FEDERATED MUNICIPAL TRUST, 497, 1996-03-08

FEDERATED MUNICIPAL TRUST
497, 1996-03-08

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CALIFORNIA MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS

The Institutional Shares of California Municipal Cash Trust (the "Fund") offered
by this prospectus represent interests in a non-diversified portfolio of
Federated Municipal Trust (the "Trust"), an open-end management investment
company (a mutual fund). The Fund invests primarily in short-term California
municipal securities including securities of states, territories, and
possessions of the United States which are not issued by or on behalf of
California, or its political subdivisions and financing authorities, but which
provide income exempt from federal regular income tax and the personal income
taxes imposed by the State of California consistent with stability of principal.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.

This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information dated February 29,
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 February 29, 1996

TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1

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GENERAL INFORMATION 2

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INVESTMENT INFORMATION 2

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Investment Objective 2

Investment Policies 2

California Municipal Securities 5

Investment Risks 5

Non-Diversification 5

Investment Limitations 6

FUND INFORMATION 6

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Management of the Fund 6

Distribution of Institutional Shares 7

Administration of the Fund 7

Expenses of the Fund and Institutional

Shares 8

NET ASSET VALUE 8

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HOW TO PURCHASE SHARES 9

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HOW TO REDEEM SHARES 10

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ACCOUNT AND SHARE INFORMATION 11

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TAX INFORMATION 11

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Federal Income Tax 11

State and Local Taxes 12

OTHER CLASSES OF SHARES 12

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PERFORMANCE INFORMATION 13

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CALIFORNIA MUNICIPAL CASH TRUST

FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES 14

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ADDRESSES 15

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SUMMARY OF FUND EXPENSES
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<TABLE>
<S> <C>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)................................................. None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)............................... None
Redemption Fee (as a percentage of amount redeemed, if applicable).................... None
Exchange Fee.......................................................................... None
</TABLE>

<TABLE>
<S> <C> <C>
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)..................................... 0.20%
Shareholder Services Fee (after waiver)(2).................................. 0.00%
Total Operating Expenses(3)....................................................... 0.20%
</TABLE>

(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 1.09% 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 operating expenses in the table above 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 Institutional Shares of the
Fund will bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Fund Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.

<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2) redemption
at the end of each time period........................................... $2 $ 6
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR INSTITUTIONAL SHARES' FISCAL YEAR ENDING
OCTOBER 31, 1996.

GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to 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 banks and other
institutions that hold assets for individuals, trusts, estates, or partnerships
as a convenient means of accumulating an interest in a professionally managed,
non-diversified portfolio investing primarily in short-term California municipal
securities. The Fund may not be a suitable investment for retirement plans or
for non-California taxpayers because it invests in municipal securities of that
state. A minimum initial investment of $25,000 within a 90-day period is
required.

The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.

INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE

The investment objective of the Fund is current income exempt from federal
regular income tax and the personal income taxes imposed by the State of
California consistent with stability of principal. This investment objective
cannot be changed without shareholder approval. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
complying with the various requirements of Rule 2a-7 under the Investment
Company Act of 1940 which regulates money market mutual funds and by following
the investment policies described in this prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing in a portfolio of
California municipal securities maturing in 13 months or less. As a matter of
investment policy, which cannot be changed without shareholder approval, at
least 80% of the Fund's annual interest income will be exempt from federal
regular income tax and California state income income tax. (Federal regular
income tax does not include the federal individual alternative minimum tax or
the federal alternative minimum tax for corporations.) The average maturity of
the securities in the Fund's portfolio, computed on a dollar-weighted basis,
will be 90 days or less. Unless indicated otherwise, the investment policies may
be changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.

ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued by
or on behalf of California and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and California state income tax imposed upon

non-corporate taxpayers ("California Municipal Securities"). Examples of
California Municipal Securities include, but are not limited to:

- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;

- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;

- municipal commercial paper and other short-term notes;

- variable rate demand notes;

- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and

- participation, trust, and partnership interests in any of the foregoing
obligations.

VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt
instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear
interest at a rate that is intended to cause the securities to trade at
par. The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes allow
the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security
at the time of each interest rate adjustment or at other fixed intervals.
See "Demand Features." The Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Fund may next tender the security for repurchase.

