open for business and on the
following holidays: Martin Luther King Day, Columbus Day, or Veterans' Day.
THROUGH BAYBANKS OFFICES. You may place an order to purchase Shares in person
through designated BayBanks offices.
Purchase orders placed through BayBanks offices typically would be received by
the Transfer Agent within two Business Days. If you want more prompt processing,
you should consider another method, such as by phone, as described above.
CORPORATE CUSTOMERS/CAPITAL MARKETS CUSTOMERS. Corporate and/or Capital Markets
customers of BayBanks interested in purchasing Shares should consult their
account relationship managers for procedures applicable to their accounts or
call 1-800-554-3311. This prospectus should be read in conjunction with any
materials provided by BayBanks regarding such procedures.
AUTOMATIC INVESTMENT PROGRAM
YOU CAN BUY SHARES CONVENIENTLY THROUGH THE AUTOMATIC INVESTMENT PROGRAM.
When you participate in the Automatic Investment Program, you can purchase
additional Shares in minimum amounts of $50. You must previously have authorized
in writing the total dollar amount to be deducted automatically from eligible
BayBanks deposit accounts or your deposit account maintained at a domestic
financial institution which is an automated clearing house member, and the
frequency of the deductions. The funds will be invested in Shares at the net
asset value next determined. The Fund may reduce or waive the investment
minimums for investors purchasing through qualified BayBanks accounts.
HOW TO EXCHANGE SHARES
IF YOUR INVESTMENT NEEDS CHANGE, YOU CAN EASILY REDEEM FUND SHARES AND
PURCHASE SHARES OF ANY BAYFUNDS' PORTFOLIO AT NO CHARGE.
BayFunds consists of the BayFunds Money Market Portfolio, the BayFunds U.S.
Treasury Money Market Portfolio, the BayFunds Short Term Yield Portfolio, the
BayFunds Bond Portfolio and the BayFunds Equity Portfolio. As a shareholder, you
have access to all of these portfolios ("Participating Funds") of BayFunds.
Because the BayFunds offer separate classes of shares, Fund shareholders (other
than certain trust and institutional investors, including qualified employee
benefit plans) must purchase shares of the Investment Shares class of these
Participating Funds.
You may redeem Shares having a net asset value of at least $100 and purchase
shares of any other Participating Funds in which you have an account. The
minimum initial investment to establish an account in any other Participating
Fund is $2,500, or $500 if you participate in the Automatic Investment Program.
BayFunds does not charge any fees for these transactions.
Shares will be redeemed at the net asset value next determined and Shares of the
Participating Fund to be acquired will be purchased at the net asset value per
share next determined after receipt of the request by the Transfer Agent on a
Business Day.
If you do not have an account in the Participating Fund whose shares you want to
acquire, you must establish an account. Prior to any such transaction, you must
receive a copy of the current prospectus of the Participating Fund into which a
purchase is to be effected. This account will be registered in the same name and
you will receive your dividends and distributions as an
automatic reinvestment in additional shares. If the new account registration
(name, address, and taxpayer identification number) is not identical to your
existing account, please call 1-800-BAYFUND for the necessary new account or
transfer procedures.
You may find this privilege useful if your investment objectives or market
outlook should change after you invest in the Fund or in any of the
Participating Funds. You may obtain further information on this privilege and
obtain a prospectus by calling 1-800-BAYFUND.
The exchange privilege is available to shareholders resident in any state in
which Participating Funds' shares being acquired may be sold.
BayFunds reserves the right to terminate this privilege at any time on 60 days'
notice. Shareholders will be notified if this privilege is terminated.
Depending on the circumstances, an exchange with a fluctuating net asset value
Participating Fund may generate a short-term or long-term capital gain or loss
for federal income tax purposes.
BY PHONE. You may provide instructions to redeem Shares and purchase shares of
any Participating Funds by calling 1-800-BAYFUND.
You must have previously authorized the Fund in writing to accept telephone
requests. If you have not done so, call 1-800-BAYFUND to receive the necessary
form and information on this Fund feature. The Fund uses reasonable procedures
(including a shareholder identity test and sending a written confirmation of
each telephone transaction) to confirm that instructions given by telephone are
genuine. However, the Fund is not responsible for the authenticity of telephone
instructions or for any losses caused by fraudulent or unauthorized telephone
instructions if the Fund reasonably believed that the instructions were genuine.
BY MAIL. You may send a written request to redeem Shares and purchase shares of
any Participating Funds to:
BayFunds
P.O. Box 889
Burlington, MA 01803
Your written request must include your name and tax identification number; the
name of the Fund, the dollar amount or number of Shares to be redeemed; the name
of the Participating Fund in which shares are to be purchased; and your account
number. Your request must be signed by the registered owner(s) exactly as
required by the account application.
THROUGH BAYBANKS OFFICES. You may place an order to redeem Shares and purchase
shares of any Participating Funds in person through designated BayBanks offices.
Orders received through designated BayBanks offices typically would be received
by the Transfer Agent within two Business Days. For more prompt processing, you
should consider another method, such as exchanging shares by phone, as described
above.
HOW TO REDEEM SHARES
WHEN YOU SELL YOUR SHARES--"REDEEM" THEM--YOU RECEIVE THE NET ASSET VALUE
PER SHARE NEXT DETERMINED AFTER YOU HAVE MADE THE REQUEST. THERE ARE NO
FEES OR OTHER REDEMPTION CHARGES (EXCEPT FOR REDEMPTIONS BY WIRE). YOU MAY
REDEEM SOME OR ALL OF YOUR INVESTMENT.
The Fund redeems Shares at the net asset value next determined after the Fund
has received your redemption request from the Transfer Agent in proper form.
Redemption requests can be executed only on Business Days. If your redemption
request is received by the Shareholder Servicing Agent on a non-Business Day,
the Transfer Agent will not communicate your redemption request to the Fund
until the next Business Day.
Redemption proceeds may be credited to an eligible BayBanks deposit account,
paid by check, or paid by wire, as you previously designated in writing. The
Fund ordinarily will make payment for Shares redeemed after proper receipt from
the Transfer Agent of the redemption request and of all documents in proper form
within one Business Day to an eligible BayBanks deposit account, within five
Business Days if you requested redemption proceeds by check, or the same day by
wire if the Fund receives your redemption request from the Transfer Agent by
12:00 noon (Eastern time) on the day of redemption. Shares redeemed and wired
the same day will not receive the dividend declared on the day of redemption.
SIGNATURE GUARANTEES. If you request a redemption for an amount in excess of
$25,000 (no limitation if the proceeds are being credited to your BayBanks
deposit account), a redemption of any amount to be sent to an address other than
your address of record with the Fund, the transfer of the registration of
Shares, or a redemption of any amount payable to someone other than yourself as
the shareholder of record, your signature must be guaranteed on a written
redemption request by a trust company or insured commercial bank; an insured
savings association or savings bank; a member firm of a national or regional
stock exchange; or any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934. The Transfer Agent has adopted standards for
accepting signature guarantees from the above institutions. The Fund may elect
in the future to limit eligible signature guarantors to institutions that are
members of a signature guarantee program. The Fund does not accept signatures
guaranteed by a notary public. The Fund and the Transfer Agent reserve the right
to amend these standards at any time without notice. If you have a question
about the proper form for redemption requests, call 1-800-BAYFUND.
YOU MAY REDEEM SHARES BY PHONE, MAIL, WIRE OR THROUGH BAYBANKS OFFICES.
BY PHONE. You may redeem Shares by calling 1-800-BAYFUND.
You must have previously authorized the Fund in writing to accept telephone
requests. If you have not done so, call 1-800-BAYFUND to receive the necessary
form.
In the event of drastic economic or market changes, you may experience
difficulty in redeeming by telephone. If this occurs, you should consider
another method of redemption, such as by mail or by wire. See below. The Fund
uses reasonable procedures (including a shareholder identity test and sending a
written confirmation of each telephone transaction) to confirm that instructions
given by telephone are genuine. However, the Fund is not responsible for the
authenticity of telephone instructions or for any losses caused by fraudulent or
unauthorized telephone instructions if the Fund reasonably believed that the
instructions were genuine.
BY MAIL. You may redeem Shares by submitting a written request for redemption
to:
BayFunds
P.O. Box 889
Burlington, MA 01803
Your written request must include your name and tax identification number, the
Fund's name, the dollar amount or number of Shares to be redeemed, and your
account number. Your request must be signed by the registered owner(s) exactly
as required by the account application.
BY WIRE. You may redeem Shares by wire (see "How to Buy Shares--By Wire") or by
calling 1-800-BAYFUND. Redemption proceeds of at
least $1,000 will be wired directly to the domestic commercial bank and account
you previously designated in writing. You are charged a fee for each wire
redemption and the fee is deducted from your redemption proceeds.
The Fund reserves the right to wire redemption proceeds within seven days after
receiving the redemption order if, in its judgment, an earlier payment could
adversely affect the Fund. The Fund also reserves the right to terminate or
modify the telephone and wire redemption procedures at any time. In that event,
shareholders would be promptly notified. Neither the Fund, the Transfer Agent,
the Sub-Transfer Agent, nor the Shareholder Servicing Agent will be responsible
for the authenticity of redemption instructions received by phone.
THROUGH BAYBANKS OFFICES. You may place an order to redeem Shares in person
through designated BayBanks offices.
Redemption orders received through designated BayBanks offices typically would
be received by the Transfer Agent within two Business Days. For more prompt
processing, you should consider another method, such as by phone, as described
above.
- -------------------------------------------------------------------------------
ADDITIONAL INFORMATION YOU
SHOULD KNOW
MINIMUM BALANCE. Due to the high cost of maintaining accounts with low balances,
the Fund may redeem your Shares and send you the proceeds if, due to shareholder
redemptions your account balance falls below a minimum value of $1,000. However,
before Shares are redeemed to close an account, the shareholder will be notified
in writing and given 60 days to purchase additional Shares to meet the minimum
balance requirement. The Fund reserves the right to amend this standard upon 60
days' prior written notice to shareholders. The Fund also reserves the right to
redeem Shares involuntarily or make payment for redemptions in the form of
securities if it appears appropriate to do so in light of the Fund's
responsibilities under the Investment Company Act of 1940.
CONFIRMATIONS AND STATEMENTS. Confirmations of each purchase, exchange or
redemption are sent to each shareholder. Monthly statements are sent to report
transactions as well as dividends paid during the month. The Fund may suspend or
terminate its practice of confirming each transaction at any time without
notice.
DIVIDENDS AND DISTRIBUTIONS
YOU EARN DIVIDENDS DAILY AND RECEIVE THEM MONTHLY AS AN AUTOMATIC
REINVESTMENT IN ADDITIONAL SHARES.
Dividends from the Fund's net investment income are declared daily to
shareholders of record immediately following the 1:00 p.m. (Eastern time)
pricing of Shares. Dividends are paid monthly within five Business Days after
the end of such calendar month. The Fund does not expect to realize any net
long-term capital gains. However, if any such gains are realized, they will be
distributed to shareholders at least annually.
You will receive your dividends and your distributions as an automatic
reinvestment in additional Shares at the net asset value next determined on the
payment dates.
TAX INFORMATION
THIS DISCUSSION OF TAXES IS FOR GENERAL INFORMATION ONLY. PLEASE CONSULT
YOUR OWN TAX ADVISER ABOUT YOUR PARTICULAR SITUATION.
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.
INTEREST ON SOME MUNICIPAL SECURITIES MAY BE SUBJECT TO THE FEDERAL
ALTERNATIVE MINIMUM TAX.
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.
MASSACHUSETTS TAX CONSIDERATIONS. Under existing Massachusetts laws,
distributions made by the Fund will not be subject to Massachusetts personal
income taxes to the extent that such distributions qualify as exempt interest
dividends under the Internal Revenue Code, and represent (i) interest or gain on
obligations issued by the Commonwealth of Massachusetts, its political
subdivisions or agencies; or (ii) interest on obligations of the United States,
its territories or possessions to the extent exempt from taxation by the states
pursuant to federal law. Conversely, to the extent that distributions made by
the Fund are derived from other types of obligations, such distributions may be
subject to Massachusetts personal income taxes.
Shareholders subject to the Massachusetts corporate excise tax must include all
dividends paid by the Fund in their net income, and the value of their shares of
stock in the Fund in their net worth, when computing the Massachusetts corporate
excise tax.
OTHER STATE AND LOCAL TAXES. Income from the Fund is not necessarily free from
taxes in states other than Massachusetts. Shareholders are urged to consult
their own tax advisers regarding the status of their accounts under state and
local tax laws.
PERFORMANCE INFORMATION
From time to time, in advertisements or in reports to shareholders, the
performance, total return and yield of the Fund may be quoted and compared to
those of other mutual funds with similar investment objectives and to relevant
money market indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds.
For example, the performance of the Fund may be compared to data prepared by
Lipper Analytical Services, Inc., a widely recognized independent service which
monitors the performance of mutual funds.
National financial publications in which performance and yield data are reported
may include The Wall Street Journal, The New York Times, Forbes, or Money
magazine. Publications of a local or regional nature, such as The Boston Globe
or The Boston Herald, may also be used in comparing the performance, total
return and yield of the Fund.
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 the 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.
TAX-EQUIVALENT YIELD. The tax-equivalent yield for 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% federal
tax rate and the 12% regular personal income tax rate imposed by Massachusetts
and assuming that income earned by the Fund is 100% tax-exempt on a regular
federal, state, and local basis.
For the seven day periods ended October 31, 1995, and November 30, 1995, the
tax-equivalent yields for the Shares were 6.86% and 6.82%, respectively.
TOTAL RETURN. Total return represents the change, over a specified period of
time, in the value of an investment in the Shares after reinvesting all income
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
Yield, effective yield, tax-equivalent yield and total return will be calculated
separately for BayFunds Shares and Institutional Service Shares.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
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 is an
attractive choice for investors, particularly in times of narrow spreads between
tax-free and taxable yields.
<TABLE>
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF MASSACHUSETTS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TAX BRACKET:
FEDERAL 15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL
AND STATE 27.00% 40.00% 43.00% 48.00% 51.60%
- --------------------------------------------------------------------------------
JOINT RETURN: $1- $39,001- $94,251- $143,601- Over
39,000 94,250 143,600 256,500 $ 256,500
SINGLE RETURN: $1- $23,351- $56,551- $117,951- Over
23,350 56,550 117,950 256,500 $ 256,500
- --------------------------------------------------------------------------------
TAX-EXEMPT YIELD TAXABLE YIELD EQUIVALENT
- --------------------------------------------------------------------------------
1.50% 2.05% 2.50% 2.63% 2.88% 3.10%
2.00 2.74 3.33 3.51 3.85 4.13
2.50 3.42 4.17 4.39 4.81 5.17
3.00 4.11 5.00 5.26 5.77 6.20
3.50 4.79 5.83 6.14 6.73 7.23
4.00 5.48 6.67 7.02 7.69 8.26
4.50 6.16 7.50 7.89 8.65 9.30
5.00 6.85 8.33 8.77 9.62 10.33
5.50 7.53 9.17 9.65 10.58 11.36
6.00 8.22 10.00 10.53 11.54 12.40
</TABLE>
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 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.
MANAGEMENT, DISTRIBUTION
AND ADMINISTRATION
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 of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. With respect to this Fund, as of the date of this
prospectus, the Board of Trustees ("Trustees") has established two classes of
shares, BayFunds Shares and Institutional Service Shares. This prospectus
relates only to BayFunds Shares of the Fund.
Shares are designed primarily for individuals, partnerships and corporations who
seek a convenient means of accumulating an interest in a professionally managed,
non-diversified portfolio limited to short-term Massachusetts municipal
securities. The Fund is not likely to be a suitable investment for
non-Massachusetts taxpayers or retirement plans since it intends to invest
primarily in Massachusetts municipal securities.
AS A SHAREHOLDER, YOU ARE ENTITLED TO VOTE ON CERTAIN MATTERS.
VOTING RIGHTS. Each Share of the Fund gives the shareholder one vote in Trustee
elections and other matters submitted to shareholders for vote. All shares of
all classes of each portfolio in the Trust have equal voting rights except that
in matters affecting only a particular Fund or class, only shares of that
particular Fund or class are entitled to vote. As of December 4, 1995, John &
Co., Burlington, Massachusetts, acting in various capacities for numerous
accounts, was the owner of record of 48,086,126 shares (100%) 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.
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 shall
be called by the Trustees upon the written request of shareholders owning at
least 10% of the outstanding shares of all series of the Trust entitled to vote.
A BOARD OF TRUSTEES SUPERVISES FEDERATED MUNICIPAL TRUST.
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the business affairs of the Trust and for exercising all of the powers
of the Trust except those reserved for the shareholders. An Executive Committee
handles the Trustees' responsibilities between meetings of the Trustees.
INVESTMENT ADVISER
ACTING UNDER THE DIRECTION OF THE TRUSTEES, THE ADVISER MAKES INVESTMENT
DECISIONS FOR THE FUND.
Pursuant to an investment advisory contract (the "Advisory Contract") with the
Trust, investment decisions for the Fund are made by Federated Management, the
Fund's investment adviser (the "Adviser") subject to direction by the Trustees.
The Adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase or sale of portfolio instruments, for
which it receives an annual fee from the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee equal to
.50 of 1% of the Fund's average daily net assets. Under the Advisory Contract,
which provides for the voluntary waiver of the advisory fee by the Adviser, the
Adviser may voluntarily waive some or all of the advisory fee. This does not
include reimbursement to the Fund of any expenses incurred by shareholders who
use the transfer agent's sub-accounting facilities. The Adviser can terminate
this voluntary waiver of expenses at any time in its sole discretion. The
Adviser has also undertaken to reimburse the Fund for operating expenses in
excess of limitations established by certain states.
THE ADVISER HAS EXTENSIVE INVESTMENT EXPERIENCE.
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. With over $72 billion invested across more than 260 funds
under management and/or administration by its subsidiaries, as of December 31,
1994, Federated Investors is one of the largest mutual fund investment managers
in the United States.
Both the Fund and the Adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of employees'
own interest. Among other things, the codes: require preclearance and periodic
reporting of personal securities transactions; prohibit personal transactions in
securities being purchased or sold, or being considered for purchase or sales,
by the Fund; prohibit purchasing securities in initial public offerings; and
prohibit taking profits on securities held for less than sixty days. Violations
of the codes are subject to review by the Trustees, and could result in severe
penalties.
DISTRIBUTION
FEDERATED SECURITIES CORP. IS THE PRINCIPAL DISTRIBUTOR FOR SHARES OF THE
FUND.
Federated Securities Corp. is the principal distributor (the "Distributor") for
the 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 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.
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
VARIOUS ORGANIZATIONS PROVIDE SERVICES TO THE FUND.
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 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.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
SHAREHOLDER SERVICING AGENT. BayBank Systems, Inc., Waltham, Massachusetts, is
the Fund's shareholder servicing agent. The Fund may pay the Shareholder
Servicing Agent a fee based on the average daily net asset value of Shares for
which it provides shareholder services. These shareholder services include, but
are not limited to, distributing prospectuses and other information, providing
shareholder assistance and communicating or facilitating purchases and
redemptions of Shares. This fee will be equal to .25 of 1% of the Fund's average
daily net assets for which the Shareholder Servicing Agent provides services;
however, the Shareholder Servicing Agent may choose voluntarily to waive all or
a portion of its fee at any time.
OTHER CLASSES OF SHARES
The Fund also offers another class of shares called Institutional Service
Shares. Institutional Service Shares are sold to accounts for which financial
institutions act in an agency capacity. Investments in Institutional Service
Shares are subject to a minimum initial investment of $25,000. Institutional
Service Shares are sold at net asset value.
Institutional Service Shares and BayFund Shares are subject to certain of the
same expenses. Institutional Service Shares are distributed with no 12b-1 fees
but are subject to shareholder services fees. Expense differences, however,
between Institutional Service Shares and BayFund Shares may affect the
performance of each class.
To obtain more information and a prospectus for Institutional Service Shares,
investors may call 1-800-235-4669.
- --------------------------------------------------------------------------------
MASSACHUSETTS MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
REFERENCE IS MADE TO THE REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON PAGE 34.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1995 1994 1993 1992 1991 1990(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.05 0.03
- ------------------------------------------------------- --------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- -------------------------------------------------------
Dividends from net investment income (0.03) (0.02) (0.02) (0.03) (0.05) (0.03)
- ------------------------------------------------------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (b) 3.34% 2.14% 1.99% 2.87% 4.63% 2.59%
- -------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------
Expenses 0.55% 0.55% 0.53% 0.34% 0.30% 0.17%*
- -------------------------------------------------------
Net investment income 3.30% 2.12% 1.97% 2.82% 4.48% 5.66%*
- -------------------------------------------------------
Expense waiver/reimbursement (c) 0.45% 0.35% 0.43% 0.55% 0.69% 0.57%*
- -------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------
Net assets, end of period (000 omitted) $99,628 $90,013 $84,524 $85,570 $81,681 $63,483
- -------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 18, 1990 (date of initial
public investment) to October 31, 1990.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
MASSACHUSETTS MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------ -------------------------------------------------------------------------- ----------- --------------
SHORT-TERM MUNICIPAL SECURITIES--99.3%
- ----------------------------------------------------------------------------------------
MASSACHUSETTS--99.3%
--------------------------------------------------------------------------
$ 3,535,000 Attleboro, MA, (Lot A), 4.10% BANs, 12/14/1995 NR(3) $ 3,535,408
--------------------------------------------------------------------------
2,000,000 Attleboro, MA, (Lot B), 5.25% BANs, 2/14/1996 NR(3) 2,000,817
--------------------------------------------------------------------------
1,250,000 Attleboro, MA, (Lot B), 5.50% BANs, 2/14/1996 NR(3) 1,251,366
--------------------------------------------------------------------------
1,500,000 Attleboro, MA, 4.10% BANs, 12/14/1995 NR(3) 1,500,347
--------------------------------------------------------------------------
620,000 Billerica, MA, LT GO Bonds, 7.25% (MBIA Insurance Corporation INS),
10/15/1996 NR(1) 638,493
--------------------------------------------------------------------------
2,000,000 Boston, MA Water & Sewer Commission, General Revenue Bonds (1994 Series A)
Weekly VRDNs (State Street Bank and Trust Co. LOC) VMIG1 2,000,000
--------------------------------------------------------------------------
5,000,000 (a) Clipper, MA Tax Exempt Trust Weekly VRDNs (State Street Bank and Trust Co.
LIQ) VMIG1 5,000,000
--------------------------------------------------------------------------
3,465,000 (a) Clipper, MA Tax Exempt Trust, (Series 1993-1) Weekly VRDNs (State Street
Bank and Trust Co. LIQ) VMIG1 3,465,000
--------------------------------------------------------------------------
3,000,000 Commonwealth of Massachusetts Weekly VRDNs (AMBAC INS)/(Citibank NA, New
York LIQ) NR(1) 3,000,000
--------------------------------------------------------------------------
3,500,000 Commonwealth of Massachusetts, (Series A), 3.75% CP (Union Bank of
Switzerland, Zurich LIQ), Mandatory Tender 11/8/1995 P-1 3,500,000
--------------------------------------------------------------------------
3,200,000 Framingham, MA IDA Weekly VRDNs (Perini Corp)/(Barclays Bank PLC, London
LOC) A-1+ 3,200,000
--------------------------------------------------------------------------
3,093,000 Greenfield, MA, 4.25% BANs, 9/13/1996 NR(3) 3,099,438
--------------------------------------------------------------------------
1,000,000 Haverhill, MA, 8.875% Bonds (United States Treasury PRF), 12/1/1995 (@102) NR(1) 1,023,454
--------------------------------------------------------------------------
300,000 Ludlow, MA Weekly VRDNs (Advanced Drainage System, Inc.)/(First National
Bank of Chicago LOC) P-1 300,000
--------------------------------------------------------------------------
4,000,000 Mashpee, MA, 4.22% BANs, 7/5/1996 NR(3) 4,001,572
--------------------------------------------------------------------------
1,500,000 Massachusetts Bay Transit Authority, (Series C), 3.70% CP (Westdeutsche
Landesbank Girozentrale LOC), Mandatory Tender 1/17/1996 SP-1+ 1,500,000
--------------------------------------------------------------------------
$ 4,000,000 Massachusetts HEFA Weekly VRDNs (Harvard University) A-1+ $ 4,000,000
--------------------------------------------------------------------------
</TABLE>
MASSACHUSETTS MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------ ------------------------------------------------------------------------ ----------- --------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------------------------
MASSACHUSETTS--CONTINUED
--------------------------------------------------------------------------
3,460,000 Massachusetts HEFA Weekly VRDNs (Newbury College)/ (Barclays Bank PLC,
London LOC) P-1 3,460,000
--------------------------------------------------------------------------
200,000 Massachusetts HEFA, (Series A) Weekly VRDNs (Brigham & Women's
Hospital)/(Sanwa Bank Ltd, Osaka LOC) P-1 200,000
--------------------------------------------------------------------------
3,410,000 Massachusetts HEFA, (Series A) Weekly VRDNs (New England Home For Little
Wanderers)/(First National Bank of Boston, MA LOC) P-1 3,410,000
--------------------------------------------------------------------------
2,900,000 Massachusetts HEFA, (Series B) Weekly VRDNs (Clark University)/(Sanwa Bank
Ltd, Osaka LOC) VMIG1 2,900,000
--------------------------------------------------------------------------
1,500,000 Massachusetts HEFA, (Series D) Weekly VRDNs (Capital Asset Program)/(MBIA
Insurance Corporation INS)/(Sanwa Bank Ltd, Osaka LIQ) VMIG1 1,500,000
--------------------------------------------------------------------------
2,400,000 Massachusetts HEFA, (Series E) Weekly VRDNs (Williams College, MA) A-1+ 2,400,000
--------------------------------------------------------------------------
400,000 Massachusetts HEFA, (Series E) Weekly VRDNs (Capital Asset Program)/(First
National Bank of Chicago LIQ)/(Sanwa Bank Ltd, Osaka LOC) VMIG1 400,000
--------------------------------------------------------------------------
6,300,000 Massachusetts HEFA, (Series F) Weekly VRDNs (Children's Hospital of
Boston) A-1+ 6,300,000
--------------------------------------------------------------------------
2,500,000 Massachusetts HEFA, (Series G) Weekly VRDNs (Massachusetts Institute of
Technology) NR(1) 2,500,000
--------------------------------------------------------------------------
4,000,000 Massachusetts HEFA, 3.75% CP (Fallon Heathcare System)/ (Sanwa Bank Ltd,
Osaka LOC), Mandatory Tender 2/22/1996 A-1+ 4,000,000
--------------------------------------------------------------------------
5,000,000 Massachusetts HEFA, 3.80% CP (Harvard University), Mandatory Tender
1/26/1996 A-1+ 5,000,000
--------------------------------------------------------------------------
3,000,000 Massachusetts HEFA, 3.90% CP (Fallon Heathcare System)/ (Sanwa Bank Ltd,
Osaka LOC), Mandatory Tender 11/28/1995 A-1+ 3,000,000
--------------------------------------------------------------------------
800,000 Massachusetts Municipal Wholesale Electric Company, Variable Rate Power
Supply System Revenue Bonds (1994 Series C) Weekly VRDNs (Canadian
Imperial Bank of Commerce, Toronto LOC) A-1+ 800,000
--------------------------------------------------------------------------
</TABLE>
MASSACHUSETTS MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------ ------------------------------------------------------------------------ ----------- --------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------------------------
MASSACHUSETTS--CONTINUED
--------------------------------------------------------------------------
$ 2,400,000 Massachusetts Port Authority, (Series 1995A) Daily VRDNs (Landesbank
Hessen-Thueringen, Frankfurt LOC) A-1+ $ 2,400,000
--------------------------------------------------------------------------
3,270,000 Massachusetts State HFA, Multi-Family Housing Refunding Bonds (1995 Series
A), 5.00% (MBIA Insurance Corporation INS), 7/1/1996 NR(1) 3,287,798
--------------------------------------------------------------------------
4,000,000 Massachusetts Water Resources Authority, (Series 1994), 3.80% CP (Morgan
Guaranty Trust Co., New York LOC), Mandatory Tender 12/13/1995 A-1+ 4,000,000
--------------------------------------------------------------------------
1,000,000 Massachusetts, IFA Weekly VRDNs (Berkshire, MA School)/ (National
Westminster Bank, PLC, London LOC) VMIG1 1,000,000
--------------------------------------------------------------------------
1,300,000 Massachusetts, IFA Weekly VRDNs (Groton School)/(National Westminster
Bank, PLC, London LOC) VMIG1 1,300,000
--------------------------------------------------------------------------
8,000,000 Massachusetts, IFA Weekly VRDNs (Kendall Square Entity)/ (State Street
Bank and Trust Co. LOC) P-1 8,000,000
--------------------------------------------------------------------------
500,000 Massachusetts, IFA Weekly VRDNs (New England Deaconess Associates)/(Banque
Paribas, Paris LOC) A-1 500,000
--------------------------------------------------------------------------
1,100,000 Massachusetts, IFA, (1991 Issue), 5.25% TOBs (St. Mark's School of
Southborough, Inc.)/(Barclays Bank PLC, London LOC), Mandatory Tender
1/9/1996 VMIG1 1,100,000
--------------------------------------------------------------------------
300,000 Massachusetts, IFA, (Series 1992) Weekly VRDNs (Holyoke Water Power
Co.)/(Canadian Imperial Bank of Commerce, Toronto LOC) VMIG1 300,000
--------------------------------------------------------------------------
2,000,000 Massachusetts, IFA, (Series 1992B), 3.75% CP (New England Power Co.),
Mandatory Tender 11/27/1995 A-1 2,000,000
--------------------------------------------------------------------------
5,000,000 Massachusetts, IFA, (Series 1992B), 3.80% CP (New England Power Co.),
Mandatory Tender 2/13/1996 A-1 5,000,000
--------------------------------------------------------------------------
5,800,000 Massachusetts, IFA, (Series 1995) Weekly VRDNs (Whitehead Institute for
Biomedical Research) VMIG1 5,800,000
--------------------------------------------------------------------------
925,000 Massachusetts, IFA, (Series A) Weekly VRDNs (Hockomock YMCA)/(Bank of Nova
Scotia, Toronto LOC) P-1 925,000
--------------------------------------------------------------------------
</TABLE>
MASSACHUSETTS MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
<C> <S> <C> <C>
- ------------ ------------------------------------------------------------------------ ----------- --------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ----------------------------------------------------------------------------------------
MASSACHUSETTS--CONTINUED
--------------------------------------------------------------------------
$ 4,000,000 Massachusetts, IFA, (Series B) Weekly VRDNs (Williston North Hampton
School)/(National Westminster Bank, PLC, London LOC) A-1+ $ 4,000,000
--------------------------------------------------------------------------
6,000,000 Massachusetts, IFA, Variable Rate Demand Revenue Bonds (Series 1995)
Weekly VRDNs (Emerson College Issue)/ (Baybank, Burlington, MA LOC) P-2 6,000,000
--------------------------------------------------------------------------
1,000,000 Massachusetts, IFA, Variable Rate Refunding Revenue Bonds 1994 Project
Daily VRDNs (Showa Womens Institute Boston, Inc.)/(Fuji Bank, Ltd., Tokyo
LOC) VMIG1 1,000,000
--------------------------------------------------------------------------
5,600,000 New Bedford, MA, 4.60% BANs (Fleet National Bank, Providence, R.I. LOC),
3/15/1996 P-1 5,614,145
--------------------------------------------------------------------------
2,500,000 North Adams, MA, 4.24% BANs, 6/30/1996 NR(3) 2,501,422
--------------------------------------------------------------------------
2,297,900 North Attleborough, MA, 4.65% BANs, 4/19/1996 NR(3) 2,299,886
--------------------------------------------------------------------------
5,300,000 Springfield, MA , 4.40% BANs (Fleet National Bank, Providence, R.I. LOC),
2/9/1996 P-1 5,308,469
--------------------------------------------------------------------------
4,000,000 Springfield, MA , 4.50% BANs (Fleet National Bank, Providence, R.I. LOC),
2/9/1996 P-1 4,006,426
-------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $ 145,229,041
-------------------------------------------------------------------------- --------------
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Denotes a restricted security which is subject to restrictions or resale
under Federal Securities laws. These securities have been determined to be
liquid under criteria established by the Board of Trustees at the end of
the period, these securities amounted to $8,465,000 which represents 5.8%
of net assets.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($146,207,706) at October 31, 1995.
