TENNESSEE MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares of Tennessee 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 Tennessee municipal securities, including securities of
states, territories, and possessions of the United States which are not
issued by or on behalf of Tennessee, or its political subdivisions and
financing authorities, but which provide current income exempt from
federal regular income tax and the personal income tax imposed by the
State of Tennessee 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 May
14, 1996, 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 May 14, 1996
SUMMARY OF FUND EXPENSES 1
GENERAL INFORMATION 3
INVESTMENT INFORMATION 4
Investment Objective 4
Investment Policies 4
Tennessee Municipal Securities 10
Investment Risks 11
Non-Diversification 13
Investment Limitations 14
FUND INFORMATION 14
Management of the Fund 14
Distribution of Institutional
Shares 16
Administration of the Fund 9
Expenses of the Fund and
Institutional Shares 18
NET ASSET VALUE 20
HOW TO PURCHASE SHARES 20
HOW TO REDEEM SHARES 22
ACCOUNT AND SHARE INFORMATION 12
TAX INFORMATION 26
Federal Income Tax 26
State and Local Taxes 28
State of Tennessee Taxes 13
OTHER CLASSES OF SHARES 28
PERFORMANCE INFORMATION 29
ADDRESSES 30
SUMMARY OF FUND EXPENSES
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 projected average net assets) *
Management Fee (after waiver) (1) .............. 0.00%
12b-1 Fee .................................... . None
Total Other Expenses (after expense reimbursement) 0.35%
Shareholder Services Fee (2) ..... 0.00%
Total Operating Expenses (3) .................... 0.35%
(1) The estimated 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 0.50%.
(2) The maximum shareholder services fee is 0.25%.
(3) The total operating expenses are estimated to be 1.68% absent the
anticipated voluntary waivers of the management fee and the shareholder
services fee and the anticipated voluntary reimbursement of certain other
operating expenses.
*Total Institutional Shares 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 Institutional Shares
will bear, either directly or indirectly. For more complete descriptions
of the various costs and expenses, see "How To Purchase Shares" and "Fund
Information". Wire--transferred redemptions of less than $5,000 may be
subject to additional fees.
EXAMPLE 1 year 3 years
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.....
$4 $11
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 THE INSTITUTIONAL
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 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 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 in
short-term Tennessee municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Tennessee 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 tax imposed by the
State of Tennessee 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
Tennessee municipal securities maturing in 13 months or less. The average
maturity of the securities in the Fund's portfolio, computed on a dollar-
weighted basis, will be 90 days 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 tax imposed by the State of
Tennessee (Federal regular income tax does not include the federal
individual alternative minimum tax or the federal alternative minimum tax
for corporations.) Unless indicated otherwise, the investment policies
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. The Fund invests primarily in debt obligations
issued by or on behalf of Tennessee 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 tax imposed by
the State of Tennessee ("Tennessee Municipal Securities"). Examples of
Tennessee Municipal Securities include, but are not limited to:
o tax and revenue anticipation notes ("TRANs") issued to finance
working capital needs in anticipation of receiving taxes or other
revenues;
o bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
o municipal commercial paper and other short-term notes;
o variable rate demand notes;
o municipal bonds (including bonds having serial maturities and pre-
refunded bonds) and leases; and
o 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
Tennessee 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 Tennessee 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 law. 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 institutions 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 Tennessee Municipal Securities is subject to the federal
alternative minimum tax.
TENNESSEE MUNICIPAL SECURITIES
Tennessee 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.
Tennessee 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 Tennessee 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 Tennessee 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 Tennessee 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
Tennessee Municipal Securities acceptable for purchase by the Fund could
become limited.
The Fund may invest in Tennessee 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 Tennessee 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 Tennessee 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 .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. Also, the adviser 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. This does not
include reimbursement to the Fund of any expenses incurred by
shareholders who use the transfer agent's subaccounting facilities.