PARTICIPATION INTERESTS. The Fund may purchase interests in California
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying California Municipal
Securities.

MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities. They may take the form of a lease, an installment purchase
contract, a conditional sales contract, or a participation interest in any
of the above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.

CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security. The
Fund may have more than 25% of its total assets invested in securities
credit-enhanced by banks.

DEMAND FEATURES. The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued

interest) within a fixed period (usually seven days) following a demand by the
Fund. The demand feature may be issued by the issuer of the underlying
securities, a dealer in the securities, or by another third party, and may not
be transferred separately from the underlying security. The Fund uses these
arrangements to provide the Fund with liquidity and not to protect against
changes in the market value of the underlying securities. The bankruptcy,
receivership, or default by the issuer of the demand feature, or a default on
the underlying security or other event that terminates the demand feature before
its exercise, will adversely affect the liquidity of the underlying security.
Demand features that are exercisable even after a payment default on the
underlying security may be treated as a form of credit enhancement.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.

The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.

RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies but which are subject
to restrictions on resale under federal securities laws. Under criteria
established by the Trustees, certain restricted securities are determined to be
liquid. To the extent that restricted securities are not determined to be liquid
the Fund will limit their purchase, together with other illiquid securities, to
10% of its net assets.

TEMPORARY INVESTMENTS. From time to time, when the investment adviser determines
that market conditions call for a temporary defensive posture, the Fund may
invest in tax-exempt or taxable securities, all of comparable quality to other
securities in which the Fund invests, such as: obligations issued by or on
behalf of municipal or corporate issuers; obligations issued or guaranteed by
the U.S. government, its agencies, or instrumentalities; instruments issued by a
U.S. branch of a domestic bank or other deposit 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 California
Municipal Securities is subject to the federal alternative minimum tax.

CALIFORNIA MUNICIPAL SECURITIES

California Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to
repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.
California Municipal Securities include industrial development bonds issued by
or on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.

The two principal classifications of California Municipal Securities are
"general obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue bonds,
however, are payable only from the revenue generated by the facility financed by
the bond or other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or charge against the general revenues of
a municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.

INVESTMENT RISKS

Yields on California Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of California Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of California
Municipal Securities acceptable for purchase by the Fund could become limited.

The Fund may invest in California Municipal Securities which are repayable out
of revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
California Municipal Securities could involve an increased risk to the Fund
should any of these related projects or facilities experience financial
difficulties.

Obligations of issuers of California Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.

NON-DIVERSIFICATION

The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or

regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.

However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each taxable
year, with regard to at least 50% of the Fund's total assets, no more than 5% of
its total assets are invested in the securities of a single issuer and that with
respect to the remainder of the Fund's total assets, no more than 25% of its
total assets are invested in the securities of a single issuer.

INVESTMENT LIMITATIONS

The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge up to 15% of the value of its total assets to secure such
borrowings. These investment limitations cannot be changed without shareholder
approval.

FUND INFORMATION
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MANAGEMENT OF THE FUND

BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.

INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.

ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .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 SHARES

Federated Securities Corp. is the principal distributor for Institutional Shares
of the Fund. It is a Pennsylvania corporation organized on November 14, 1969,
and is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors. SHAREHOLDER SERVICES.
The Fund has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, under which the Fund
may make payments up to .25 of 1% of the average daily net asset value of
Institutional Shares, computed at an annual rate, to obtain certain personal
services for shareholders and provide maintenance of shareholder accounts
("shareholder services"). From time to time and for such periods as deemed
appropriate, the amount stated above may be reduced voluntarily.

Under the Shareholder Services Agreement, Federated Shareholder Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting ser-

vices) necessary to operate the Fund. Federated Administrative Services provides
these at an annual rate as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
-------------------------------- --------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
on assets in excess of $750
.075 of 1% million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.