The following acronyms are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
BANs--Bond Anticipation Notes
CP--Commercial Paper
GO--General Obligation
HEFA--Health and Education Facilities Authority
HFA--Housing Finance Authority
IDA--Industrial Development Authority
IFA--Industrial Finance Authority
INS--Insured
LIQ--Liquidity Agreement
LOC--Letter of Credit
LT--Limited Tax
MBIA--Municipal Bond Investors Assurance
PLC--Public Limited Company
PRF--Prerefunded
TOBs--Tender Option Bonds
VRDNs--Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
MASSACHUSETTS MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $ 145,229,041
- ------------------------------------------------------------------------------------------------------
Cash 181,475
- ------------------------------------------------------------------------------------------------------
Income receivable 1,052,777
- ------------------------------------------------------------------------------------------------------
Receivable for shares sold 958
- ------------------------------------------------------------------------------------------------------
Deferred expenses 1,248
- ------------------------------------------------------------------------------------------------------ --------------
Total assets 146,465,499
- ------------------------------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------------------------
Income distribution payable $ 219,077
- ------------------------------------------------------------------------------------------
Accrued expenses 38,716
- ------------------------------------------------------------------------------------------ ----------
Total liabilities 257,793
- ------------------------------------------------------------------------------------------------------ --------------
NET ASSETS for 146,207,706 shares outstanding $ 146,207,706
- ------------------------------------------------------------------------------------------------------ --------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES:
- ------------------------------------------------------------------------------------------------------
($99,627,788 / 99,627,788 shares outstanding) $1.00
- ------------------------------------------------------------------------------------------------------ --------------
BAYFUNDS SHARES:
- ------------------------------------------------------------------------------------------------------
($46,579,918 / 46,579,918 shares outstanding) $1.00
- ------------------------------------------------------------------------------------------------------ --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MASSACHUSETTS MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------------------------------
Interest $ 5,286,218
- --------------------------------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------------------------
Investment advisory fee $ 686,918
- --------------------------------------------------------------------------------------------
Administrative personnel and services fee 155,000
- --------------------------------------------------------------------------------------------
Custodian fees 36,851
- --------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 47,328
- --------------------------------------------------------------------------------------------
Sub-transfer agent fees--BayFunds Shares 20,832
- --------------------------------------------------------------------------------------------
Directors'/Trustees' fees 1,447
- --------------------------------------------------------------------------------------------
Auditing fees 14,671
- --------------------------------------------------------------------------------------------
Legal fees 2,692
- --------------------------------------------------------------------------------------------
Portfolio accounting fees 40,267
- --------------------------------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 232,505
- --------------------------------------------------------------------------------------------
Shareholder services fee--BayFunds Shares 110,936
- --------------------------------------------------------------------------------------------
Share registration costs 17,284
- --------------------------------------------------------------------------------------------
Printing and postage 16,615
- --------------------------------------------------------------------------------------------
Insurance premiums 5,740
- --------------------------------------------------------------------------------------------
Miscellaneous 9,888
- -------------------------------------------------------------------------------------------- ----------
Total expenses 1,398,974
- --------------------------------------------------------------------------------------------
Waivers--
- -------------------------------------------------------------------------------
Waiver of investment advisory fee $ (276,299)
- -------------------------------------------------------------------------------
Waiver of shareholder services fee--Institutional Service Shares (232,505)
- -------------------------------------------------------------------------------
Waiver of shareholder services fee--BayFunds Shares (110,936)
- ------------------------------------------------------------------------------- -----------
Total waivers (619,740)
- -------------------------------------------------------------------------------------------- ----------
Net expenses 779,234
- -------------------------------------------------------------------------------------------------------- ------------
Net investment income $ 4,506,984
- -------------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MASSACHUSETTS MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C>
1995 1994
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------------
Net investment income $ 4,506,984 $ 2,717,161
- -------------------------------------------------------------------------------- ------------------ ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------------------------
Distributions from net investment income
- --------------------------------------------------------------------------------
Institutional Service Shares (3,066,535) (2,037,982)
- --------------------------------------------------------------------------------
BayFunds Shares (1,440,449) (679,179)
- -------------------------------------------------------------------------------- ------------------ ---------------
Change in net assets resulting from distributions to shareholders (4,506,984) (2,717,161)
- -------------------------------------------------------------------------------- ------------------ ---------------
SHARE TRANSACTIONS--
- --------------------------------------------------------------------------------
Proceeds from sale of shares 371,068,422 349,831,127
- --------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions
declared 2,255,146 1,275,493
- --------------------------------------------------------------------------------
Cost of shares redeemed (359,040,754) (321,848,920)
- -------------------------------------------------------------------------------- ------------------ ---------------
Change in net assets resulting from share transactions 14,282,814 29,257,700
- -------------------------------------------------------------------------------- ------------------ ---------------
Change in net assets 14,282,814 29,257,700
- --------------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------------
Beginning of period 131,924,892 102,667,192
- -------------------------------------------------------------------------------- ------------------ ---------------
End of period $ 146,207,706 $ 131,924,892
- -------------------------------------------------------------------------------- ------------------ ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MASSACHUSETTS MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Massachusetts
Municipal Cash Trust (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The Fund offers two classes of shares: Institutional Service Shares and
BayFund Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
55.1% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments
insured by or supported (backed) by a letter of credit for any one
institution or agency does not exceed 10.3% of total investments.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. Many restricted securities may
be resold in the secondary market in transactions exempt from registration.
In some cases, the restricted securities may be resold without registration
upon exercise of a demand feature. Such restricted securities may be
determined to be liquid under criteria established by the Board of
Trustees. The Fund will not incur any registration costs upon such resales.
Restricted securities are valued at amortized cost in accordance with Rule
2a-7 under the Investment Company Act of 1940.
Additional information on each restricted security held at October 31, 1995
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Clipper, MA, Tax Exempt Trust, Weekly
VRDNs (State Street Bank and Trust Co. LIQ) 5/15/95 $ 5,000,000
Clipper, MA, Tax Exempt Trust, (Series
1993-1) Weekly VRDNs (State Street Bank
and Trust Co. LIQ) 6/30/95 $ 3,465,000
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At October 31, 1995, capital paid-in aggregated $146,207,706.
MASSACHUSETTS MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C>
1995 1994
INSTITUTIONAL SERVICE SHARES
- ----------------------------------------------------------------------------------
Shares sold 337,436,671 298,784,520
- ----------------------------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 814,368 594,441
- ----------------------------------------------------------------------------------
Shares redeemed (328,636,637) (293,889,923)
- ---------------------------------------------------------------------------------- -------------- --------------
Net change resulting from
Institutional Service share transactions 9,614,402 5,489,038
- ---------------------------------------------------------------------------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C>
1995 1994
BAYFUNDS SHARES
- ----------------------------------------------------------------------------------
Shares sold 33,631,751 51,046,608
- ----------------------------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 1,440,778 681,051
- ----------------------------------------------------------------------------------
Shares redeemed (30,404,117) (27,958,997)
- ---------------------------------------------------------------------------------- -------------- --------------
Net change resulting from
BayFunds share transactions 4,668,412 23,768,662
- ---------------------------------------------------------------------------------- -------------- --------------
Net change resulting from share transactions 14,282,814 29,257,700
- ---------------------------------------------------------------------------------- -------------- --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment
adviser, (the "Adviser"), receives for its services an annual investment
advisory fee equal to .50 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement at any time at its
sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. This fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period
of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay
FSS up to .25 of 1% of average daily net assets for Institutional Service
Shares for the period. Under the terms of a Shareholder Services Agreement
with BayBank Systems, Inc., the Fund will pay BayBank Systems, Inc. up to
.25 of 1% of average daily net assets for BayFunds Shares for the period.
These fees are to obtain certain services for shareholders and to maintain
shareholder accounts. FSS may voluntarily choose to waive a portion of its
fee. FSS can modify or terminate this voluntarily waiver at any time at its
sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent
for the Fund. This fee is based on the size, type, and number of accounts
and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's
average daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $44,840 and start-up
administrative service expenses of $43,014 were borne initially by the
Adviser. The Fund has agreed to reimburse the Adviser for the
organizational and start-up administrative expenses during the five year
period following May 18, 1990 (the date the Fund became effective). For the
period ended October 31, 1995, the Fund paid $3,869 and $4,291,
respectively, pursuant to this agreement. During the period, the Fund
completed its obligation for organizational and start-up administrative
expenses pursuant to this agreement.
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common officers.
These transactions were made at current market value pursuant to rule 17a-7
under the Act amounting to $189,150,000 and $215,560,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Massachusetts Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of
Massachusetts Municipal Cash Trust (an investment portfolio of Federated
Municipal Trust, a Massachusetts business trust), including the schedule of
portfolio investments, as of October 31, 1995, the related statement of
operations for the year then ended, and the statement of changes in net assets
for each of the two years in the period then ended, and the financial highlights
(see pages 3 and 21 of the prospectus) for the periods presented. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Massachusetts Municipal Cash Trust (an investment portfolio of Federated
Municipal Trust) as of October 31, 1995, the results of its operations for the
year then ended, and the changes in its net assets for each of the two years in
the period then ended and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
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ADDRESSES
Massachusetts Municipal Cash Trust
BayFunds Shares
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Federated Services Company
P.O. Box 8600
Boston, Massachusetts 02266-8600
SUB-TRANSFER AGENT
DST Systems, Inc.
210 West 10th Street
Kansas City, Missouri 64105
SHAREHOLDER SERVICING AGENT
BayBank Systems, Inc.
One BayBank Technology Place
Waltham, Massachusetts 02154
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 1119
Boston, Massachusetts 02266
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place
MASSACHUSETTS MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
BAYFUNDS(R) SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus
for BayFunds Shares of Massachusetts Municipal Cash Trust (the "Fund")
dated December 31, 1995. This Statement is not a prospectus. You may
request a copy of a prospectus or a paper copy of this Statement, if you
have received it electronically, free of charge by calling 1-800-
BAYFUND (1-800-229-3863).
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated December 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
INVESTMENT POLICIES 1
ACCEPTABLE INVESTMENTS 1
PARTICIPATION INTERESTS 1
MUNICIPAL LEASES 1
RATINGS 2
WHEN-ISSUED AND DELAYED DELIVERY
TRANSACTIONS 3
REPURCHASE AGREEMENTS 3
CREDIT ENHANCEMENT 4
INVESTMENT LIMITATIONS 4
REGULATORY COMPLIANCE 8
MASSACHUSETTS INVESTMENT RISKS 9
FEDERATED MUNICIPAL TRUST
MANAGEMENT 10
FUND OWNERSHIP 19
TRUSTEES' COMPENSATION 20
TRUSTEE LIABILITY 22
INVESTMENT ADVISORY SERVICES 22
ADVISER TO THE FUND 22
ADVISORY FEES 22
BROKERAGE TRANSACTIONS 23
OTHER SERVICES 24
FUND ADMINISTRATION 24
CUSTODIAN 25
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT 25
SUB-TRANSFER AGENT 25
INDEPENDENT PUBLIC ACCOUNTANTS 25
SHAREHOLDER SERVICING AGENT 26
EXCHANGING SECURITIES FOR SHARES
26
DETERMINING NET ASSET VALUE 27
REDEMPTION IN KIND 28
MASSACHUSETTS PARTNERSHIP LAW 28
THE FUND'S TAX STATUS 29
MASSACHUSETTS STATE INCOME TAX 29
PERFORMANCE INFORMATION 30
YIELD 31
EFFECTIVE YIELD 31
TOTAL RETURN 31
PERFORMANCE COMPARISONS 32
ABOUT FEDERATED INVESTORS 33
APPENDIX 33
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by the
Trustees without shareholder approval. Shareholders will be notified before any
material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or any
guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation interests
frequently provide or secure from another financial institution irrevocable
letters of credit or guarantees and give the Fund the right to demand payment of
the principal amounts of the participation interests plus accrued interest on
short notice (usually within seven days). The municipal securities subject to
the participation interests are not limited to the Fund's maximum maturity
requirements so long as the participation interests include the right to demand
payment from the issuers of those interests. By purchasing participation
interests having a seven day demand feature, the Fund is buying a security
meeting the maturity and quality requirements of the Fund and also is receiving
the tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments by
a governmental or nonprofit entity. The lease payments and other rights under
the lease provide for and secure payments on the certificates. Lease obligations
may be limited by municipal charter or the nature of the appropriation for the
lease. Furthermore, a lease may provide that the participants cannot accelerate
lease obligations upon default. The participants would only be able to enforce
lease payments as they became due. In the event of a default or failure of
appropriation, unless the participation interests are credit enhanced, it is
unlikely that the participants would be able to obtain an acceptable substitute
source of payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be terminated by
the lessee; the potential recovery, if any, from a sale of the leased property
upon termination of the lease; the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and prospects); the
likelihood that the lessee will discontinue appropriating funding for the leased
property because the property is no longer deemed essential to its operations
(e.g., the potential for an "event of non-appropriation"); and any credit
enhancement or legal recourse provided upon an event of non-appropriation or
other termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two highest
short-term rating categories by one or more nationally recognized statistical
rating organizations ("NRSROs") or be of comparable quality to securities having
such ratings. An NRSRO's two highest rating categories are determined without
regard for sub-categories and gradations. For example, securities rated SP-1+,
SP-1 or SP-2 by Standard & Poor's Ratings Group ("S&P"), or MIG-1 or MIG-2 by
Moody's Investors Service, Inc. ("Moody's"), or FIN-1+, FIN-1 and FIN-2 by Fitch
Investor Services, Inc. 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 categories.
See "Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These securities are marked to market daily and
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities to
the Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. The Fund or its custodian will take possession of the
securities subject to repurchase agreements and these securities will be marked
to market daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Fund believes that under the regular
procedures normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Fund and allow retention or disposition of such securities. The
Fund will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the Fund's
adviser to be creditworthy, pursuant to guidelines established by the Trustees.
CREDIT ENHANCEMENT
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.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for the
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money in amounts up to one-third of the value of its total assets,
including the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate management
of the portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while borrowings
in excess of 5% of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having a
market value not exceeding the lesser of the dollar amounts borrowed or 15%
of the value of total assets at the time of the pledge.
DIVERSIFICATION OF INVESTMENTS
With regard to at least 50% of its total assets, no more than 5% of its
total assets are to be invested in the securities of a single issuer, and
no more than 25% of its total assets are to be invested in the securities
of a single issuer at the close of each quarter of each fiscal year. Under
this limitation, each governmental subdivision, including states,
territories, possessions of the United States or their political
subdivisions, agencies, authorities, instrumentalities, or similar entities
will be considered a separate issuer if its assets and revenues are
separate from those of the governmental body creating it and the security
is backed only by its own assets and revenues.
Industrial development bonds backed only by the assets and revenues of a
nongovernmental issuer are considered to be issued solely by that issuer.
If, in the case of an industrial development bond or government-issued
security, a governmental or other entity guarantees the security, such
guarantee would be considered a separate security issued by the guarantor,
as well as the other issuer, subject to limited exclusions allowed by the
Investment Company Act of 1940.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate or real estate limited
partnerships, although it may invest in securities of issuers whose
business involves the purchase or sale of real estate or in securities
which are secured by real estate or interests in real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its net assets in securities
subject to restrictions on resale under the Securities Act of 1933.
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.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except that it may acquire
publicly or nonpublicly issued Massachusetts municipal securities or
temporary investments or enter into repurchase agreements 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 total 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 investment limitations cannot be changed without shareholder approval.
The following 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 SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies except
as part of a merger, consolidation, reorganization, or other acquisition.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
industrial development bonds or other municipal securities where the
principal and interest are the responsibility of companies (or guarantors,
where applicable) with less than three years of continuous operations,
including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or the Fund's investment adviser, owning
individually more than 1/2 of 1% of the issuer's securities, together own
more than 5% of the issuer's securities.
DEALING IN PUTS AND CALLS
The Fund will not purchase or sell puts, calls, straddles, spreads, or any
combination of them, except that the Fund may purchase municipal securities
accompanied by agreements of sellers to repurchase them at the Fund's
option.
INVESTING IN MINERALS
The Fund will not purchase or sell oil, gas, or other mineral exploration
or development programs or leases.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
securities which are illiquid, including repurchase agreements providing
for settlement in more than seven days after notice, certain restricted
securities not determined by the Trustees to be liquid, and non-negotiable
fixed time deposits with maturities over seven days.
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
restriction.
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.
For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings association having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items."
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940. In particular, the Fund will comply
with the various requirements of Rule 2a-7, 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.
MASSACHUSETTS INVESTMENT RISKS
The Fund invests in obligations of Massachusetts issuers which results in the
Fund's performance being subject to risks associated with the overall economic
conditions present within Massachusetts (the "Commonwealth"). The following
information is a brief summary of the recent prevailing economic conditions and
a general summary of the Commonwealth's financial status. This information is
based on official statements relating to securities that have been offered by
Massachusetts issuers and from other sources believed to be reliable but should
not be relied upon as a complete description of all relevant information.
The Commonwealth has a diverse economy with manufacturing, education, health
care, computers and financial services all being significant contributors.
Massachusetts is generally considered the leader in research and development
within the biotechnology, software and robotics industries as well as having
many highly prestigious universities. In addition to a highly skilled and
educated workforce, the Commonwealth has one of the higher average per capita
incomes in this country.
Beginning in the late 1980's, economic growth in the New England region and
Massachusetts, in particular, slowed and showed pronounced deterioration in the
construction, real estate, financial and manufacturing sectors. Between 1988
and 1992 there were massive job losses that resulted in a 10% reduction in the
work force. Also, over the same period, property values in the region
experienced a similar decline. More recently the Massachusetts economy has
experienced a slight recovery, however at a slower pace than the nation and
there are signs that this recovery may be slowing.
The two major revenue sources available to cities and towns in Massachusetts are
local property taxes and local aid from the Commonwealth. Property taxes are
subject to limitations imposed by a state-wide initiative approved by the voters
in November, 1980 (commonly known as Proposition 2-1/2), which limits the
property taxes that may be levied by any city or town in any fiscal year to the
lesser of (i) 2.5% of the full valuation of the real estate and personal
property therein or (ii) 2.5% over the previous year's levy limit plus any
growth in the tax base from new construction. In recent years the decrease in
property values due to the recession and the limitations of tax levy growth
imposed by Prop 2-1/2 have resulted in budget constraints for many cities and
towns.
The overall financial condition of the Commonwealth can also be illustrated by
the changes of its debt ratings. During the period in which the Commonwealth has
experienced its financial difficulties beginning in 1988, its general obligation
long-term debt ratings as determined by Moody's and S&P decreased from Aa and
AA+, respectively, to a low of Baa and BBB. Since then the Commonwealth has had
its debt ratings raised by the two rating agencies to A1 and A+ (Moody's and
S&P) reflecting its improved fiscal performance.
The Fund's concentration in securities issued by the Commonwealth and its
political subdivisions provides a greater level of risk than a fund which is
diversified across numerous states and municipal entities. The ability of the
Commonwealth or its municipalities to meet their obligations will depend on the
availability of tax and other revenues; economic, political, and demographic
conditions within the Commonwealth; and the underlying fiscal condition of the
Commonwealth and its municipalities.