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 $80 billion invested across more than 250 funds under
management and/or administration by its subsidiaries, as of December
31, 1995, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 1,800
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 interests. 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 the Institutional Service Shares,
computed at an annual rate, to obtain personal services for shareholders
and to provide the maintenance of shareholder accounts. 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 Federated
Shareholder Services.
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.
EXPENSES OF THE FUND AND INSTITUTIONAL SHARES
Holders of shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of shares pay their allocable
portion include, but are not limited to: the cost of organizing the Trust
and continuing its existence; registering the Trust with federal and
state securities authorities; Trustees' fees; auditors' fees; the cost of
meetings of Trustees; legal fees of the Trust; association membership
dues; and such non-recurring and extraordinary items as may arise.
The Fund expenses for which holders of shares pay their allocable portion
include, but are not limited to: registering the Fund and shares of the
Fund; investment advisory services; taxes and commissions; custodian
fees; insurance premiums; auditors' fees; and such non-recurring and
extraordinary items as may arise.
At present, no expenses are allocated to the shares as a class. However,
the Trustees reserve the right to allocate certain expenses to holders of
shares as they deem appropriate ("class expenses"). In any case, class
expenses would be limited to: transfer agent fees as identified by the
transfer agent as attributable to holders of shares; printing and postage
expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxies to current shareholders;
registration fees paid to the Securities and Exchange Commission and
registration fees paid to state securities commissions; expenses related
to administrative personnel and services as required to support holders
of shares; legal fees relating solely to shares; and Trustees' fees
incurred as a result of issues relating solely to shares.
NET ASSET VALUE
The Fund attempts to stabilize the net asset value of shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net
asset value per share is determined by subtracting liabilities
attributable to Institutional Shares from the value of Fund assets
attributable to Institutional Shares, and dividing the remainder by the
number of Institutional Shares outstanding. The Fund cannot guarantee
that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m. (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 Shareholder Services Company,
c/o State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE;
For Credit to: Tennessee 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 sending a check
to: Federated Shareholder Services Company, P.O. Box 8600, Boston, MA
02266-8600. The check should be made payable to Tennessee Municipal Cash
Trust-Institutional 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.
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 Shareholder 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 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. 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 Shareholder 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
Shareholder Services Company maintains a share account for each
shareholder. Share certificates are not issued unless requested by
contacting the Fund or Federated Shareholder 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 share of the Trust owned by a shareholder gives that
shareholder one vote in Trustee elections and other matters submitted to
shareholders for vote. All shares of all classes of each portfolio in the
Trust have equal voting rights, except that in matters affecting only a
particular portfolio or class, only shareholders 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, within the limits of
its investment policies, 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 Tennessee. Shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.
STATE OF TENNESSEE TAXES
Under existing Tennessee law, distributions made by the Fund will not be
subject to Tennessee personal 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
Tennessee or its political subdivisions; or (ii) interest on certain
obligations of the United States, or any agency or instrumentality
thereof. To the extent that distributions by the Fund are derived from
distributions on other types of obligations, such distributions will be
subject to Tennessee personal income taxes.
Distributions made by the Fund will be subject to the excise taxes
imposed on corporations.
OTHER CLASSES OF SHARES
The Fund also offers another class of shares called Institutional Service
Shares. Institutional Service Shares are sold primarily to financial
institutions acting in an agency capacity. Institutional Service Shares
are sold at net asset value and are subject to a Shareholder Services
Agreement. Investments in Institutional Service Shares are subject to a
minimum initial investment of $10,000 over a 90-day period.
Institutional Shares and Institutional Service Shares are subject to
certain of the same expenses. 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. 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 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.