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: shareholder servicing fees; transfer agent fees as identified by the
transfer agent as attributable to holders of shares; printing and postage
expenses related to preparing and distributing materials such as shareholder
reports, prospectuses and proxies to current shareholders; registration fees
paid to the Securities and Exchange Commission and registration fees paid to
state securities commissions; expenses related to administrative personnel and
services as required to support holders of shares; legal fees relating solely to
shares; and Trustees' fees incurred as a result of issues relating solely to
shares.

NET ASSET VALUE
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The Fund attempts to stabilize the net asset value of 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 shares outstanding. The Fund cannot
guarantee that its net asset value will always remain at $1.00 per share.

The net asset value is determined at 9:00 a.m. Pacific time (12:00 noon Eastern
time), 10:00 a.m. Pacific time (l:00 p.m. Eastern time), and as of the close of
trading (normally 1:00 p.m. Pacific time or 4:00 p.m. Eastern time) on the New
York Stock Exchange, Monday through Friday, except on New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.

HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------

Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days 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 10:00 p.m. Pacific time (1:00 p.m. Eastern time). The
order is considered received immediately. Payment by federal funds must be
received before 12:00 noon Pacific time (3:00 p.m. Eastern time) in order to
begin earning dividends that same day. Federal funds should be wired as follows:
Federated Shareholder Services Company, c/o State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: California Municipal Cash
Trust--Institutional Shares; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.

PURCHASING SHARES BY CHECK. Shares may be purchased by mailing a check made
payable to California Municipal Cash Trust--Institutional Shares to Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600. Orders by
mail are considered received when payment by check is converted into federal
funds. This is normally the next business day after the check is received.

SUBACCOUNTING SERVICES. Financial institutions are encouraged to open single
master accounts. A subaccounting system is available through the transfer agent
to minimize internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Financial
institutions may charge or pass through subaccounting fees as part of or in
addition to normal trust or agency account fees. They may also charge fees for
other services provided which may be related to the ownership of Fund shares.
This prospectus should, therefore, be read together with any agreement between
the customer and the financial institution with regard to the services provided,
the fees charged for those services, and any restrictions and limitations
imposed. State securities laws may require certain financial institutions such
as depository institutions to register as dealers.

HOW TO REDEEM SHARES
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Shares are redeemed at their net asset value next determined after Federated
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 9:00 a.m. Pacific time (12:00 noon Eastern time) will
be wired the same day to the shareholder's account at a domestic commercial bank
which is a member of the Federal Reserve System, but will not include that day's
dividend. Proceeds from redemption requests received after that time include
that day's dividend but will be wired the following business day. Proceeds from
redemption requests received on holidays when wire transfers are restricted will
be wired the following business day. Questions about telephone redemptions on
days when wire transfers are restricted should be directed to your shareholder
services representative at the telephone number listed on your account
statement.

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 12:00 noon Pacific time (3:00 p.m. Eastern time) begin earning
dividends that day. Shares purchased by check begin earning dividends the day
after the check is converted into federal funds.

CAPITAL GAINS. The Fund does not expect to realize any capital gains or losses.
If capital gains or losses were to occur, they could result in an increase or
decrease in dividends. The Fund will distribute in cash or additional shares any
realized net long-term capital gains at least once every 12 months.

CERTIFICATES AND CONFIRMATIONS. As transfer agent for the Fund, Federated
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 gives the shareholder one vote in Trustee
elections and other matters submitted to shareholders for vote. All shares of
all classes of each portfolio in the Trust have equal voting rights, except that
in matters affecting only a particular portfolio or class, only shares of that
portfolio or class are entitled to vote. 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.

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
California. Shareholders are urged to consult their own tax advisers regarding
the status of their accounts under state and local tax laws.

CALIFORNIA TAXES. Under existing California laws, distributions made by the Fund
will not be subject to California individual income taxes provided that such
distributions qualify as exempt-interest dividends under the California Revenue
and Taxation Code, and provided further that at the close of each quarter, at
least 50 percent of the value of the total assets of the Fund consists of
obligations the interest on which is exempt from California taxation under
either the Constitution or laws of California or the Constitution or laws of the
United States. The Fund will furnish its shareholders with a written note
designating exempt-interest dividends within 60 days after the close of its
taxable year. Conversely, to the extent that distributions made by the Fund are
derived from other types of obligations, such distributions will be subject to
California individual income taxes.