FEDERATED MUNICIPAL TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management Advisory
Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global 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.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Services Company; Chairman, Treasurer, and Trustee, Federated Administrative
Services; Trustee or Director of some of the Funds; President, Executive Vice
President and Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President, Secretary,
and Trustee, Federated Administrative Services; President and Trustee, Federated
Shareholder Services; Director, Federated Securities Corp.; Executive Vice
President and Secretary of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors; Controller,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., and Passport Research, Ltd.; Senior Vice President, Federated
Shareholder Services; Vice President, Federated Administrative Services;
Treasurer of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between meetings
of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated ARMs
Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Master Trust; Federated Municipal Trust;
Federated Short-Term Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund: 3-5
Years; First Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Term Trust, Inc. - 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; 111 Corcoran Funds; Peachtree Funds;
The Planters Funds; RIMCO Monument Funds; The Shawmut Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust For Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; The
Virtus Funds; World Investment Series, Inc.
FUND OWNERSHIP
The Officers and Trustees, as a group, do not own more than 1% of the
outstanding shares of the Fund.
As of December 4, 1995, the following shareholders of record owned 5% or more of
the outstanding BayFunds Shares of the Fund: John & Co., Burlington,
Massachusetts owned approximately 48,086,126 shares (100%).
As of December 4, 1995, the following shareholders of record owned 5% or more of
the outstanding Institutional Service Shares of the Fund: State Street Bank,
North Qunicy, Massachusetts (as record owner holding Institutional Services
Shares for its clients) owned approximately 16,017,267 (16.02%) shares, John &
Co., Burlington, Massachusetts owned approximately 19,517,013 (19.52%) shares,
and State Street Bank, North Qunicy, Massachusetts (as record owner holding
Institutional Services Shares for its clients) owned approximately 17,899,340
(17.90%) shares.
TRUSTEES' COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue, $ -0- $ -0- for the Trust and
Chairman and Trustee
68 other investment companies in the Fund Complex
Thomas G. Bigley,$2,458 $20,688 for the Trust and
Trustee 49 other investment companies in the Fund Complex
John T. Conroy, Jr., $3,520
$117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
William J. Copeland, $3,520
$117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
James E. Dowd, $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D., $3,166
$106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Edward L. Flaherty, Jr., $3,520
$117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Glen R. Johnson, $ -0- $0 for the Trust and
President and Trustee
8 other investment companies in the Fund Complex
Peter E. Madden, $2,757 $90,563 for Trust and
Trustee 64 other investment companies in the Fund Complex
Gregor F. Meyer, $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
John E. Murray, Jr., $1,762
$0 for the Trust and
Trustee 68 other investment companies in the Fund Complex
Wesley W. Posvar,$3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Marjorie P. Smuts, $3,166
$106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of 15
portfolios.
+The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Trust's 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
ADVISER TO THE FUND
The Fund's investment adviser is Federated Management (the "Adviser"). It is a
subsidiary of Federated Investors. All of the voting securities of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue, his
wife, and his son, J. Christopher Donahue.
The Adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus. During the fiscal years ended October 31,
1995, 1994, and 1993, the Adviser earned $686,918, $643,293, and $498,975,
respectively, of which $276,299, $445,711, and $427,232, respectively, were
voluntarily waived because of undertakings to limit the Fund's expenses.
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 expense
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 by
the amount of the investment advisory fee.
This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Board of Trustees. The Adviser may select brokers
and dealers who offer brokerage and research services. These services may be
furnished directly to the Fund or to the Adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the Adviser or its affiliates in advising the Trust and
other accounts. To the extent that receipt of these services may supplant
services for which the Adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The Adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. During the fiscal
year ended October 31, 1995, the Trust paid no brokerage commissions.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the Adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the Adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the Adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Fund's administrator.
For purposes of this Statement of Additional Information, Federated
Administrative Services and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the "Administrators." For the fiscal
year ended October 31, 1995, 1994, and 1993, the Administrators earned $155,000,
$195,483, and $253,380, respectively. Dr. Henry J. Gailliot, an officer of
Federated Management, the Adviser to the Fund, holds approximately 20% of the
outstanding common stock and serves as director of Commercial Data Services,
Inc., a company which provides computer processing services to Federated
Administrative Services, Inc.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, a subsidiary of Federated Investors, serves as
transfer agent and dividend disbursing agent for the Fund. The fee paid to the
transfer agent is based upon the size, type and number of accounts and
transactions made by shareholders.
Federated Services Company also maintains the Trust's accounting records. The
fee paid for this service is based upon the level of the Fund's average net
assets for the period plus out-of-pocket expenses.
SUB-TRANSFER AGENT
DST Systems, Inc., Kansas City, Missouri, is the sub-transfer agent for the
Shares of the Fund. The Institutional Service Shares class has no sub-transfer
agent.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, Pennsylvania.
SHAREHOLDER SERVICING AGENT
Under a Shareholder Servicing Plan, the Fund may pay a fee to BayBank Systems,
Inc., as shareholder servicing agent, for services provided which are necessary
for the maintenance of shareholder accounts. 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. For the fiscal years ended October 31, 1995 and 1994, payments in
the amount of $110,936 and $19,343, respectively, were made to the shareholder
servicing agent.
EXCHANGING SECURITIES FOR SHARES
The Fund may accept securities in exchange for Shares. The Fund will allow such
exchanges only upon the prior approval of the Fund and a determination by the
Fund and the Adviser that the securities to be exchanged are acceptable.
Any securities exchanged must meet the investment objective and policies of the
Fund, must have a readily ascertainable market value and must be liquid. The
Fund acquires the exchanged securities for investment and not for resale. The
market value of any securities exchanged in an initial investment plus any cash,
must be at least $25,000.
Securities accepted by the Fund will be valued in the same manner as the Fund
values its assets. The basis of the exchange will depend upon the net asset
value of Shares on the day the securities are valued. One Share of the Fund
will be issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription or other
rights attached to the securities become the property of the Fund, along with
the securities.
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.
MONTHLY STATEMENTS
Shareholders of the Fund who have eligible BayBanks deposit accounts will
receive combined monthly statements containing all information relating to
their deposit account(s) and BayFunds transactions.
COMPANION ACCOUNT AVAILABILITY
Certain BayBanks deposit account customers may elect to open a companion
BayFunds account to facilitate BayFunds transactions.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable under
Massachusetts law for obligations of the Trust. To protect shareholders, the
Trust has filed legal documents with Massachusetts that expressly disclaim the
liability of shareholders for acts or obligations of the Trust. These documents
require notice of this disclaimer to be given in each agreement, obligation, or
instrument that 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 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 cannot meet its obligations to indemnify shareholders and pay
judgments against them.
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.
MASSACHUSETTS STATE INCOME TAX
Individual shareholders of the Fund who are subject to Massachusetts income
taxation will not be required to pay Massachusetts income tax on that portion of
their dividends which are attributable to: interest earned on Massachusetts tax-
free municipal obligations; gain from the sale of certain of such obligations;
and interest earned on obligations of United States territories or possessions,
to the extent interest on such obligations is exempt from taxation by the state
pursuant to federal law. All remaining dividends will be subject to
Massachusetts income tax.
If a shareholder of the Fund is a Massachusetts business corporation or any
foreign business corporation which exercises its charter, qualifies to do
business, actually does business or owns or uses any part of its capital, plant
or other property in Massachusetts, then it will be subject to Massachusetts
excise taxation either as a tangible property corporation or as an intangible
property corporation. If the corporate shareholder is a tangible property
corporation, it will be taxed upon its net income allocated to Massachusetts and
the value of certain tangible property. If it is an intangible property
corporation, it will be taxed upon its net income and net worth allocated to
Massachusetts. Net income is gross income less allowable deductions for federal
income tax purposes, subject to specified modifications. Dividends received from
the Fund are includable in gross income and generally may not be deducted by a
corporate shareholder in computing its net income. The corporation's shares in
the Fund are not includable in the computation of the tangible property base of
a tangible property corporation, but are includable in the computation of the
net worth base of an intangible property corporation.
Shares of Massachusetts Municipal Cash Trust will be exempt from local property
taxes in Massachusetts.
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 yield for the seven-day period ended October 31, 1995 for the BayFunds
Shares of the Fund was 3.32%.
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 effective yield for the seven-day period ended October 31, 1995 for the
BayFunds Shares of the Fund was 3.37%.
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.
For the one-year period ended October 31, 1995, and for the period from March 8,
1993 (date of initial public investment) to October 31, 1995, the average annual
total returns were 3.30% and 2.46%, respectively, for the BayFunds Shares of the
Fund.
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:
O LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports monthly
and 12-month-to-date investment results for the same money funds.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
From time to time as it deems appropriate, the Fund may advertise the
performance of its shares using charts, graphs and description, compared to
federally insured bank products, including certificates of deposit and time
deposits, and to money market funds using the Lipper Analytical Services money
market instruments average. Unlike federally insured bank products, the shares
of the Fund are not insured.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making - structured, straightforward, and consistent.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the municipal sector, as of December 31, 1994, Federated Investors managed 18
bond funds with approximately $1.9 billion in assets and 18 money market funds
with approximately $6.6 billion in total assets. In 1976, Federated Investors
introduces one of the first municipal bond mutual funds in the industry and is
now one of the largest institutional buyers of municipal securities.
William D. Dawson, Executive Vice President, oversees Federated Investor's
domestic fixed income management.
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1
Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a
plus sign (+) designation.
SP-2
Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the long-
term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1
This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2
Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
LONG-TERM DEBT RATINGS
AAA
Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and
repay principal is extremely strong.
AA
Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs
from the highest
rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1
This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
AAA/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1
Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries,
high rates of return on funds employed, conservative capitalization
structure with moderate reliance on debt and ample asset protection, broad
margins in earning coverage of fixed financial charges and high internal
cash generation, well-established access to a range of financial markets
and assured sources of alternate liquidity
P-2
Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be
more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
LONG-TERM DEBT RATINGS
AAA
Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes is can be visualized
are most unlikely to impair the fundamentally strong position of
such issues.
AA Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of
protective elements
may be of greater amplitude or there may be other elements present which
make the long-term risks appear
somewhat larger than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to
securities rated A-1 or P-1.
NR(1)
The underlying issuer/obligor/guarantor has other outstanding debt rated
"AAA" by S&P or "AAA" by Moody's.
NR(2)
The underlying issuer/obligor/guarantor has other outstanding debt rated
"AA" by S&P or "AA" by Moody's.
NR(3)
The underlying issuer/obligor/guarantor has other outstanding debt rated
"A" by S&P or Moody's.
Cusip 314229832
- --------------------------------------------------------------------------------
MICHIGAN MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
PROSPECTUS
The shares of Michigan 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 primarily in short-term Michigan municipal
securities, including securities of states, territories, and possessions of the
United States which are not issued by or on behalf of Michigan, or its political
subdivisions and financing authorities, but which provide income exempt from
federal regular income tax and and the personal income tax imposed by the State
of Michigan consistent with stability of principal and liquidity. In addition,
the Fund intends to qualify as an investment substantially exempt from the
Michigan intangibles tax.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SUMMARY OF FUND EXPENSES 1
- --------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- --------------------------------------------------
GENERAL INFORMATION 3
- --------------------------------------------------
INVESTMENT INFORMATION 3
- --------------------------------------------------
Investment Objective 3
Investment Policies 3
Michigan Municipal Securities 6
Investment Risks 6
Non-Diversification 7
Investment Limitations 7
FUND INFORMATION 7
- --------------------------------------------------
Management of the Fund 7
Distribution of Shares 8
Administration of the Fund 9
NET ASSET VALUE 9
- --------------------------------------------------
HOW TO PURCHASE SHARES 9
- --------------------------------------------------
Special Purchase Features 10
HOW TO REDEEM SHARES 10
- --------------------------------------------------
Special Redemption Features 12
ACCOUNT AND SHARE INFORMATION 12
- --------------------------------------------------
TAX INFORMATION 13
- --------------------------------------------------
Federal Income Tax 13
State and Local Taxes 13
PERFORMANCE INFORMATION 14
- --------------------------------------------------
FINANCIAL STATEMENTS 15
- --------------------------------------------------
REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS 26
- --------------------------------------------------
ADDRESSES 27
- --------------------------------------------------
</TABLE>
I
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Charge 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
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver) (1)................................................................ 0.00%
12b-1 Fee........................................................................................ None
Total Other Expenses (after expense reimbursement)............................................... 0.50%
Shareholder Services Fee............................................................ 0.25%
Total Fund Operating Expenses (2)........................................................ 0.50%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of the
management fee. The adviser can terminate this voluntary waiver at any time
at its sole discretion. The maximum management fee is 0.50%.
(2) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending October 31, 1996. The total operating
expenses were 0.32% for the fiscal year ended October 31, 1995 and would
have been 1.95% 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 "Fund Information." Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end of
each time period................................................. $5 $16 $28 $63
</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.
1
MICHIGAN MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 26.
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31,
1995(a)
- ------------------------------------------------------------------ ------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
- ------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------
Net investment income 0.01
- ------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------
Distributions from net investment income (0.01)
- ------------------------------------------------------------------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00
- ------------------------------------------------------------------ ------
------
TOTAL RETURN (b) 1.35%
- ------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------
Expenses 0.32%*
- ------------------------------------------------------------------
Net investment income 3.67%*
- ------------------------------------------------------------------
Expense waiver/reimbursement (c) 1.63%*
- ------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------
Net assets, end of period (000 omitted) $30,133
- ------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from June 20, 1995 (date of initial
public investment) to October 31, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
2
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 Michigan municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Michigan taxpayers because it invests
in municipal securities of that state. A minimum initial investment of $10,000
within a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the personal income tax imposed by the State of Michigan
consistent with stability of principal and liquidity. This investment objective
cannot be changed without shareholder approval. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
complying with the various requirements of Rule 2a-7 under the Investment
Company Act of 1940 which regulates money market mutual funds and by following
the investment policies described in this prospectus. In addition, the Fund
intends to qualify as an investment substantially exempt from the Michigan
Intangibles Personal Property Tax ("intangibles tax").
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
Michigan 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 Michigan state income and intangibles tax.
(Federal regular income tax does not include the federal individual alternative
minimum tax or the federal alternative minimum tax for corporations.) The
average maturity of the securities in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies may be changed by the Trustees without shareholder approval.
Shareholders will be notified before any material change in these policies
becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of Michigan 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 Michigan personal income tax
3
("Michigan Municipal Securities"). Examples of Michigan 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 Michigan
Municipal Securities from financial institutions such as commercial and
investment banks, savings 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 Michigan 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.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party
4
providing the credit enhancement will adversely affect the quality and
marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; 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
5
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 Michigan
Municipal Securities is subject to the federal alternative minimum tax.
MICHIGAN MUNICIPAL SECURITIES
Michigan 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.
Michigan 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 Michigan 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 Michigan 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 Michigan 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 Michigan
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Michigan 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
Michigan 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 Michigan 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
6
any issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge assets to secure such borrowings. These investment limitations
cannot be changed without shareholder approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .50 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is
7
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. With over $72 billion invested across more
than 260 funds under management and/or administration by its subsidiaries,
as of December 31, 1994, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 1,750
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,000
financial institutions nationwide. More than 100,000 investment
professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to .25 of 1% of the average
daily net asset value of Fund shares, computed at an annual rate, to obtain
certain personal services for shareholders and provide maintenance of
shareholder accounts ("shareholder services"). From time to time and for such
periods as deemed appropriate, the amount stated above may be reduced
voluntarily.
Under the Shareholder Services Agreement, Federated Shareholder Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.
8
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
-------------------- ------------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days which the New York Stock Exchange
is 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 or more
within a 90-day period and additional investments of as little as $500.
Financial institutions may impose different minimum investment requirements on
their customers.
9
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: Michigan 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. Questions on wire purchases should be directed to your
shareholder services representative at the telephone number listed on your
account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to Michigan Municipal Cash Trust. 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
10
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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If shares certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name; the account name as registered
with the Fund; the account number; and the number of shares to be redeemed or
the dollar amount requested. All owners of the account must sign the request
exactly as the shares are registered. Normally, a check for the proceeds is
mailed within one business day, but in no event more than seven days, after the
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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
11
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. Shareholder accounts will continue to
receive the daily dividend declared on the shares to be redeemed until the check
is presented to UMB Bank, N.A., the bank responsible for administering the check
writing program, for payment. However, checks should never be made payable or
sent to UMB Bank, N.A. or the Fund to redeem shares, and a check may not be
written to close an account.
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
institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$10,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has 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. 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 election of Trustees under certain circumstances.
12
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting 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 December 4, 1995, McDonald & Co. Securities Inc., Cincinnati, OH, owned
45.69% 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.
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
Michigan. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
MICHIGAN TAX CONSIDERATIONS. Under existing Michigan laws, distributions made
by the Fund will not be subject to Michigan personal income taxes to the extent
that such distributions qualify as exempt-interest dividends under the Internal
Revenue Code, and represent (i) interest from obligations of Michigan or any of
its political subdivisions, or (ii) income from obligations of the United States
government which are exempted from state income taxation by a law of the United
States.