ADDRESSES
Tennessee 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 P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder
Services Company P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
TENNESSEE MUNICIPAL CASH TRUST
INSTITUTIONAL SHARES
Prospectus
A Non-Diversified Portfolio of Federated Municipal Trust, an Open-End
Management Investment Company
Prospectus dated May 14, 1996
CUSIP
G01682-01 (5/96)
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
TENNESSEE MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares of Tennessee 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 Tennessee municipal securities, including
securities of states, territories, and possessions of the United States
which are not issued by or on behalf of Tennessee, or its political
subdivisions and financing authorities, but which provide current income
exempt from federal regular income tax and the personal income tax
imposed by the State of Tennessee 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 May
14, 1996, 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 May 14, 1996
SUMMARY OF FUND EXPENSES 1
GENERAL INFORMATION 2
INVESTMENT INFORMATION 2
Investment Objective 2
Investment Policies 2
Tennessee Municipal Securities 4
Investment Risks 5
Non-Diversification 5
Investment Limitations 6
FUND INFORMATION 6
Management of the Fund 6
Distribution of Institutional
Service Shares 7
Administration of the Fund 7
Expenses of the Fund and
Institutional Service Shares 8
NET ASSET VALUE 8
HOW TO PURCHASE SHARES 9
Special Purchase Features 9
HOW TO REDEEM SHARES 10
Special Redemption Features 11
ACCOUNT AND SHARE INFORMATION 11
TAX INFORMATION 12
Federal Income Tax 12
State and Local Taxes 12
State of Tennessee Taxes 12
OTHER CLASSES OF SHARES 13
PERFORMANCE INFORMATION 13
ADDRESSES 14
SUMMARY OF FUND EXPENSES
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 projected average net assets) *
Management Fee (after waiver) (1) ............. 0.00%
12b-1 Fee ................................... . None
Total Other Expenses (after expense reimbursement) 0.60%
Shareholder Services Fee ....... 0.25%
Total Operating Expenses (2) .................. 0.60%
(1) The estimated 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 0.50%.
(2) The total operating expenses are estimated to be 1.68% absent the
anticipated voluntary waiver of a portion of the management fee and the
anticipated voluntary reimbursement of certain other operating expenses.
*Total Institutional Service Shares 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 Institutional
Service Shares will bear, either directly or indirectly. For more
complete descriptions of the various costs and expenses, see "How to
Purchase Shares" and "Fund Information". Wire--transferred redemptions
of less than $5,000 may be subject to additional fees.
EXAMPLE 1 year 3 years
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
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 THE INSTITUTIONAL
SERVICE 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 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 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 in short-term Tennessee municipal securities. The
Fund may not be a suitable investment for retirement plans or for non-
Tennessee 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 Tennesee 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
Tennessee municipal securities maturing in 13 months or less. The average
maturity of the securities in the Fund's portfolio, computed on a dollar-
weighted basis, will be 90 days 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 tax imposed by the State of
Tennessee (Federal regular income tax does not include the federal
individual alternative minimum tax or the federal alternative minimum tax
for corporations.) Unless indicated otherwise, the investment policies
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. The Fund invests primarily in debt obligations
issued by or on behalf of Tennessee 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 tax imposed by
the State of Tennessee ("Tennessee Municipal Securities"). Examples of
Tennessee Municipal Securities include, but are not limited to:
o tax and revenue anticipation notes ("TRANs") issued to finance
working capital needs in anticipation of receiving taxes or other
revenues;
o bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
o municipal commercial paper and other short-term notes;
o variable rate demand notes;
o municipal bonds (including bonds having serial maturities and pre-
refunded bonds) and leases; and
o 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
Tennessee 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 Tennessee 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 law. 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 institutions 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 Tennessee Municipal Securities is subject to the federal
alternative minimum tax.
TENNESSEE MUNICIPAL SECURITIES
Tennessee 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.
Tennessee 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 Tennessee 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 Tennessee 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 Tennessee 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
Tennessee Municipal Securities acceptable for purchase by the Fund could
become limited.
The Fund may invest in Tennessee 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 Tennessee 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 Tennessee 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 .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 $80 billion invested across more than 250 funds under
management and/or administration by its subsidiaries, as of December
31, 1995, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 1,800
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 interests. 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.