Dividends of the Fund are not exempt from the California taxes payable by
corporations.

OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------

The Fund also offers another class of shares called Institutional Service
Shares. Institutional Service Shares are sold at net asset value primarily to
banks and other institutions and are subject to a minimum initial investment of
$25,000 over a 90-day period.

Both classes are subject to certain of the same expenses.

Institutional Service Shares are distributed with no 12b-1 Plan but are subject
to shareholder services fees.

Expense differences between classes may affect the performance of each class.

To obtain more information and a prospectus for any other class, investors may
call 1-800-235-4669.

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield. 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.

CALIFORNIA MUNICIPAL CASH TRUST

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report dated December 15, 1995 on the
Fund's financial statements for the year ended October 31, 1995 and on the
information shown below for each of the years presented is included in the
Prospectus dated December 31, 1995, which is incorporated by reference. This
table should be read in conjunction with the Fund's financial statements and
notes thereto, which may be obtained free of charge from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER PERIOD ENDED YEAR ENDED SEPTEMBER 30,
31, OCTOBER 31, ---------------------------------------------------------------
1995 1994(A) 1994 1993 1992 1991 1990 1989(B)
---------- ------------ ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- --------------------------------
Net investment income 0.03 0.002 0.02 0.02 0.03 0.04 0.05 0.03
- --------------------------------
Net realized loss from
investments (0.01) -- -- -- -- -- -- --
- -------------------------------- ----- ------ ---- ---- ---- ---- ---- ----
Total from investment
operations 0.02 0.002 0.02 0.02 0.03 0.04 0.05 0.03
- -------------------------------- ----- ------ ---- ---- ---- ---- ---- ----
CAPITAL CONTRIBUTION 0.01 -- -- -- -- -- -- --
- -------------------------------- ----- ------ ---- ---- ---- ---- ---- ----
LESS DISTRIBUTIONS
- --------------------------------
Distributions from net
investment income (0.03) (0.002) (0.02) (0.02) (0.03) (0.04) (0.05) (0.03)
- -------------------------------- ----- ------ ---- ---- ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------- ----- ------ ---- ---- ---- ---- ---- ----
TOTAL RETURN (C) 3.37% 0.23% 2.07% 2.03% 2.83% 4.30% 5.38% 2.95%
- --------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------
Expenses 0.59% 0.59%* 0.58% 0.54% 0.45% 0.35% 0.38% 0.40%*
- --------------------------------
Net investment income 3.33% 2.71%* 2.03% 2.00% 2.76% 4.19% 5.27% 5.86%*
- --------------------------------
Ratio of net investment
Expense waiver/
reimbursement (d) 0.50% 0.44%* 0.40% 0.35% 0.58% 0.75% 0.86% 0.89%*
- --------------------------------
SUPPLEMENTAL DATA
- --------------------------------
Net assets, end of period
(000 omitted) $96,534 $81,563 $74,707 $104,322 $59,709 $56,754 $50,391 $36,628
- --------------------------------
</TABLE>

* Computed on an annualized basis.

(a) For the one month ended October 31, 1994. The Fund changed its fiscal
year-end from September 30 to October 31, beginning September 30, 1994.

(b) Reflects operations for the period from March 15, 1989 (date of initial
public offering) to September 30, 1989.

(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(d) This voluntary expense decrease is reflected in both the expense and net

investment income ratios shown above.

ADDRESSES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
California Municipal Cash Trust
Institutional Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600
Boston, MA 02266-8600
- ------------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- ------------------------------------------------------------------------------------------------
</TABLE>

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

- --------------------------------------------------------------------------------
CALIFORNIA MUNICIPAL
CASH TRUST
INSTITUTIONAL SHARES
PROSPECTUS

A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company

Prospectus dated February 29, 1996

FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------

Distributor

A subsidiary of FEDERATED INVESTORS

FEDERATED INVESTORS TOWER

PITTSBURGH, PA 15222-3779

Cusip 314229675

G00300-01-IS (3/96)

CALIFORNIA 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
prospectus(es) of California Municipal Cash Trust (the "Fund"), a portfolio
of Federated Municipal Trust (the "Trust") dated December 31, 1995 and
February 29, 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 February 29, 1996