13
The portion of a shareholder's shares in the Fund representing (i) bonds or
other similar obligations of Michigan or its political subdivisions, or (ii)
obligations of the United States which are exempt from taxation by a law of the
United States, and dividends paid by the Fund representing interest payments on
securities, will be exempt from Michigan intangibles tax.
Distributions by the Fund are not subject to the Michigan Single Business Tax to
the extent that such distributions are derived from interest on obligations of
Michigan or its political subdivisions, or obligations of the United States
government that are exempt from state taxation by a law of the United States.
Certain municipalities in Michigan also impose an income tax on individuals and
corporations. However, to the extent that the dividends from the Funds are
exempt from federal regular income taxes, such dividends also will be exempt
from Michigan municipal income taxes.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, 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.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
14
MICHIGAN MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--111.3%
- -------------------------------------------------------------------------------
MICHIGAN--108.0%
------------------------------------------------------------
$1,000,000 Auburn Hills, MI EDC, Limited Obligation Multi-Option
Revenue Bonds (Series 1995) Weekly VRDNs (Suburban Tool,
Inc. Project)/(Huntington National Bank, Columbus, OH LOC) A-1 $ 1,000,000
------------------------------------------------------------
1,100,000 Bedford Township, MI Economic Development Corp., EDRB
(Series 1985) Weekly VRDNs (Form-Tech Steel Inc.
Project)/(Society National Bank, Cleveland, OH LOC) P-1 1,100,000
------------------------------------------------------------
1,000,000 Bruce Township, MI Hospital Finance Authority, Adjustable
Rate Tender Securities (ARTS) Weekly VRDNs (Sisters of
Charity Health Care System)/(MBIA Insurance Corporation
INS)/(Morgan Guaranty Trust Co., New York LIQ) VMIG1 1,000,000
------------------------------------------------------------
1,400,000 Bruce Township, MI Hospital Finance Authority, Adjustable
Rate Tender Securities (ARTS) (Series 1988B), 3.70% TOBs
(Sisters of Charity Health Care System)/(MBIA Insurance
Corporation INS)/(Morgan Guaranty Trust Co., New York LIQ),
Optional Tender 5/1/1996 VMIG1 1,400,000
------------------------------------------------------------
1,000,000 Clinton Twp, MI EDA, Adjustable Rate Tender Securities
(ARTS) Weekly VRDNs (Sisters of Charity Health Care
System)/(MBIA Insurance Corporation INS)/(Morgan Guaranty
Trust Co., New York LIQ) VMIG1 1,000,000
------------------------------------------------------------
1,000,000 Cornell, MI Economic Development Corp., Industrial
Development Revenue Refunding Bonds (Series 1990), 3.75% CP
(Mead-Escanaba Paper Co. Project)/(Credit Suisse, Zurich
LOC), Mandatory Tender 1/9/1996 A-1+ 1,000,000
------------------------------------------------------------
850,000 Dearborn, MI Economic Development Corp, (Series 1990) Weekly
VRDNs (Exhibit Productions, Inc. Project)/(Bank of
America--Illinois LOC) P-1 850,000
------------------------------------------------------------
</TABLE>
15
MICHIGAN MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
MICHIGAN--CONTINUED
------------------------------------------------------------
$1,150,000 Dearborn, MI Economic Development Corp, (Series 1991) Weekly
VRDNs (Oakbrook Common Project)/(Mellon Bank NA, Pittsburgh
LOC) A-1 $ 1,150,000
------------------------------------------------------------
1,000,000 Delta County, MI Economy Development Corp., Environmental
Improvement Revenue Refunding Bonds (Series 1985 B), 3.70%
CP (Mead-Escanaba Paper Co. Project)/(Union Bank of
Switzerland, Zurich LOC), Mandatory Tender 1/11/1996 P-1 1,000,000
------------------------------------------------------------
800,000 Detroit, MI Water Supply System, Water Supply System Revenue
and Revenue Refunding Bonds (Series 1993) Weekly VRDNs (FGIC
INS)/(FGIC Securities Purchase, Inc. LIQ) VMIG1 800,000
------------------------------------------------------------
2,100,000 Michigan Job Development Authority, Variable Rate Demand
Limited Obligation Revenue Bonds Weekly VRDNs (Andersons
Project)/(Credit Lyonnais, Paris LOC) P-2 2,100,000
------------------------------------------------------------
1,000,000 Michigan Municipal Bond Authority, 4.50% RANs, 7/3/1996 SP-1+ 1,004,849
------------------------------------------------------------
1,000,000 Michigan Municipal Bond Authority, Revenue Notes, Series
1995C, 4.50% RANs, 9/6/1996 SP-1+ 1,004,476
------------------------------------------------------------
310,000 Michigan State Hospital Finance Authority, (Series 1994)
Weekly VRDNs (Mt. Clemens General Hospital)/(Comerica Bank,
Detroit, MI LOC) VMIG1 310,000
------------------------------------------------------------
1,600,000 Michigan State Hospital Finance Authority, (Series A) Weekly
VRDNs (OSF Health Care Systems) P-1 1,600,000
------------------------------------------------------------
1,105,000 (b) Michigan State Hospital Finance Authority, Hospital Revenue
Refunding Bonds (Series 1995), 4.00% (Port Huron Hospital
Obligated Group)/(FSA INS), 7/1/1996 NR(1) 1,107,331
------------------------------------------------------------
1,400,000 Michigan State Housing Development Authority, Rental Housing
Revenue Bonds (1994 Series C) Weekly VRDNs (Credit Suisse,
Zurich LOC) A-1+ 1,400,000
------------------------------------------------------------
</TABLE>
16
MICHIGAN MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
MICHIGAN--CONTINUED
------------------------------------------------------------
$1,000,000 Michigan State Housing Development Authority, Revenue Bonds
(Series A), 3.75% CP (Sanwa Bank Ltd, Osaka LOC), Mandatory
Tender 2/8/1996 VMIG1 $ 1,000,000
------------------------------------------------------------
1,500,000 Michigan State Trunk Line, Refunding Bonds (Series B), 4.00%
(FGIC INS), 11/15/1996 NR(1) 1,503,735
------------------------------------------------------------
620,000 Michigan State, Strategic Fund (Series 1991) Weekly VRDNs
(AGA Gas, Inc.)/(Svenska Handelsbanken, Inc. LOC) P-1 620,000
------------------------------------------------------------
1,000,000 Michigan State, Strategic Fund Weekly VRDNs (Tesco
Engineering)/(Bank of Tokyo Ltd., Tokyo LOC) VMIG1 1,000,000
------------------------------------------------------------
530,000 Michigan Strategic Fund, (Series 1995) Weekly VRDNs (Rood
Industries, Inc. Project)/(NBD Bank, N.A., Detroit, MI LOC) A-1+ 530,000
------------------------------------------------------------
1,200,000 Michigan Strategic Fund, Adjustable Rate Demand Refunding
Revenue Bond, Series 1995CC Daily VRDNs (Detroit Edison
Co.)/(Barclays Bank PLC, London LOC) A-1+ 1,200,000
------------------------------------------------------------
1,200,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds
(Series 1991) Weekly VRDNs (Martin Luther Memorial Home,
Inc.)/(National Australia Bank, Ltd., Melbourne LOC) A-1 1,200,000
------------------------------------------------------------
370,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds
(Series 1995) Weekly VRDNs (United Waste Systems,
Inc.)/(Bank of America Illinois LOC) A-1 370,000
------------------------------------------------------------
600,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds
(series 1995) Weekly VRDNs (RSR Project)/(Old Kent Bank &
Trust Co., Grand Rapids LOC) A-1 600,000
------------------------------------------------------------
1,000,000 Michigan Strategic Fund, Obligation Revenue Bonds (Series
1995) Weekly VRDNs (Rowe Thomas Company Project)/(Comerica
Bank, Detroit, MI LOC) P-1 1,000,000
------------------------------------------------------------
480,000 Michigan Strategic Fund, Obligation Revenue Bonds (Series
1995) Weekly VRDNs (Wayne Disposal-Oakland, Inc.
Project)/(Comerica Bank, Detroit, MI LOC) A-1 480,000
------------------------------------------------------------
</TABLE>
17
MICHIGAN MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- -------------- ------------------------------------------------------------ ------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
MICHIGAN--CONTINUED
------------------------------------------------------------
$ 500,000 Michigan Strategic Fund, Variable Rate Demand Limited
Obligation Revenue Bonds (Series 1995) Weekly VRDNs (Bear
Lake Associates Project)/(Old Kent Bank & Trust Co., Grand
Rapids LOC) P-1 $ 500,000
------------------------------------------------------------
1,200,000 Michigan Underground Storage Tank Financial Assurance
Authority, (Series I - 1995) Weekly VRDNs (Canadian Imperial
Bank of Commerce, Toronto LOC) VMIG1 1,200,000
------------------------------------------------------------
1,000,000 Ottawa County, MI Economic Development Corp., Limited
Obligation Revenue Bonds (Series 1995B) Weekly VRDNs (Sunset
Manor, Inc. Project)/(Old Kent Bank & Trust Co., Grand
Rapids LOC) A-1 1,000,000
------------------------------------------------------------
1,500,000 Sterling Heights, MI Economy Development Corp., Adjustable
Rate Demand Limited Obligation Revenue Refunding Bonds
Weekly VRDNs (Sterling Shopping Center Associates
Project)/(NBD Bank, N.A., Detroit, MI LOC) A-1+ 1,500,000
------------------------------------------------------------ -----------
Total 32,530,391
------------------------------------------------------------ -----------
PUERTO RICO--3.3%
------------------------------------------------------------
1,000,000 Puerto Rico Government Development Bank, 3.70% CP, Mandatory
Tender 1/12/1996 A-1+ 1,000,000
------------------------------------------------------------ -----------
TOTAL INVESTMENTS (AT AMORTIZED COST)(a) $33,530,391
------------------------------------------------------------ -----------
-----------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 24.0% of
the portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
(a) Also represents cost for federal tax purposes.
(b) Denotes when-issued security.
Note: The categories of investments are shown as a percentage of net assets
($30,133,273) at October 31, 1995.
18
MICHIGAN MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The following acronyms are used throughout this portfolio:
CP --Commercial Paper
EDA --Economic Development Authority
EDC --Economic Development Commission
EDRB --Economic Development Revenue Bonds
FGIC --Financial Guaranty Insurance Company
FSA --Financial Security Assurance
INS --Insured
LIQ --Liquidity Agreement
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance
PLC --Public Limited Company
RANs --Revenue Anticipation Notes
TOBs --Tender Option Bonds
VRDNs --Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
19
MICHIGAN MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------
Total investments in securities, at amortized cost and value $33,530,391
- ----------------------------------------------------------------------
Cash 390,655
- ----------------------------------------------------------------------
Income receivable 172,007
- ----------------------------------------------------------------------
Receivable for shares sold 128,354
- ----------------------------------------------------------------------
Deferred expenses 8,045
- ---------------------------------------------------------------------- -----------
Total assets 34,229,452
- ----------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------
Payable for investments purchased $4,042,750
- ----------------------------------------------------------
Income distribution payable 21,733
- ----------------------------------------------------------
Accrued expenses 31,696
- ---------------------------------------------------------- ----------
Total liabilities 4,096,179
- ---------------------------------------------------------------------- -----------
Net Assets for 30,133,273 shares outstanding $30,133,273
- ---------------------------------------------------------------------- -----------
-----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ----------------------------------------------------------------------
$30,133,273 DIVIDED BY 30,133,273 shares outstanding $ 1.00
- ---------------------------------------------------------------------- -----------
-----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
20
MICHIGAN MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
PERIOD ENDED OCTOBER 31, 1995 (a)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------
Interest $255,885
- ------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------
Investment advisory fee $ 32,107
- -------------------------------------------------------
Administrative personnel and services fee 45,548
- -------------------------------------------------------
Custodian fees 11,250
- -------------------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 4,044
- -------------------------------------------------------
Legal fees 109
- -------------------------------------------------------
Portfolio accounting fees 13,801
- -------------------------------------------------------
Shareholder services fee 16,054
- -------------------------------------------------------
Share registration costs 575
- -------------------------------------------------------
Printing and postage 800
- -------------------------------------------------------
Insurance premiums 706
- -------------------------------------------------------
Miscellaneous 398
- ------------------------------------------------------- ---------
Total expenses 125,392
- -------------------------------------------------------
Waivers and reimbursements--
- ---------------------------------------------
Waiver of investment advisory fee $(32,107)
- ---------------------------------------------
Reimbursement of other operating expenses (73,000)
- --------------------------------------------- --------
Total waivers and reimbursements (105,107)
- ------------------------------------------------------- ---------
Net expenses 20,285
- ------------------------------------------------------------------ --------
Net investment income $235,600
- ------------------------------------------------------------------ --------
--------
</TABLE>
(a) For the period from June 20, 1995 (date of initial public investment) to
October 31, 1995.
(See Notes which are an integral part of the Financial Statements)
21
MICHIGAN MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1995(a)
--------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 235,600
- ------------------------------------------------------------ --------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------
Distributions from net investment income (235,600)
- ------------------------------------------------------------ --------------------
SHARE TRANSACTIONS--
- ------------------------------------------------------------
Proceeds from sale of shares 41,468,554
- ------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of distributions declared 229,562
- ------------------------------------------------------------
Cost of shares redeemed (11,564,843)
- ------------------------------------------------------------ --------------------
Change in net assets resulting from share transactions 30,133,273
- ------------------------------------------------------------ --------------------
Change in net assets 30,133,273
- ------------------------------------------------------------ --------------------
NET ASSETS:
- ------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------ --------------------
End of period $ 30,133,273
- ------------------------------------------------------------ --------------------
--------------------
</TABLE>
(a) For the period from June 20, 1995 (date of initial public investment) to
October 31, 1995.
(See Notes which are an integral part of the Financial Statements)
22
MICHIGAN MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Michigan Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
86.3% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or supported (backed) by a letter of credit for any one institution or
agency does not exceed 10.1% of total investments.
23
MICHIGAN MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
October 31, 1995, capital paid-in aggregated $30,133,273.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31,
1995(a)
- --------------------------------------------------------------- --------------
<S> <C>
Shares sold 41,468,554
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 229,562
- ---------------------------------------------------------------
Shares redeemed (11,564,843)
- --------------------------------------------------------------- --------------
Net change resulting from share transactions 30,133,273
- --------------------------------------------------------------- --------------
--------------
</TABLE>
(a) For the period from June 20, 1995 (date of initial public investment) to
October 31, 1995.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee and/or reimburse certain
operating expenses of the Fund. The Adviser can modify or terminate this
voluntary waiver and/or reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services under the Administrative
Services Agreement, provides the Fund with administrative personnel and
services. This fee is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services, the Fund will pay Federated Shareholder
Services up to .25 of 1% of average
24
MICHIGAN MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
daily net assets of the Fund for the period. This fee is to obtain certain
services for shareholders and to maintain shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ") serves as transfer and dividend disbursing agent for the Fund.
This fee is based on the size, type, and number of accounts and transactions
made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $18,618 were borne initially
by the Adviser. The Fund has agreed to reimburse the Adviser for the
organizational expenses during the five year period following effective date.
For the period end October 31, 1995, the Fund paid $414 pursuant to the
agreement.