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 obtain personal services for shareholders
and to provide the maintenance of shareholder accounts. 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 Federated
Shareholder Services.
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.
EXPENSES OF THE FUND AND INSTITUTIONAL SERVICE SHARES
Holders of shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of shares pay their allocable
portion include, but are not limited to: the cost of organizing the Trust
and continuing its existence; registering the Trust with federal and
state securities authorities; Trustees' fees; auditors' fees; the cost of
meetings of Trustees; legal fees of the Trust; association membership
dues; and such non-recurring and extraordinary items as may arise.
The Fund expenses for which holders of shares pay their allocable portion
include, but are not limited to: registering the Fund and shares of the
Fund; investment advisory services; taxes and commissions; custodian
fees; insurance premiums; auditors' fees; and such non-recurring and
extraordinary items as may arise.
At present, the only expenses allocated to the shares as a class are
expenses under the Shareholder Services Agreement which relate to shares.
However, the Trustees reserve the right to allocate certain other
expenses to holders of shares as they deem appropriate ("class
expenses"). In any case, class expenses would be limited to: transfer
agent fees as identified by the transfer agent as attributable to holders
of shares; printing and postage expenses related to preparing and
distributing materials such as shareholder reports, prospectuses and
proxies to current shareholders; registration fees paid to the Securities
and Exchange Commission and registration fees paid to state securities
commissions; expenses related to administrative personnel and services as
required to support holders of shares; legal fees relating solely to
shares; and Trustees' fees incurred as a result of issues relating solely
to shares.
NET ASSET VALUE
The Fund attempts to stabilize the net asset value of shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net
asset value per share is determined by subtracting liabilities
attributable to Institutional Service Shares from the value of Fund
assets attributable to Institutional Service Shares, and dividing the
remainder by the number of Institutional Service Shares outstanding. The
Fund cannot guarantee that its net asset value will always remain at
$1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m. (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) to place an order. 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 Shareholder Services Company, c/o State Street Bank and Trust
Company, Boston, MA; Attention: EDGEWIRE; For Credit to: Tennessee
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 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 Shareholder Services Company, P.O. Box 8600, Boston, MA
02266-8600. The check should be made payable to Tennessee Municipal Cash
Trust-Institutional Service 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.
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.
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
Shareholder 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 Shareholder 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 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
Shareholder Services Company maintains a share account for each
shareholder. Share certificates are not issued unless requested by
contacting the Fund or Federated Shareholder 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 share of the Trust owned by a shareholder gives that
shareholder one vote in Trustee elections and other matters submitted to
shareholders for vote. All shares of all classes of each portfolio in the
Trust have equal voting rights, except that in matters affecting only a
particular portfolio or class, only shareholders 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, within the limits of
its investment policies, 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 Tennessee. Shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.
STATE OF TENNESSEE TAXES
Under existing Tennessee law, distributions made by the Fund will not be
subject to Tennessee personal 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
Tennessee or its political subdivisions; or (ii) interest on certain
obligations of the United States, or any agency or instrumentality
thereof. To the extent that distributions by the Fund are derived from
distributions on other types of obligations, such distributions will be
subject to Tennessee personal income taxes.
Distributions made by the Fund will be subject to the excise taxes
imposed on corporations.
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 sold
pursuant 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 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. 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 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.
ADDRESSES
Tennessee 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 Shareholder
Services Company P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
TENNESSEE MUNICIPAL CASH TRUST
INSTITUTIONAL SERVICE SHARES
Prospectus
A Non-Diversified Portfolio of Federated Municipal Trust, an Open-End
Management Investment Company
Prospectus dated May 14, 1996
CUSIP (Number)
#######X (5/96)
Federated Securities Corp.
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
TENNESSEE 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 Tennessee Municipal Cash Trust (the "Fund"), a portfolio
of Federated Municipal Trust (the "Trust") dated May 14, 1996. 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 May 14, 1996
Federated Securities Corp.