Federated Securities Corp.
Distributor
A subsidiary of Federated Investors

INVESTMENT POLICIES 1

Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
Ratings 1
When-Issued and Delayed Delivery
Transactions 1
Repurchase Agreements 2
Credit Enhancement 2
CALIFORNIA INVESTMENT RISKS 2

INVESTMENT LIMITATIONS 3

Investments in Any One Issuer 4
Regulatory Compliance 5
FEDERATED MUNICIPAL TRUST MANAGEMENT 5

Share Ownership 10
Trustee Compensation 10
Trustee Liability 11
INVESTMENT ADVISORY SERVICES 11

Investment Adviser 11
Advisory Fees 11
State Expense Limitations 11

BROKERAGE TRANSACTIONS 11

OTHER SERVICES 12

Fund Administration 12
Custodian and Portfolio Recordkeeper 12
Transfer Agent 12
SHAREHOLDER SERVICES AGREEMENT 12

DETERMINING NET ASSET VALUE 12

REDEMPTION IN KIND 13

MASSACHUSETTS PARTNERSHIP LAW 13

THE FUND'S TAX STATUS 13

PERFORMANCE INFORMATION 13

Yield 13
Effective Yield 14
Tax-Equivalent Yield 14
Tax-Equivalency Table 14
Total Return 15
Performance Comparisons 15
ABOUT FEDERATED INVESTORS 15

Mutual Fund Market 16
Institutional Clients 16
Trust Organizations 16
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 16

FINANCIAL STATEMENTS 17

APPENDIX 18

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

LIMITS ON TAXING AND SPENDING AUTHORITY
Developments in California ( the "State" or "California") which constrain the
taxing and spending authority of California governmental entities could
adversely affect the ability of such entities to meet their interest and/or
principal payment obligations on securities they have issued or will issue.
The following information constitutes only a brief summary and is not intended
as a complete description.

In 1978, a statewide referendum approved Proposition 13, an amendment to the
California Constitution limiting both the valuation of real property for
property tax purposes and the power of local taxing authorities to increase
real property tax revenues. To provide revenue to local governments,
legislation was enacted shortly thereafter providing for the redistribution to
local governments of the State's then existing surplus in its General Fund,
reallocation of revenues to local governments, and assumption by the State of
certain local government obligations. More recent California legislation has,
however, reduced State assistance payments to local governments and
reallocated a portion of such payments to the State's General Fund.
In 1979, California voters amended the California Constitution again by
passing Article XIII B, which imposes an appropriations limit on the spending
authority of certain State and local government entities. The State's
appropriations limit is based on its 1978-1979 fiscal year authorizations to
expend proceeds of taxes and is adjusted annually to reflect changes in cost
of living and population and transfer of financial responsibility from one
governmental unit to another. If a California governmental entity raises
revenues beyond its appropriations limit, the excess must be returned to the
entity's taxpayers within the two subsequent fiscal years, generally by a tax
credit, refund, or temporary suspension of tax rates or fee schedules. These
spending limitations do not, however, apply to the debt service on obligations
existing or legally authorized as of January 1, 1979, or on bonded
indebtedness thereafter approved by the voters.
In November 1988, California voters approved Proposition 98. This initiative
requires that revenues in excess of amounts permitted to be spent, and which
would otherwise be returned by revision of tax rates or fee schedules, be
transferred and allocated (up to a maximum of 4%) to the State School Fund and
be expended solely for purposes of instructional improvement and