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/Trustees, and/or common officers. These
transactions were made at current market value pursuant to rule 17a-7 under the
Act amounting to $36,054,465 and $14,340,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Michigan Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of Michigan
Municipal Cash Trust (an investment portfolio of Federated Municipal Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of October 31, 1995, the related statement of operations and changes in net
assets, and the financial highlights (see page 2 of the prospectus) for the
period from June 20, 1995 (date of initial public investment) to October 31,
1995. These financial statements and financial highlights are the responsibility
of the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of October 31, 1995, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Michigan Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations, the changes in its
net assets, and its financial highlights for the period from June 20, 1995 (date
of initial public investment) to October 31, 1995, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
26
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Michigan 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 8600
Boston, MA 02266-8600
- --------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- --------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- --------------------------------------------------------------------------------
</TABLE>
27
- --------------------------------------------------------------------------------
MICHIGAN MUNICIPAL
CASH TRUST
PROSPECTUS
A Non-Diversified Portfolio
of Federated Municipal
Trust, an Open-End
Management Investment
Company
Prospectus dated December
31, 1995
[FEDERATED SECURITIES CORP. LOGO]
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 314229725
G01212-01 (12/95) [RECYCLED PAPER LOGO]
RECYCLED
MICHIGAN 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 Michigan Municipal Cash Trust (the "Fund"), a portfolio of Federated
Municipal Trust (the "Trust") dated dated December 31, 1995. This
Statement is not a prospectus. You may request a copy of a prospectus or a
paper copy of this Statement, if you have received it electronically, free
of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated dated December 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated Investors
INVESTMENT POLICIES 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
Ratings 2
When-Issued and Delayed Delivery
Transactions 3
Repurchase Agreements 3
Credit Enhancement 3
MICHIGAN INVESTMENT RISKS 4
INVESTMENT LIMITATIONS 6
Regulatory Compliance 9
FEDERATED MUNICIPAL TRUST
MANAGEMENT 5
Share Ownership 10
Trustees Compensation 18
Trustee Liability 19
INVESTMENT ADVISORY SERVICES 20
Investment Adviser 20
Advisory Fees 20
BROKERAGE TRANSACTIONS 21
OTHER SERVICES 22
Fund Administration 22
Custodian and Portfolio
Recordkeeper. 22
Transfer Agent 13
Independent Public Accountants 13
SHAREHOLDER SERVICES AGREEMENT 23
DETERMINING NET ASSET VALUE 23
REDEMPTION IN KIND 24
MASSACHUSETTS PARTNERSHIP LAW 25
THE FUND'S TAX STATUS 14
PERFORMANCE INFORMATION 25
Yield 15
Effective Yield 26
Tax-Equivalent Yield 26
Tax-Equivalency Table 27
Total Return 28
Performance Comparisons 29
ABOUT FEDERATED INVESTORS 29
Mutual Fund Market 30
Institutional Clients 31
Trust Organizations 31
Broker/Dealers and Bank
Broker/Dealer Subsidiaries 31
APPENDIX 19
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by the
Board of Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or any
guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation interests
frequently provide or secure from another financial institution irrevocable
letters of credit or guarantees and give the Fund the right to demand payment of
the principal amounts of the participation interests plus accrued interest on
short notice (usually within seven days). The municipal securities subject to
the participation interests are not limited to the Fund's maximum maturity
requirements so long as the participation interests include the right to demand
payment from the issuers of those interests. By purchasing these participation
interests, the Fund is buying a security meeting the maturity and quality
requirements of the Fund and also is receiving the tax-free benefits of the
underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments by
a governmental or nonprofit entity. The lease payments and other rights under
the lease provide for and secure payments on the certificates. Lease obligations
may be limited by municipal charter or the nature of the appropriation for the
lease. Furthermore, a lease may provide that the participants cannot accelerate
lease obligations upon default. The participants would only be able to enforce
lease payments as they became due. In the event of a default or failure of
appropriation, unless the participation interests are credit enhanced, it is
unlikely that the participants would be able to obtain an acceptable substitute
source of payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be terminated by
the lessee; the potential recovery, if any, from a sale of the leased property
upon termination of the lease; the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and prospects); the
likelihood that the lessee will discontinue appropriating funding for the leased
property because the property is no longer deemed essential to its operations
(e.g., the potential for an "event of non-appropriation"); and any credit
enhancement or legal recourse provided upon an event of non-appropriation or
other termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two highest
short-term rating categories by one or more nationally recognized statistical
rating organizations ("NRSROs") or be of comparable quality to securities having
such ratings. An NRSRO's two highest rating categories are determined without
regard for sub-categories and gradations. For example, securities rated SP-1+,
SP-1, or SP-2 by Standard & Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by
Moody's Investors Service, Inc. ("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch
Investors Service, Inc. ("Fitch") are all considered rated in one of the two
highest short-term rating categories. The Fund will follow applicable
regulations in determining whether a security rated by more than one NRSRO can
be treated as being in one of the two highest short-term rating categories;
currently, such securities must be rated by two NRSROs in one of their two
highest rating categories. See "Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund`s
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities to
the Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. The Fund or its custodian will take possession
of the securities subject to repurchase agreements, and these securities will be
marked to market daily. In the event that a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the Fund might
be delayed pending court action. The Fund believes that under the regular
procedures normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Fund and allow retention or disposition of such securities. The
Fund will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the Fund's
adviser to be creditworthy pursuant to guidelines established by the Trustees.
CREDIT ENHANCEMENT
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 Fund may have more than 25% of its total assets invested in securities
credit enhanced by banks.
MICHIGAN INVESTMENT RISKS
Michigan's economy continues to be among the most cyclical of states, remaining
heavily dependent on domestic auto production and durable goods consumption.
While manufacturing comprises 23% of the total jobs in the state in 1991,
relative to 17% nationally, it comprises a lesser share than in the 1970s when
it was 35%. The automobile industry has reduced its share of employment to 6.9%
of total employment, compared with 10.8% in 1979. In fact, Michigan's economy
continues to shift away from durable goods manufacturing to a more diversified
base reliant on services and trade. This shift to jobs in service and trade
industries has, however, resulted in declines in per capita income relative to
the nation.
As of June 1995, unemployment stood at 6.2%, still above the national level of
5.6%. However, the economic recovery from the early 1990s recession has proved
hearty in Michigan as employment levels reached an all-time high, attracting
more workers into the labor force.
On August 19, 1993, the Governor of Michigan signed into law Act 145, Public
Acts of Michigan, 1993 (Act 145), a measure which significantly impacted
financing of primary and secondary school operations and which has resulted in
additional property tax and school reform legislation. Michigan's school finance
reform shifts the responsibility of funding schools away from the local district
and their real property tax bases to the state and an earmarked portion of sales
taxes. Moreover, the state government is also subject to a revenue raising cap
which is tied to the annual state personal income growth. The margin between
existing revenue and the constitutional cap is greatly narrowed now that the
state absorbs the costs of funding the local schools. Over the long term the cap
may reduce the state's flexibility to deal with adverse financial developments.
Concerning Michigan's fiscal policy, the state has proven that it can maintain a
balanced budget, low debt levels and high reserves. While the state's Rainy Day
Fund was drawn down substantially during fiscal years 1990-92 in order to meet
budget needs of the state during fiscal stress, spending restraint and an
improved economy enabled the state to begin to restore balances in fiscal 1993.
By the end of fiscal 1994, the balances in the fund were $780 million and are
expected to reach $1.1 billion by the end of fiscal 1995. This makes the fund
one of the highest in the nation.
Because of the increased revenues in fiscal 1995, the governor proposed a tax
cut which would reduce revenues by $186 million. The governor also is proposing
that the state increase the deposit to the Rainy Day Fund by $110 million,
ending the year with a nominal $2 million surplus in the General Fund. The tax
cuts would reduce personal income taxes by increasing the personal exemption
from $2100 to $2400 and would reduce the Single Business Tax by excluding FICA,
workers compensation, and unemployment compensation from the tax liability base.
Reductions are also made to the intangibles tax. The full annual cost of the tax
cuts will be $246 million in fiscal 1996.
While Michigan's economy is in good standing now because of conservative
budgeting practices and the improved economy, the enduring effectiveness of the
state's financial management will continue to be tested by economic cycles.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on margin
but may obtain such short-term credits as are necessary for clearance of
transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow money
in amounts up to one-third of the value of its total assets, including the
amounts borrowed.
The Fund will not borrow money for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate management of
the portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while borrowings in
excess of 5% of the value of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or hold
portfolio securities permitted by its investment objective, policies, and
limitations, or Declaration of Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited partnership
interests, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
sale of securities in accordance with its investment objective, policies, and
limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in any one
industry, or in industrial development bonds or other securities the interest
upon which is paid from revenues of similar types of projects, except that the
Fund may invest 25% or more of the value of its total assets in cash, cash
items, or securities issued or guaranteed by the government of the United States
or its agencies, or instrumentalities and repurchase agreements collateralized
by such U.S. government securities.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities subject
to restrictions on resale under federal securities law, except for restricted
securities determined to be liquid under criteria established by the Trustees.
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
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 association having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items." Except with
respect to borrowing money, if a percentage limitation is adhered to at the time
of investment, a later increase or decrease in percentage resulting from any
change in value or net assets will not result in a violation of such limitation.
The Fund does not intend to borrow money or pledge securities in excess of 5% of
the value of its net assets during the coming fiscal year.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in its
prospectus and this Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940. In particular, the Fund will comply
with the various requirements of Rule 2a-7, 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.
FEDERATED MUNICIPAL TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management Advisory
Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global 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 of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Services Company; Chairman, Treasurer, and Trustee, Federated Administrative
Services; Trustee or Director of some of the Funds; President, Executive Vice
President and Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors; Controller,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., and Passport Research, Ltd.; Senior Vice President, Federated
Shareholder Services; Vice President, Federated Administrative Services;
Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President, Secretary,
and Trustee, Federated Administrative Services; President and Trustee, Federated
Shareholder Services; Director, Federated Securities Corp.; Executive Vice
President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated ARMs
Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Master Trust; Federated Municipal Trust;
Federated Short-Term Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund: 3-5
Years; First Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Term Trust, Inc. - 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; 111 Corcoran Funds; Peachtree Funds;
The Planters Funds; RIMCO Monument Funds; The Shawmut Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust For Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; The
Virtus Funds; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.
As of December 4, 1995, the following shareholder(s) of record owned 5% or more
of the outstanding shares of the Michigan Municipal Cash Trust: First MAR & Co.,
Marquette, MI, 10.34%; ENBANCO, Traverse City, MI, 10.74%; McDonald & Co.
Securities Inc., Cincinnati, OH, 45.69%; and ISI Automation Products Group, Mt.
Clemens, MI, 8.44%.
TRUSTEES COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
<S> <C> <C>
John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 68 other investment companies in the Fund
Complex
Thomas G. Bigley $2,458 $20,688 for the Trust and
Trustee 49 other investment companies in the Fund Complex
John T. Conroy, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
William J. Copeland $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Glen R. Johnson $0 $0 for the Trust and
President and Trustee 14 other investment companies in the Fund
Complex
James E. Dowd $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Edward L. Flaherty, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Peter E. Madden $2,757 $90,563 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Gregor F. Meyer $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
John E. Murray, Jr., $1,762 $0 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Wesley W. Posvar $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
Marjorie P. Smuts $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund Complex
</TABLE>
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of
fifteen portfolios.
+The information is provided for the last calendar year.
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 the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the period from June 20, 1995
(date of initial public investment) to October 31, 1995, the adviser earned
$32,107, all of which was 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.
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 June 20, 1995 (date of initial public investment) to October 31, 1995, 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
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. For the period from June 20, 1995 (date of initial public
investment) to October 31, 1995, Federated Administrative Services earned
$45,548. 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 the size, type and number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
SHAREHOLDER SERVICES AGREEMENT
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 balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses. By
adopting the Shareholder Services Agreement, the Trustees expect that the Fund
will benefit by: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the period from June 20, 1995 (date of initial public investment) to October
31, 1995,the Fund paid shareholder services fees in the amount of $16,054, none
of which were waived.
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.
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.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average portfolio
maturity; type of instruments in which the portfolio is invested; changes in
interest rates; changes in expenses; and the relative amount of cash flow. To
the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in shares of
the Fund, the performance will be reduced for those shareholders paying those
fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding capital
changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.
The Fund's yield for the seven-day period ended October 31, 1995, was 3.50%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended October 31, 1995, was
3.56%.
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, 1995,
was 6.26%.
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 Michigan
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
19.47% 32.47% 35.47% 40.47% 44.07%
JOINT $1- $39,001- $94,251- $143,601- OVER
RETURN 39,000 94,250 143,600 256,500 256,500
SINGLE $1- $23,351- $56,551- $117,951- OVER
RETURN 23,350 56,550 117,950 256,500 256,500
Tax-Exempt
Yield Taxable Yield Equivalent
1.50% 1.86% 2.22% 2.32% 2.52% 2.68%
2.00% 2.48% 2.96% 3.10% 3.36% 3.58%
2.50% 3.10% 3.70% 3.87% 4.20% 4.47%
3.00% 3.73% 4.44% 4.65% 5.04% 5.36%
3.50% 4.35% 5.18% 5.42% 5.88% 6.26%
4.00% 4.97% 5.92% 6.20% 6.72% 7.15%
4.50% 5.59% 6.66% 6.97% 7.56% 8.05%
5.00% 6.21% 7.40% 7.75% 8.40% 8.94%
5.50% 6.83% 8.14% 8.52% 9.24% 9.83%
6.00% 7.45% 8.88% 9.30% 10.08% 10.73%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state and
local taxes paid on comparable taxable investments were not used to
increase federal deductions.
The chart above is for illustrative purposes only. It is not an indicator
of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a given
period that would equate a $1,000 initial investment to the ending redeemable
value of that investment. The ending redeemable value is computed by multiplying
the number of shares owned at the end of the period by the net asset value per
share at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of the period
with $1,000, adjusted over the period by any additional shares, assuming the
monthly reinvestment of all dividends and distributions.
Cumulative total return reflects the Fund's total performance over a specific
period of time. For the period from June 20, 1995 (date of initial public
investment) through October 31, 1995, the cumulative total return for the Fund
was 1.35%. This total return is representative of only 4 months of activity
since the date of initial public investment.
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:
O LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports monthly
and 12-month-to-date investment results for the same money funds.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making-structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of competitive
investment products that have gained the confidence of thousands of clients and
their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the mutual
fund industry in 1974 with the creation of the first institutional money market
fund. Simultaneously, the company pioneered the use of the amortized cost method
of accounting for valuing shares of money market funds, a principal means used
by money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1994, Federated Investors managed more than $31 billion in assets across
approximately 43 money market funds, including 17 government, 8 prime and 18
municipal with assets approximating $17 billion, $7.4 billion and $6.6 billion,
respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors `international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
*Source: Investment Company Institute
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Mark R. Gensheimer, Executive
Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group ("S&P") note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a variable rate demand feature. The first rating (long-term
rating) addresses the likelihood of repayment of principal and interest when
due, and the second rating (short-term rating) describes the demand
characteristics. Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions
for the long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
LONG-TERM DEBT RATINGS
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investors Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below)).
The purpose of the MIG or VMIG ratings is to provide investors with a simple
system by which the relative investment qualities of short-term obligations may
be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity.
In this case, two ratings are usually assigned, (for example, Aaa/VMIG-1); the
first representing an evaluation of the degree of risk associated with scheduled
principal and interest payments, and the second representing an evaluation of
the degree of risk associated with the demand feature. The VMIG rating can be
assigned a 1 or 2 designation using the same definitions described above for the
MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1 Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short- term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries,
high rates of return on funds employed, conservative
capitalization structure with moderate reliance on debt and ample asset
protection, broad margins in earning coverage of fixed financial charges and
high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity
P-2 Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short- term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected
by external conditions. Ample alternate liquidity is maintained.
LONG-TERM DEBT RATINGS
AAA Bonds which are rated AAA are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes is can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
AA Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "Aaa" by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "Aa" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.
Cusip 314229725
GEORGIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
PROSPECTUS
The shares of Georgia 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 primarily in short-term Georgia municipal
securities, including securities of states, territories, and possessions of the
United States which are not issued by or on behalf of Georgia, or its political
subdivisions and financing authorities, but which provide income exempt from
federal regular income tax and the income tax imposed by the State of Georgia
consistent with stability of principal and liquidity.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December 31,
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,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund, contact 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 December 31, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Georgia Municipal Securities 5
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Shares 8
Administration of the Fund 8
NET ASSET VALUE 9
- ------------------------------------------------------
HOW TO PURCHASE SHARES 9
- ------------------------------------------------------
Special Purchases Shares 10
HOW TO REDEEM SHARES 10
- ------------------------------------------------------
Special Redemption Features 11
ACCOUNT AND SHARE INFORMATION 12
- ------------------------------------------------------
TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
State and Local Taxes 13
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
FINANCIAL STATEMENTS 15
- ------------------------------------------------------
REPORT OF INDEPENDENT
PUBLIC ACCOUNTANTS 27
- ------------------------------------------------------
ADDRESSES 28
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................................ None
Maximum Sales Charge 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)............................................. 0.09%
12b-1 Fee.................................................................... None
Total Other Expenses......................................................... 0.50%
Shareholder Services Fee................................................ 0.25%
Total Operating Expenses(2)........................................ 0.59%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.50%.
(2) The total Fund operating expenses in the table above are based on expenses
expected during the fiscal year ending October 31, 1996. The total operating
expenses were 0.25% for the fiscal year ended October 31, 1995 and would have
been 1.00% 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 "Fund 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.
GEORGIA MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 27.
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1995(A)
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- ---------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------
Net investment income 0.01
- ---------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------
Distributions from net investment income (0.01)
- --------------------------------------------------------------------- -----
NET ASSET VALUE, END OF PERIOD $1.00
- --------------------------------------------------------------------- -----
TOTAL RETURN(B) 0.73%
- ---------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------
Expenses 0.25%*
- ---------------------------------------------------------------------
Net investment income 3.81%*
- ---------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.75%*
- ---------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------
Net assets, end of period (000 omitted) $111,278
- ---------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 22, 1995, (date of initial
public investment) to October 31, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
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 Georgia municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Georgia taxpayers because it invests
in municipal securities of that state. A minimum initial investment of $10,000
within 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 Georgia consistent
with stability of principal and liquidity. This investment objective cannot be
changed without shareholder approval. While there is no assurance that the Fund
will achieve its investment objective, it endeavors to do so by complying with
the various requirements of Rule 2a-7 under the Investment Company Act of 1940
which regulates money market mutual funds and by following the investment
policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of Georgia
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 Georgia 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 Georgia 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 Georgia state income tax ("Georgia Municipal Securities"). Examples of
Georgia 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 Georgia
Municipal Securities from financial institutions such as commercial and
investment banks, savings 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 Georgia 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.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.
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, all of comparable quality to other
securities in which the Fund invests, such as: obligations issued by or on
behalf of municipal or corporate issuers; 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 Georgia
Municipal Securities is subject to the federal alternative minimum tax.
GEORGIA MUNICIPAL SECURITIES
Georgia 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.
Georgia 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 Georgia 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 Georgia 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 Georgia 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 Georgia
Municipal Securities acceptable for purchase by the Fund could become limited.