Distributor
A subsidiary of Federated Investors
INVESTMENT POLICIES 2
Acceptable Investments 2
Participation Interests 2
Municipal Leases 3
Ratings 4
When-Issued and Delayed Delivery
Transactions 5
Repurchase Agreements 5
Reverse Repurchase Agreements 6
Credit Enhancement 7
TENNESSEE INVESTMENT RISKS 2
INVESTMENT LIMITATIONS 9
FEDERATED MUNICIPAL TRUST MANAGEMENT
15
The Funds
25
Share Ownership
27
Trustees Compensation
27
Trustee Liability
30
INVESTMENT ADVISORY SERVICES
30
Investment Adviser
30
Advisory Fees
30
BROKERAGE TRANSACTIONS
31
OTHER SERVICES
33
Fund Administration
33
Custodian and Portfolio Recordkeeper
33
Transfer Agent
34
Independent Auditors
34
SHAREHOLDER SERVICES
34
DETERMINING NET ASSET VALUE
35
REDEMPTION IN KIND
36
MASSACHUSETTS PARTNERSHIP LAW
37
THE FUND'S TAX STATUS
38
PERFORMANCE INFORMATION
38
Yield
38
Effective Yield
39
Tax-Equivalency Table
39
Total Return
41
Performance Comparisons
42
ABOUT FEDERATED INVESTORS
43
Mutual Fund Market
44
Institutional Clients
44
Trust Organizations
45
Broker/Dealers and Bank Broker/Dealer
Subsidiaries
45
APPENDIX 17
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.
The Fund may have more than 25% of its total assets invested in
securities credit enhanced by banks.
TENNESSEE INVESTMENT RISKS
The Fund's performance can be expected to be closely tied to the
prevailing economic conditions of the state of Tennessee as a whole, its
particular geographic regions, financial institutions located in the
southeastern region, and the industries located within the state.
Traditionally divided into three geographic regions, the State's economy
has historically been dominated by agriculture in the west, manufacturing
in the east, and government in the middle region. Though trade and
services have replaced agriculture in terms of total output,
manufacturing continues to be the largest single sector of the economy.
While the Gross State Product of Tennessee was in excess of $100 billion
in 1991 and the state placed 20th in national rank, manufacturing
comprised 24% of total production in that year. The recent decision by
Saturn and Nissan to locate automobile production facilities in the state
suggests that manufacturing, with its inherent susceptibility to economic
downturns, will continue to dominate.
Tennessee's economy experienced many of the problems associated with the
national economy during the past recession. Though it consistently
remained below the national average, the state's unemployment rate rose
significantly during the prior recessionary period. Also, overbuilding of
commercial and residential properties in prior years caused the state to
experience some difficulties with declining real estate values.
Along with the national economy, Tennessee has recently experienced a
significant recovery in economic activity. Although moderate rates of
economic growth in past recoveries along with a steady influx of
transplant corporations have helped the state avoid the dramatic "boom
and bust" cycle experienced by many sunbelt states, the recent recession
did put pressure on governmental receipts and outlays.
The constitution of the state requires a balanced budget. This constraint
along with relatively low debt and expenditure per capita ratios has
helped the state maintain its current long term bond rating of AAA by
Standard and Poor's Rating Group and Aaa by Moody's Investors Service
Inc. While Tennessee is one of only nine states which have such ratings,
the ability of the state to maintain this rating given the current
economic and political environment is by no means certain.