accountability. Any funds allocated to the State school fund shall cause the
appropriation limits to be annually increased for any such allocation made in
the prior year. Proposition 98 also requires the State to provide a minimum
level of funding for public schools and community colleges. The initiative
permits the enactment of legislation, by a two-thirds vote, to suspend the
minimum funding requirement for one year.
On September 28, 1995, the California Supreme Court upheld the
constitutionality of Proposition 62. This referendum was approved by the
State's voters in 1986, but not enforced due to previous judicial decisions.
Proposition 62 requires a two-thirds voter approval for special taxes and a
new simple majority approval for general municipal purposes. The future effect
of Proposition 62 on the financial performance of California local governments
and on note and debt security in unclear. It is possible that court
challenges, based on Proposition 62, to taxes raised or imposed after 1986,
may reduce general municipal revenues available for financing municipal
operations and services, including repayment of tax anticipation notes and
other forms of debt such as certificates of participation.
The effect of these various constitutional and statutory changes upon the
ability of California municipal securities issuers to pay interest and
principal on their obligations remains unclear. Furthermore, other measures
affecting the taxing or spending authority of California or its political
subdivisions may be approved or enacted in the future.
ECONOMIC DEVELOPMENTS
The California economy is in recovery. Statewide unemployment in September,
1995 was one full percentage point lower that in September, 1994. Major
sectors of employment growth have been high tech industries and motion picture
production. Gains in these and other sectors have more than offset continued
job losses in the aerospace and financial services industries. Other positive

economic developments include greatly increased exports, new home construction
and retail sales.
As a result of the improvement in the economy, tax revenues have been higher
than budgeted. In the first quarter of fiscal year 1996, the State's General
(operating) Fund revenues were $525 million (5.3%) above the budget forecast.
Financial challenges clearly remain, as the budget for fiscal year 1996
appears to reflect optimism about certain revenue sources, most notably
federal government aid for illegal immigrants.
INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for clearance
of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money in amounts up to one-third of the value of its total assets, including
the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate management of
the portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous.The Fund will not purchase any securities while borrowings in
excess of 5% of the value of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings. In those cases, it may pledge assets

having a market value not exceeding the lesser of the dollar amounts borrowed
or 15% of the value of total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may acquire publicly
or non-publicly issued California municipal securities or temporary
investments or enter into repurchase agreements, in accordance with its
investment objective, policies, limitations, and the Trust's Declaration of
Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchaseor sell real estate, although it may invest in
securities of issuers whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or interests in real
estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase, 25% or
more of the value of its total assets would be invested in any one industry,
or in industrial development bonds or other securities, the interest upon
which is paid from revenues of similar types of projects. However, the Fund
may invest as temporary investments more than 25% of the value of its assets
in cash or certain money market instruments, securities issued or guaranteed

by the U.S. government, its agencies or instrumentalities, or instruments
secured by these money market instruments, such as repurchase agreements.
INVESTMENTS IN ANY ONE ISSUER
With respect to securities comprising 75% of its assets, the Fund will not
invest more than 10% of its total assets in the securities of any one issuer
(except cash and cash items, repurchase agreements collateralized by U.S.
government securities, and U.S. government obligations).
Under this limitation, each governmental subdivision, including states,
territories, possessions of the United States, or their political
subdivisions, agencies, authorities, instrumentalities, or similar entities,
will be considered a separate issuer if its assets and revenues are separate
from those of the government body creating it and the security is backed only
by its own assets and revenues.
Industrial development bonds backed only by the assets and revenues of a non-
governmental user are considered to be issued solely by that user. If in the
case of an industrial development bond or government- issued security, a
governmental or other entity guarantees the security, such guarantee would be
considered a separate security issued by the guarantor, as well as the other
issuer, subject to limited exclusions allowed by the Investment Company Act of
1940.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under federal securities law, except for

restricted securities determined to be liquid under criteria established by
the Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies, except as
part of a merger, consolidation, or other acquisition.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers (including companies responsible for paying principal
and interest on industrial development bonds) which have records of less than
three years of continuous operations, including the operation of any
predecessor.
INVESTING FOR CONTROL
The Fund will not invest in securities of a company for the purpose of
exercising control or management.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES
The Fund will not purchase or retain the securities of any issuer if the
Officers and Trustees of the Trust or its investment adviser, owning
individually more than .50 of 1% of the issuer's securities, together own more
than 5% of the issuer's securities.
INVESTING IN OPTIONS
The Fund will not invest in puts, calls, straddles, spreads, or any
combination of them.