The Fund may invest in Georgia 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
Georgia 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 Georgia Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer
and that with respect to the remainder of the Fund's total assets, no more than
25% of its total assets are invested in the securities of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge assets to secure such borrowings. These investment limitations
cannot be changed without shareholder approval.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .50 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized 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. With over $72 billion invested across
more than 260 funds under management and/or administration by its
subsidiaries, as of December 31, 1994, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,750 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to .25 of 1% of the average
daily net asset value of Fund shares, computed at an annual rate, to obtain
certain personal services for shareholders and provide maintenance of
shareholder accounts ("shareholder services"). From time to time and for such
periods as deemed appropriate, the amount stated above may be reduced
voluntarily.
Under the Shareholder Services Agreement, Federated Shareholder Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting ser-
vices) necessary to operate the Fund. Federated Administrative Services provides
these at an annual rate as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
-------------------------------- -----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days which the New York Stock Exchange
is 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 or more
within a 90-day period. 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: Georgia 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. Questions on wire purchases should be directed to your
shareholder services representative at the telephone number listed on your
account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to:
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. The check
should be made payable to Georgia Municipal Cash Trust. 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 include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days
when wire transfers are restricted should be directed to your shareholder
services representative at the telephone number listed on your account
statement. 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 to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name; the account name as registered
with the Fund; the account number; and the number of shares to be redeemed or
the dollar amount requested. All owners of the account must sign the request
exactly as the shares are registered. Normally, a check for the proceeds is
mailed within one business day, but in no event more than seven days, after the
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 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 association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING. Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. Shareholder accounts will continue to
receive the daily dividend declared on the shares to be redeemed until the check
is presented to UMB Bank, N.A., the bank responsible for administering the check
writing program, for payment. However, checks should never be made payable or
sent to UMB Bank, N.A. or the Fund to redeem shares, and a check may not be
written to close an account.
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 institutions or the Fund.
ACCOUNT AND SHARE 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 all
transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$10,000 due to shareholder redemptions. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
VOTING RIGHTS. Each shareholder has 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. 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 election of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting 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 December 4, 1995, COBATCO, Columbus, GA owned 26.91% 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.
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
Georgia. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
GEORGIA TAXES. Under existing Georgia law, shareholders of the Fund will not be
subject to individual or corporate Georgia income taxes on distributions from
the Fund to the extent that such distributions represent exempt-interest
dividends for federal income tax purposes that are attributable to (1)
interest-bearing obligations issued by or on behalf of the State of Georgia or
its political subdivisions, or (2) interest on obligations of the United States
or of any other issuer whose obligations are exempt from state income taxes
under federal law. Distributions, if any, derived from capital gains or other
sources generally will be taxable for Georgia income tax purposes to
shareholders of the Fund who are subject to the Georgia income tax. For purposes
of the Georgia intangibles tax, shareholders may exclude from the share value of
the Fund that portion of the total share value which is attributable to the
value of United States obligations held in the Fund. To the extent that the Fund
is comprised of other types of obligations, shares of the Fund will be taxable
at the rate of 10 cents per $1000 in value of the shares held on January 1 of
each year.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its total return, 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.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
GEORGIA MUNICIPAL CASH TRUST
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--107.2%
- -----------------------------------------------------------------------
GEORGIA--107.2%
-------------------------------------------------------
$ 1,000,000 Albany-Dougherty County, GA Hospital Authority, VMIG1 $ 1,000,000
Refunding Revenue Anticipation Certificates
(Series 1991) Weekly VRDNs (AMBAC INS)/
(Credit Local de France LIQ)
-------------------------------------------------------
4,000,000 Athens-Clarke County, GA, (Series 1988), 3.80% CP VMIG1 4,000,000
(Rhone Merieux, Inc. Project)/(Societe Generale, Paris
LOC), Mandatory Tender 11/7/1995
-------------------------------------------------------
1,600,000 Atlanta, GA, Urban Residential Finance Authority, A-1 1,600,000
Multifamily Housing Revenue Bonds (Series 1995) Weekly
VRDNs (West End Housing Development Project)/
(First Union National Bank, Charlotte, NC LOC)
-------------------------------------------------------
2,500,000 Atlanta, GA, Urban Residential Finance Authority, A-1 2,500,000
Multifamily Rental Housing Revenue Refunding Bonds
(Series 1988A), 4.00% TOBs (West Paces Club Towers
Project)/(Sanwa Bank Ltd, Osaka LOC), Optional
Tender 2/1/1996
-------------------------------------------------------
3,980,000 Brunswick, GA, Housing Authority, (Series S93) A-1 3,980,000
Weekly VRDNs (Island Square Apartments)/
(Columbus Bank and Trust Co., GA LOC)
-------------------------------------------------------
2,000,000 Burke County, GA Development Authority, (Series 1992A), A-1+ 2,000,000
3.70% CP (Oglethorpe Power Corp.)/
(Credit Suisse, Zurich LOC), Mandatory Tender 1/18/1996
-------------------------------------------------------
1,400,000 Burke County, GA Development Authority, A-1+ 1,400,000
(Series 1992A), 3.80% CP (Oglethorpe Power Corp.)/
(Credit Suisse, Zurich LOC), Mandatory Tender 1/18/1996
-------------------------------------------------------
2,250,000 Carrolton, GA Payroll Development Authority, P-1 2,250,000
(Series 1993) Weekly VRDNs (Sunox, Inc. Project)/
(First Union National Bank, Charlotte, NC LOC)
-------------------------------------------------------
</TABLE>
GEORGIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
GEORGIA--CONTINUED
-------------------------------------------------------
$ 3,000,000 Cherokee County, GA Development Authority Weekly VRDNs A-1+ $ 3,000,000
(Seaboard Farms of Canton, Inc. Project)/
(Bank of Nova Scotia, Toronto LOC)
-------------------------------------------------------
2,155,000 Cherokee County, GA Development Authority, Variable P-1 2,155,000
Rate IDRB Weekly VRDNs (Morrison Products, GA)/
(Society National Bank, Cleveland, OH LOC)
-------------------------------------------------------
3,945,000 Cobb County, GA IDA Weekly VRDNs (Atlanta RDC P-1 3,945,000
Co.)/(First Union National Bank, Charlotte, NC LOC)
-------------------------------------------------------
1,900,000 Cobb County, GA IDA, IDRB (Series 1995) Weekly VRDNs A-1 1,900,000
(Consolidated Engineering Company, Inc. Project)/
(Nationsbank of Georgia, N.A. LOC)
-------------------------------------------------------
1,270,000 Columbia County, GA Development Authority, Aa2 1,270,000
(Series 1991) Weekly VRDNs (Augusta Sportswear, Inc.
Project)/(Wachovia Bank of Georgia NA, Atlanta LOC)
-------------------------------------------------------
6,405,000 Columbus, GA IDA Industrial & Port Development A-1 6,405,000
Commission, (Series 1992) Weekly VRDNs
(Maine Street Village Partnership)/(Columbus Bank and
Trust Co., GA LOC)
-------------------------------------------------------
1,575,000 Columbus, GA IDA, (Series 90B) Weekly VRDNs A-1 1,575,000
(R. P. Real Estate, Inc.)/(Columbus Bank and Trust Co.,
GA LOC)
-------------------------------------------------------
6,000,000 Crisp County, GA Development Authority, (Series B), A- 6,000,000
4.30% TOBs (Masonite Corporation)/(International Paper
Co. GTD), Optional Tender 9/1/1996
-------------------------------------------------------
1,775,000 De Kalb County, GA Development Authority, (Series 1992) P-1 1,775,000
Weekly VRDNs (House of Cheatham, Inc. Project)/
(Nationsbank of Georgia, N.A. LOC)
-------------------------------------------------------
600,000 De Kalb County, GA Development Authority, (Series 1993) A1 600,000
Weekly VRDNs (Pet, Inc.)/(PNC Bank, N.A. LOC)
-------------------------------------------------------
1,850,000 De Kalb County, GA, 5.00% TANs, 12/29/1995 SP-1+ 1,853,514
-------------------------------------------------------
</TABLE>
GEORGIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
GEORGIA--CONTINUED
-------------------------------------------------------
$ 2,000,000 Forsythe County, GA Development Authority, IDRB Aaa $ 2,000,000
(Series 1995) Weekly VRDNs (American BOA, Inc.
Project)/(Dresdner Bank Ag, Frankfurt LOC)
-------------------------------------------------------
9,240,000 Franklin County, GA Industrial Building Authority, A-1+ 9,240,000
(Series 1995) Weekly VRDNs (Bosal Industries, Inc.)/
(ABN AMRO Bank N.V., Amsterdam LOC)
-------------------------------------------------------
3,185,000 Fulco, GA Hospital Authority Weekly VRDNs A-1+ 3,185,000
(Piedmont Hospital)/(Trust Company Bank, Atlanta LOC)
-------------------------------------------------------
2,000,000 Fulco, GA Hospital Authority, (Series 1989), 3.70% CP VMIG1 2,000,000
(St. Joseph's Hospital of Atlanta)/(Trust Company Bank,
Atlanta LOC), Mandatory Tender 1/17/1996
-------------------------------------------------------
4,470,000 Fulton County, GA Housing Authority, (Series 1994B) VMIG1 4,470,000
Weekly VRDNs (Champions Green Apartments Project)/
(SouthTrust Bank of Alabama, Birmingham LOC)
-------------------------------------------------------
1,000,000 Fulton County, GA Housing Authority, Multifamily A-1+ 1,000,000
Housing Revenue Refunding Bonds (Series 1994)
Weekly VRDNs (Spring Creek Crossing Project)/
(Wachovia Bank of Georgia NA, Atlanta LOC)
-------------------------------------------------------
2,200,000 Fulton County, GA IDA Weekly VRDNs P-1 2,200,000
(Automatic Data Processing, Inc.)
-------------------------------------------------------
4,000,000 Fulton County, GA IDA Weekly VRDNs (C.K.S. Packaging, P-1 4,000,000
Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC)
-------------------------------------------------------
2,000,000 Georgia State, 7.25% BONDs, 9/1/1996 Aaa 2,055,021
-------------------------------------------------------
3,800,000 Gwinnett County, GA IDA Daily VRDNs (Volvo)/ P-1 3,800,000
(Union Bank of Switzerland, Zurich LOC)
-------------------------------------------------------
2,000,000 Gwinnett County, GA, Certificates of Participation AA+ 2,056,373
Water & Sewer, 7.75% BONDs, 8/1/1996
-------------------------------------------------------
3,180,000 La Grange, GA, Multi-Family Housing Authority, Revenue P-1 3,180,000
Bonds, 4.25% TOBs (Lee's Crossing Project Phase II)/
(Barnett Bank of Jacksonville LOC), Optional Tender
5/1/1996
-------------------------------------------------------
</TABLE>
GEORGIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
GEORGIA--CONTINUED
-------------------------------------------------------
$ 3,000,000 La Grange, GA, Multi-Family Housing Authority, Revenue P-1 $ 3,000,000
Bonds, 4.25% TOBs (Lee's Crossing Project Phase I)/
(Barnett Bank of Jacksonville LOC), Optional Tender
5/1/1996
-------------------------------------------------------
1,000,000 Macon-Bibb County, GA Industrial Authority, IDRB A-1 1,000,000
(Series 1990) Weekly VRDNs (Diamond Plastics
Corporation Project)/(Nationsbank, N.A. (Carolinas)
LOC)
-------------------------------------------------------
1,280,000 Macon-Bibb County, GA Urban Development Authority, A-1+ 1,280,000
Refunding Revenue Bonds (Series 1995) Weekly VRDNs
(Macon Hotel Investors Project)/
(NBD Bank, N.A., Detroit, MI LOC)
-------------------------------------------------------
2,800,000 Municipal Electric Authority of Georgia, (Series A-1 2,800,000
1994D), 4.00% CP (Credit Suisse, Zurich LIQ), Mandatory
Tender 12/12/1995
-------------------------------------------------------
1,600,000 Municipal Electric Authority of Georgia, 3.85% CP, A-1 1,600,000
Mandatory Tender 12/8/1995
-------------------------------------------------------
4,500,000 Richmond County, GA Development Authority, A-1+ 4,500,000
Solid Waste Disposal Revenue Bonds, (Series 1995)
Weekly VRDNs (Federal Paper Board Co., Inc.)/
(Wachovia Bank of Georgia NA, Atlanta LOC)
-------------------------------------------------------
3,500,000 Rockdale County, GA Development Authority, (Series Aa3 3,500,000
1995) Weekly VRDNs (Great Southern Wood Preserving
Co.)/(Sun Bank NA, Orlando LOC)
-------------------------------------------------------
2,500,000 Rockdale County, GA Hospital Authority, Revenue VMIG1 2,500,000
Anticipation Certificates (Series 1994) Weekly VRDNs
(Rockdale Hospital)/(Trust Company Bank, Atlanta LOC)
-------------------------------------------------------
5,750,000 Savannah, GA EDA, (Series 1995A) Weekly VRDNs (Home P-1 5,750,000
Depot, Inc.)
-------------------------------------------------------
1,000,000 Savannah, GA Housing Authority, Multi-Family Housing A-1 1,000,000
Revenue Bonds (Series 1985 B) Weekly VRDNs (Somerset
Wharf Project)/(Amsouth Bank N.A., Birmingham LOC)
-------------------------------------------------------
</TABLE>
GEORGIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
- ----------- ------------------------------------------------------- ------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------
GEORGIA--CONTINUED
-------------------------------------------------------
$ 1,500,000 Screven County, GA IDA, (Series 1995) Weekly VRDNs Aa3 $ 1,500,000
(Sylvania Yarn Systems, Inc. Project)/(Trust Company
Bank, Atlanta LOC)
-------------------------------------------------------
1,000,000 Wayne County, GA, IDA, Revenue Bonds, (Series 1995) A-1 1,000,000
Weekly VRDNs (Harsco Corp.)/(Nationsbank, N.A.
(Carolinas) LOC)
-------------------------------------------------------
1,500,000 Whitfield County, GA Development Authority Weekly VRDNs NR 1,500,000
(Franklin Industries Inc., Project)/
(Nationsbank of Virginia, N.A. LOC)
------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(A) $119,324,908
------------------------------------------------------- ------------
</TABLE>
Securities that are subject to alternative minimum tax represent 53.9% of the
portfolio as calculated based upon total portfolio market value.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
(a) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($111,277,623) at October 31, 1995.
GEORGIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
AMBAC --American Municipal Bond Assurance Corporation
CP --Commercial Paper
EDA --Economic Development Authority
GTD --Guaranty
IDA --Industrial Development Authority
IDRB --Industrial Development Revenue Bonds
INS --Insured
LIQ --Liquidity Agreement
LOC --Letter of Credit
TANs --Tax Anticipation Notes
TOBs --Tender Option Bonds
VRDNs --Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
GEORGIA MUNICIPAL CASH TRUST
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $119,324,908
- --------------------------------------------------------------------------------
Cash 236,785
- --------------------------------------------------------------------------------
Income receivable 549,984
- --------------------------------------------------------------------------------
Receivable for shares sold 4,645
- --------------------------------------------------------------------------------
Deferred expenses 29,967
- -------------------------------------------------------------------------------- ------------
Total assets 120,146,289
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $8,680,000
- -------------------------------------------------------------------
Income distribution payable 122,375
- -------------------------------------------------------------------
Accrued expenses 66,291
- ------------------------------------------------------------------- ----------
Total liabilities 8,868,666
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 111,277,623 shares outstanding $111,277,623
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------
$111,277,623 / 111,277,623 shares outstanding $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
GEORGIA MUNICIPAL CASH TRUST
STATEMENT OF OPERATIONS
PERIOD ENDED OCTOBER 31, 1995(A)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------
Interest $707,458
- -------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------
Investment advisory fee $ 87,222
- ------------------------------------------------------------------------
Administrative personnel and services fee 23,973
- ------------------------------------------------------------------------
Custodian fees 4,360
- ------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 487
- ------------------------------------------------------------------------
Portfolio accounting fees 10,372
- ------------------------------------------------------------------------
Shareholder services fee 43,611
- ------------------------------------------------------------------------
Share registration costs 1,033
- ------------------------------------------------------------------------
Printing and postage 2,500
- ------------------------------------------------------------------------
Miscellaneous 105
- ------------------------------------------------------------------------ ---------
Total expenses 173,663
- ------------------------------------------------------------------------
Waivers and reimbursements--
- ------------------------------------------------------------------------
Waiver of investment advisory fee $(87,222)
- -------------------------------------------------------------
Reimbursement of other operating expenses (42,829)
- ------------------------------------------------------------- --------
Total waivers and reimbursements (130,051)
- ------------------------------------------------------------------------ ---------
Net expenses 43,612
- ------------------------------------------------------------------------------------- --------
Net investment income $663,846
- ------------------------------------------------------------------------------------- --------
</TABLE>
(a) For the period from August 22, 1995 (date of initial public investment) to
October 31, 1995.