INVESTMENT LIMITATIONS
The following investment limitations are fundamental (except that no
investment limitation of the Fund shall prevent the Fund from investing
substantially all of its assets (except for assets which are not
considered "investment securities" under the Investment Company Act of
1940, or assets exempted by the SEC) in an open-end investment company
with substantially the same investment objectives):
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 Tennessee 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 investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Trustees without shareholder approval (except that no investment
limitation of the Fund shall prevent the Fund from investing
substantially all of its assets (except for assets which are not
considered "investment securities" under the Investment Company Act of
1940, or assets exempted by the SEC) in an open-end investment company
with substantially the same investment objectives). Shareholders will be
notified before any material changes in these limitations become
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
Shareholder Services Company, and Federated Shareholder Services;
Director, Federated Services Company; President or Executive 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 Shareholder 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, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global
Research Corp.; Trustee, Federated Shareholder Services Company;
Director, Federated Services Company; 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 and Trustee, Federated Investors; Vice President,
Federated Shareholder Services; Executive Vice President, Federated
Securities Corp.; 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 between meetings of
the Board.
THE FUNDS
As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies:
111 Corcoran Funds; 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 Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income
Fund, Inc.; Federated Fund for U.S. Government Securities, Inc.;
Federated GNMA Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Insurance Series; Federated Master Trust; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust;
Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S.
Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Utility Fund, Inc.; High
Yield Cash Trust; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty
Term Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust;
Liquid Cash Trust; Managed Series Trust; Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Trust; Municipal Securities
Income Trust; Newpoint Funds; Peachtree Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds;
The Starburst Funds; The Starburst Funds II; The Virtus Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; and World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s
outstanding Institutional 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
54 other investment companies in the Fund Complex
Thomas G. Bigley++ $2,458 $86,331 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John T. Conroy, Jr. $3,520 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
William J. Copeland $3,520 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
James E. Dowd $3,520 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D. $3,166
$106,460 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $3,520
$115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Glen R. Johnson $0 $0 for the Trust and
President and Trustee
9 other investment companies in the Fund Complex
Peter E. Madden $2,757 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Gregor F. Meyer $3,166 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,762
$104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Wesley W. Posvar $3,166 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Marjorie P. Smuts $3,166 $104,898 for the Trust and
Trustee 54 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 sixteen portfolios.
+The information is provided for the last calendar year.
++Mr. Bigley served on 39 investment companies in the Federated Funds
Complex from January 1 through
September 30, 1995. On October 1, 1995, he was appointed a Trustee on
15 additional Federated Funds.
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.
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.
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. 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 ACCOUNTANT
State Street Bank and Trust Company -Boston, Boston, MA, is custodian for
the securities and cash of the Fund. Federated Shareholder Services
Company, Pittsburgh, PA, provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments.
TRANSFER AGENT
As transfer agent, Federated Shareholder 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 AUDITORS
The independent auditors for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
SHAREHOLDER SERVICES
With respect to Institutional Service Shares, 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 Trustee expect that the Trust will
benefit by: (1) providing personal services to shareholders;
(2) investing shareholder assets with a minimum of delay and
administrative detail; (3) enhancing shareholder recordkeeping systems;
and (4) responding promptly to shareholders' requests and inquiries
concerning their accounts.
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.
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.
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 1996
STATE OF TENNESSEE
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 $1- $40,101- $96,901- $147,701- OVER
RETURN 40,100 96,900 147,700 263,750 $263,750
SINGLE $1- $24,001- $58,151- $121,301- OVER
RETURN 24,000 58,150 121,300 263,750 $263,750
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%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state
and local taxes paid on comparable taxable investments were not used to
increase federal deductions.
The chart above is for illustrative purposes only. It is not an indicator
of past or future performance of the Fund.
* Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for
a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value
is computed by multiplying the number of shares owned at the end of the
period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number of
shares purchased at the beginning of the period with $1,000, adjusted
over the period by any additional shares, assuming the monthly
reinvestment of all dividends and distributions.
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
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, 1995, Federated Investors
managed more than $40 billion in assets across approximately 47 money
market funds, including 17 government, 10 prime and 20 municipal with
assets approximating $20.9 billion, $11.4 billion and $7.8 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.
*Source: Investment Company Institute
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 are 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 314229642
CUSIP 314229634