INVESTING IN MINERALS
The Fund will not purchase or sell interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase the
securities of issuers which invest in or sponsor such programs.
For purposes of the above limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic
bank or savings association having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items." Except
with respect to borrowing money, if a percentage limitation is adhered to at
the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the
value of its net assets during the last fiscal year and has no present intent
to do so during the coming fiscal year.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940. In particular, the Fund
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. The Fund will determine the effective maturity of its
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The Fund
may change these operational policies to reflect changes in the laws and
regulations without the approval of its shareholders.

FEDERATED MUNICIPAL TRUST MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Municipal Trust, and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director, Trustee, or Managing General Partner of
the Funds. Mr. Donahue is the father of J. Christopher Donahue, Vice President
of the Trust .

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital
of Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.

John T. Conroy, Jr.
Wood/IPC Commercial Department

John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds;
formerly, President, Naples Property Management, Inc.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director, Trustee, or Managing General Partner of the Funds.

Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.

Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative
Services.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation.

Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee

Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; founding Chairman, National Advisory

Council for Environmental Policy and Technology and Federal Emergency
Management Advisory Board.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Administrative Services, Federated Services Company, and
Federated Shareholder Services; President or 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
Company.

Edward C. Gonzales

Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Services Company; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; President,
Executive Vice President and Treasurer of some of the Funds.

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 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, Controller and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice President,
Federated Shareholder Services; Vice President, Federated Administrative
Services; Treasurer of some of the Funds.

ARMs Fund; Federated Equity Funds; Federated GNMA Trust; Federated Government
Trust; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Master Trust; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated Stock
Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government Securities
Fund: 1-3 Years; Federated U.S. Government Securities Fund: 3-5 Years;
Federated U.S. Government Securities Fund 5-10 Years; First Priority Funds;
Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund,
Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund
for U.S. Government Securities, Inc.; Government Income Securities, Inc.; High
Yield Cash Trust; Insurance Management Series; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment
SeriesTrust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund,
Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S. Government Money
Market Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.;
Liquid Cash Trust; Managed Series Trust; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; 111 Corcoran Funds; Peachtree Funds; The Planters
Funds; RIMCO Monument Funds; Star Funds; The Starburst Funds; The Starburst
Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; Trademark Funds; Trust for Financial Institutions;
Trust For Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; The Virtus Funds; World
Investment Series, Inc.

SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.
As of January 12, 1996, the following shareholder(s) of record owned 5% or
more of the outstanding Institutional Service Shares of the California
Municipal Cash Trust: Citibank NA, Long Island City, NY, 19.65%; Fiduciary
Trust Co. International, New York, NY, 15.40%; Borel Bank & Trust, San Mateo,
CA, 9.32%; REPUB & Co. Los Angeles, CA, 8.57%; Northern Trust Co., Chicago ,
IL 6.95%; First Interstate Bank, Calabasas, CA, 6.88%; and SBT & Co., La
Jolla, CA 5.48%.
TRUSTEE COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

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
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 $104,898 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
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
fifteen 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. For the fiscal year ended October
31, 1995, and for the period from October 1, 1994 to October 31, 1994, the
adviser earned $465,758 and $34,909, respectively, of which $402,906 and
$30,860, respectively, were waived. For the fiscal year ended September 30,
1994 and 1993, the adviser earned $469,163 and $541,209, respectively, of
which $370,160 and $376,910, respectively, were waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1-1/2% per
year of the remaining average net assets, the adviser will reimburse the
Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the adviser will generally use
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. The
adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to guidelines established by the Trustees. The adviser may
select brokers and dealers who offer brokerage and research services. These
services may be furnished directly to the Fund or to the adviser and may
include: advice as to the advisability of investing in securities; security
analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research services
provided by brokers and dealers may be used by the adviser or its affiliates
in advising theFund and other accounts. To the extent that receipt of these
services may supplant services for which the adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses. The adviser and
its affiliates exercise reasonable business judgment in selecting brokers who
offer brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided. During the fiscal year ended October 31, 1995, and for the period
from October 1, 1994 to October 31, 1994, as well as the fiscal years ended
September 30, 1994 and 1993, the Fund paid no brokerage commissions.
Although investment decisions for the Fund are made independently from those
of the other accounts managed by the adviser, investments of the type the Fund
may make may also be made by those other accounts. When the Fund and one or

more other accounts managed by the adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.
OTHER SERVICES