(See Notes which are an integral part of the Financial Statements)
GEORGIA MUNICIPAL CASH TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1995(A)
--------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------
Net investment income $ 663,846
- ----------------------------------------------------------------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -----------------------------------------------------------------------
Distributions from net investment income (663,846)
- ----------------------------------------------------------------------- ------------------
SHARE TRANSACTIONS--
- -----------------------------------------------------------------------
Proceeds from sale of shares 276,631,071
- -----------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 363,049
- -----------------------------------------------------------------------
Cost of shares redeemed (165,716,497)
- ----------------------------------------------------------------------- ------------------
Change in net assets resulting from share transactions 111,277,623
- ----------------------------------------------------------------------- ------------------
Change in net assets 111,277,623
- -----------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------
Beginning of period --
- ----------------------------------------------------------------------- ------------------
End of period $ 111,277,623
- ----------------------------------------------------------------------- ------------------
</TABLE>
(a) For the period from August 22, 1995 (date of initial public investment) to
October 31, 1995.
(See Notes which are an integral part of the Financial Statements)
GEORGIA MUNICIPAL CASH TRUST
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Municipal Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of fifteen non-diversified portfolios.
The financial statements included herein are only those of Georgia Municipal
Cash Trust (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS --Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the
"Code"). Distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS --The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
CONCENTRATION OF CREDIT RISK --Since the Fund invests a substantial portion
of its assets in issuers located in one state, it will be more susceptible
to factors adversely affecting issuers in that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at October 31, 1995,
84.7% of the securities in the portfolio of investments are backed by
letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The value of investments insured by
or supported (backed) by a letter of credit for any one institution or
agency do not exceed 10.0% of total investments.
GEORGIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
October 31, 1995, capital paid-in aggregated $ 111,277,623. Transactions in
shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, 1995(A)
- ----------------------------------------------------------------------- -------------------
<S> <C>
Shares sold 276,631,071
- -----------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 363,049
- -----------------------------------------------------------------------
Shares redeemed (165,716,497)
- ----------------------------------------------------------------------- ----------------
Net change resulting from share transactions 111,277,623
- ----------------------------------------------------------------------- ----------------
</TABLE>
(a) Reflects operations for the period from August 22, 1995 (date of initial
public investment) to October 31, 1995.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. This fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors for
the period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of the
GEORGIA MUNICIPAL CASH TRUST
- --------------------------------------------------------------------------------
Fund for the period. This fee is to obtain certain services for shareholders and
to maintain shareholder accounts.
TRANSFER AGENT FEES--Federated Services Company ("FServ") serves as transfer and
dividend disbursing agent for the Fund. This fee is based on the size, type, and
number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $13,648 were borne initially
by the Adviser. The Fund has agreed to reimburse the Adviser for the
organizational expenses during the five year period following effective date.
For the period ended October 31, 1995, the Fund paid $152 pursuant to this
agreement.
INTERFUND TRANSACTIONS--During the period ended October 31, 1995, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser, common Directors/ Trustees, and/ or common Officers. These
transactions were made at current market value pursuant to Rule 17a-7 under the
Act amounting to $140,235,000 and $86,670,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
FEDERATED MUNICIPAL TRUST
(Georgia Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities of Georgia
Municipal Cash Trust (an investment portfolio of Federated Municipal Trust, a
Massachusetts business trust), including the schedule of portfolio investments,
as of October 31, 1995, the related statement of operations and changes in net
assets, and the financial highlights (see page 2 of the prospectus) for the
period from August 22, 1995 (date of initial public investment) to October 31,
1995. These financial statements and financial highlights are the responsibility
of the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of October 31, 1995, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Georgia Municipal Cash Trust (an investment portfolio of Federated Municipal
Trust) as of October 31, 1995, the results of its operations, the changes in its
net assets, and its financial highlights for the period from August 22, 1995
(date of initial public investment) to October 31, 1995, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 15, 1995
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Georgia 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 P.O. Box 8600
Trust Company Boston, MA 02266-8600
- -----------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- -----------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- -----------------------------------------------------------------------------------------------
</TABLE>
28
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GEORGIA MUNICIPAL
CASH TRUST
PROSPECTUS
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated December 31, 1995
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314229691
G01204-01 (12/95)
(LOGO)
GEORGIA 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 Georgia Municipal Cash Trust (the "Fund"), a portfolio of
Federated Municipal Trust (the "Trust") dated December 31, 1995. This
Statement is not a prospectus. You may request a copy of a prospectus or a
paper copy of this Statement, if you have received it electronically, free
of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated December 31, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated Investors
INVESTMENT POLICIES 3
Acceptable Investments 3
Participation Interests 3
Municipal Leases 3
Ratings 4
When-Issued and Delayed Delivery
Transactions 5
Repurchase Agreements 5
Credit Enhancement 6
GEORGIA INVESTMENT RISKS 6
INVESTMENT LIMITATIONS 3
Regulatory Compliance 11
FEDERATED MUNICIPAL TRUST MANAGEMENT
5
Share Ownership 10
Trustees Compensation 11
Trustee Liability 23
INVESTMENT ADVISORY SERVICES 23
Investment Adviser 23
Advisory Fees 24
BROKERAGE TRANSACTIONS 25
OTHER SERVICES 26
Fund Administration 26
Custodian and Portfolio
Recordkeeper. 27
Transfer Agent 13
Independent Public Accountants 13
SHAREHOLDER SERVICES AGREEMENT 27
DETERMINING NET ASSET VALUE 28
REDEMPTION IN KIND 29
MASSACHUSETTS PARTNERSHIP LAW 29
THE FUND'S TAX STATUS 30
PERFORMANCE INFORMATION 30
Yield 15
Effective Yield 31
Tax-Equivalent Yield 31
Tax-Equivalency Table 16
Total Return 17
Performance Comparisons 34
ABOUT FEDERATED INVESTORS 35
Mutual Fund Market 36
Institutional Clients 36
Trust Organizations 36
Broker/Dealers and Bank
Broker/Dealer Subsidiaries 36
APPENDIX 19
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by
the Board of Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or
any guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation interests
include the right to demand payment from the issuers of those interests. By
purchasing these participation interests, the Fund is buying a security
meeting the maturity and quality requirements of the Fund and also is
receiving the tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments
by a governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the
appropriation for the lease. Furthermore, a lease may provide that the
participants cannot accelerate lease obligations upon default. The
participants would only be able to enforce lease payments as they became due.
In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be terminated
by the lessee; the potential recovery, if any, from a sale of the leased
property upon termination of the lease; the lessee's general credit strength
(e.g., its debt, administrative, economic and financial characteristics and
prospects); the likelihood that the lessee will discontinue appropriating
funding for the leased property because the property is no longer deemed
essential to its operations (e.g., the potential for an "event of non-
appropriation"); and any credit enhancement or legal recourse provided upon
an event of non-appropriation or other termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations ("NRSROs") or be of comparable quality to
securities having such ratings. An NRSRO's two highest rating categories are
determined without regard for sub-categories and gradations. For example,
securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Ratings Group
("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or
FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all
considered rated in one of the two highest short-term rating categories. The
Fund will follow applicable regulations in determining whether a security
rated by more than one NRSRO can be treated as being in one of the two
highest short-term rating categories; currently, such securities must be
rated by two NRSROs in one of their two highest rating categories. See
"Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund`s records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20%
of the total value of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities
to the Fund and agree at the time of sale to repurchase them at a mutually
agreed upon time and price. To the extent that the seller does not repurchase
the securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. The Fund or its custodian will take
possession of the securities subject to repurchase agreements, and these
securities will be marked to market daily. In the event that a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of
the Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.
CREDIT ENHANCEMENT
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 Fund may have more than 25% of its total assets invested in securities
credit enhanced by banks.
GEORGIA INVESTMENT RISKS
Georgia's AAA rating by Fitch, Aaa rating by Moody's, and AA+ rating by S&P
reflect the state's positive economic trends, conservative financial
management, improved financial position, and low debt burden. The state's
recovery from the recent recession has been steady, with a rate surpassing
regional trends. However, the rate of recovery is still at half the rate of
earlier recoveries.
Georgia ranks among the top five states in the nation in employment and total
population growth. Job growth has been mainly centered in business and health
services. Manufacturing employment grew slightly. Total non-farm employment
grew 5.0% in 1994, well above the U.S. rate of 2.6%. As of April 1995, the
state's unemployment rate was 4.4% while the national rate stood at 5.5%.
The state's economy is receiving a boost from the economic activity
associated with the 1996 Olympic Games. The economic benefit of the games has
spawned considerable construction activity as well as additional revenue to
come at the time of the events.
The state closed fiscal 1995 with positive financial results, and the revenue
shortfall reserve fully funded at $267 million (3.0% of revenues) for the
third consecutive year. The state's adopted budget for fiscal 1996 calls for
state spending of $10.7 billion--a $915.6 million increase over the fiscal
1995 budget. The funds will come from three sources. $10.1 billion will come
from the state's revenue estimate of taxes and fees, an increase of $642
million. Lottery proceeds will contribute $435 million, an increase of $70
million. Indigent Care Trust Fund receipts will add $146 million for fiscal
1996.
The fund's concentration in securities issued by Georgia and its political
subdivisions provide a greater level of risk than a fund whose assets are
diversified across numerous states and municipal issuers. The ability of
Georgia or its municipalities to meet their obligations will depend on the
availability of tax and other revenues; economic, political and demographic
conditions within Georgia; and the underlying fiscal condition of the state,
its counties, and its municipalities.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for clearance
of transactions.
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 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 measure or to
facilitate management of the portfolio by enabling the Fund to meet
redemption requests value of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or hold
portfolio securities permitted by its investment objective, policies, and
limitations, or the Trust's Declaration of Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited partnership
interests, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are
secured by real estate or interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in any
one industry, or in industrial development bonds or other securities the
interest upon which is paid from revenues of similar types of projects,
except that the Fund may invest 25% or more of the value of its total assets
in cash, cash items, or securities issued or guaranteed by the government of
the United States or its agencies, or instrumentalities and repurchase
agreements collateralized by such U.S. government securities.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under federal securities law, except for
restricted securities determined to be liquid under criteria established by
the Trustees.
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
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 association having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items." Except
with respect to borrowing money, if a percentage limitation is adhered to at
the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
limitation.
The Fund does not intend to borrow money or pledge securities in excess of 5%
of the value of its net assets during the coming fiscal year.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in its
prospectus and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940. In particular, the Fund
will comply with the various requirements of Rule 2a-7, 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.
FEDERATED MUNICIPAL TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive
Vice President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
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
Birthdate: June 23, 1937
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
Birthdate: July 4, 1918
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
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
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.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative
Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
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.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management
Center; Director, Trustee, or Managing General Partner of the Funds;
President Emeritus, University of Pittsburgh; founding Chairman, National
Advisory Council for Environmental Policy and Technology and Federal
Emergency Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global 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 of
the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Services Company; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice
President, Federated Shareholder Services; Vice President, Federated
Administrative Services; Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global Research
Corp.; Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; President and
Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Equity Funds; Federated Exchange Fund, Ltd.; Federated
GNMA Trust; Federated Government Trust; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated
U.S. Government Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 3-5 Years; First Priority Funds; Fixed Income Securities,
Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal
Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government
Securities, Inc.; Government Income Securities, Inc.; High Yield Cash Trust;
Insurance Management Series; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty
Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty
Municipal Securities Fund, Inc.; Liberty U.S. Government Money Market Trust;
Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; 111 Corcoran Funds; Peachtree Funds; The Planters Funds;
RIMCO Monument Funds; The Shawmut Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Financial Institutions; Trust For Government Cash Reserves; Trust for Short-
Term U.S. Government Securities; Trust for U.S. Treasury Obligations; The
Virtus Funds; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.
As of December 4, 1995, the following shareholder(s) of record owned 5% or
more of the outstanding shares of the Georgia Municipal Cash Trust: COBATCO,
Columbus, GA, 26.91%; Scientific Games Inc., Alpharetta, GA, 6.25%; Valujet
Airlines, Atlanta, GA, 13.94%; COMP DENT, Atlanta, GA, 16.24%; and American
Megatrends Inc., Norcross, GA, 5.49%.
TRUSTEES COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 68 other investment companies in the
Fund Complex
Thomas G. Bigley $2,458 $20,688 for the Trust and
Trustee 49 other investment companies in the Fund
Complex
John T. Conroy, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
William J. Copeland $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Glen R. Johnson $0 $0 for the Trust and
President and Trustee 14 other investment companies in the
Fund Complex
James E. Dowd $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D. $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $3,520 $117,202 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Peter E. Madden $2,757 $90,563 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Gregor F. Meyer $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,762 $0 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Wesley W. Posvar $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
Marjorie P. Smuts $3,166 $106,460 for the Trust and
Trustee 64 other investment companies in the Fund
Complex
*Information is furnished for the fiscal year ended October 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of
fifteen portfolios.
+The information is provided for the last calendar year.
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 the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the period from August 22,
1995 (date of initial public investment) to October 31, 1995, the adviser
earned $87,222, all of which was 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.
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 August 22, 1995 (date of initial
public investment) to October 31, 1995, 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.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the period from August 22, 1995 (date of
initial public investment) to October 31, 1995, Federated Administrative
Services earned $23,973. 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 the size, type and number of accounts and transactions made by
shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
SHAREHOLDER SERVICES AGREEMENT
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 balances;
answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses. By adopting the
Shareholder Services Agreement, the Trustees expect that the Fund will
benefit by: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding promptly
to shareholders' requests and inquiries concerning their accounts.
For the period from August 22, 1995 (date of initial public investment) to
October 31, 1995,the Fund paid shareholder services fees in the amount of
$43,611, none of which was waived.
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.
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.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its net
income earned during the year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for those
shareholders paying those fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding
capital changes but including the value of any additional shares purchased
with dividends earned from the original one share and all dividends declared
on the original and any purchased shares; dividing the net change in the
account's value by the value of the account at the beginning of the base
period to determine the base period return; and multiplying the base period
return by 365/7.
The Fund's yield for the seven-day period ended October 31, 1995, was 3.82%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended October 31, 1995,
was 3.89%.
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,
1995, was 7.15%.
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 Georgia
TAX BRACKET:
Federal: 15.00% 28.00% 31.00% 36.00% 39.60%
Combined
Federal
and State:21.00% 34.00% 37.00% 42.00% 45.60%
Joint Return$1-39,000$39,001-94,250 $94,251-143,600$143,601-$256,500
OVER $256,500
Single Return$1-23,350 $23,351-56,550$56,551-117,950$117,951-256,500
OVER $256,500
Tax-Exempt
Yield
Taxable Yield Equivalent
- ---
1.50% 1.90% 2.27% 2.38% 2.59% 2.76%
2.00 2.53 3.03 3.17 3.45 3.68
2.50 3.16 3.79 3.97 4.31 4.60
3.00 3.80 4.55 4.76 5.17 5.51
3.50 4.43 5.30 5.56 6.03 6.43
4.00 5.06 6.06 6.35 6.90 7.35
4.50 5.70 6.82 7.14 7.76 8.27
5.00 6.33 7.58 7.94 8.62 9.19
5.50 6.96 8.33 8.73 9.48 10.11
6.00 7.59 9.09 9.52 10.34 11.03
6.50 8.23 9.85 10.32 11.21 11.95
7.00 8.86 10.61 11.11 12.07 12.87
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.
Cumulative total return reflects the Fund's total performance over a specific
period of time. For the period from August 22, 1995 (date of initial public
investment) through October 31, 1995, the cumulative total return for the
Fund was 0.73%. This total return is representative of only 2 months of
activity since the date of initial public investment.
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:
O LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports
monthly and 12-month-to-date investment results for the same money
funds.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected
in its investment decision making-structured, straightforward, and
consistent. This has resulted in a history of competitive performance with a
range of competitive investment products that have gained the confidence of
thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market funds,
a principal means used by money managers today to value money market fund
shares. Other innovations include the first institutional tax-free money
market fund. As of December 31, 1994, Federated Investors managed more than
$31 billion in assets across approximately 43 money market funds, including
17 government, 8 prime and 18 municipal with assets approximating $17
billion, $7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $2 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional
clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
*Source: Investment Company Institute
APPENDIX
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group ("S&P") note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a variable rate demand feature. The first rating (long-term
rating) addresses the likelihood of repayment of principal and interest when
due, and the second rating (short-term rating) describes the demand
characteristics. Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The
definitions for the long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
LONG-TERM DEBT RATINGS
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investors Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below)).
The purpose of the MIG or VMIG ratings is to provide investors with a simple
system by which the relative investment qualities of short-term obligations
may be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the
use of the VMIG symbol to reflect such characteristics as payment upon
periodic demand rather than fixed maturity dates and payment relying on
external liquidity.
In this case, two ratings are usually assigned, (for example, Aaa/VMIG-1);
the first representing an evaluation of the degree of risk associated with
scheduled principal and interest payments, and the second representing an
evaluation of the degree of risk associated with the demand feature. The VMIG
rating can be assigned a 1 or 2 designation using the same definitions
described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1 Issuers rated PRIME-1 (or related supporting institutions)
have a superior capacity for repayment of short- term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well
established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on
debt and ample asset protection, broad margins in earning
coverage of fixed financial charges and high internal cash generation,
well-established access to a range of financial markets and assured
sources of alternate liquidity
P-2 Issuers rated PRIME-2 (or related supporting institutions)
have a strong capacity for repayment of short- term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is
maintained.
LONG-TERM DEBT RATINGS
AAA Bonds which are rated AAA are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large or by
an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes is can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in AAA securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger
than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to
securities rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "Aaa" by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "Aa" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.
Cussip 314229691