FUND ADMINISTRATION
FEDERATED ADMINISTRATIVE SERVICES, A SUBSIDIARY OF FEDERATED INVESTORS,
PROVIDES ADMINISTRATIVE PERSONNEL AND SERVICES TO THE FUND FOR A FEE AS
DESCRIBED IN THE PROSPECTUS. DR. HENRY J. GAILLIOT, AN OFFICER OF FEDERATED
MANAGEMENT, THE ADVISER TO THE FUND, HOLDS APPROXIMATELY 20% OF THE
OUTSTANDING COMMON STOCK AND SERVES AS A DIRECTOR OF COMMERCIAL DATA SERVICES,
INC., A COMPANY WHICH PROVIDES COMPUTER PROCESSING SERVICES TO FEDERATED
ADMINISTRATIVE SERVICES.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
TRANSFER AGENT

As transfer agent, Federated 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 PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
SHAREHOLDER SERVICES AGREEMENT

This arrangement permits the payment of fees to Federated Shareholder Services
and financial institutions to cause services to be provided which are
necessary for the maintenance of shareholder accounts and to encourage
personal services to shareholders by a representative who has knowledge of the
shareholder's particular circumstances and goals. These activities and
services may include, but are not limited to: providing office space,
equipment, telephone facilities, and various clerical, supervisory, computer,
and other personnel as necessary or beneficial to establish and maintain
shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries; and assisting clients in changing dividend
options, account designations, and addresses. By adopting the Shareholder
Services Agreement, the Trustees expect that the Fund will benefit by:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.

For the fiscal year ended October 31, 1995, the Fund paid shareholder services
fees in the amount of $232,864 on behalf of Institutional Service Shares, of

which $65,184 were waived. Institutional Shares did not exist prior to
February 29, 1996.

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

defend any claim made and pay any judgment against a shareholder for any act
or obligation of the Trust. Therefore, financial loss resulting from liability
as a shareholder will occur only if the Trust itself cannot meet its
obligations to indemnify shareholders and pay judgments against them.
THE FUND'S TAX STATUS

To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its net
income earned during the year.
PERFORMANCE INFORMATION

Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers charge
fees in connection with services provided in conjunction with an investment in
shares of the Fund, the performance will be reduced for those shareholders
paying those fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding
capital changes but including the value of any additional shares purchased
with dividends earned from the original one share and all dividends declared

on the original and any purchased shares; dividing the net change in the
account's value by the value of the account at the beginning of the base
period to determine the base period return; and multiplying the base period
return by 365/7.

The Fund's yield for Institutional Service Shares for the seven-day period
ended October 31, 1995, was 3.31%. Institutional Shares did not exist prior
to February 29, 1996.

EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.

The Fund's effective yield for Institutional Service Shares for the seven-day
period ended October 31, 1995, was 3.37%. Institutional Shares did not exist
prior to February 29, 1996.

TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Fund is calculated similarly to the yield but
is adjusted to reflect the taxable yield that the Fund would have had to earn
to equal its actual yield, assuming a 39.6% tax rate (the maximum effective
federal rate for individuals) and assuming that income is 100% exempt.

The Fund's tax-equivalent yield for Institutional Service Shares for the
seven-day period ended October 31, 1995, was 6.70%. Institutional Shares did
not exist prior to February 29, 1996.

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 CALIFORNIA

COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
21.00% 37.30% 40.30% 46.00% 49.60% 50.60%

JOINT $1 - $40,101 - $96,901 - $147,701 - $263,751 OVER
RETURN 40,100 96,900 147,700 263,750 439,744 $439,744

TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT

1.50% 1.90% 2.39% 2.51% 2.78% 2.98% 3.04%
2.00% 2.53% 3.19% 3.35% 3.70% 3.97% 4.05%
2.50% 3.16% 3.99% 4.19% 4.63% 4.96% 5.06%

3.00% 3.80% 4.78% 5.03% 5.56% 5.95% 6.07%
3.50% 4.43% 5.58% 5.86% 6.48% 6.94% 7.09%
4.00% 5.06% 6.38% 6.70% 7.41% 7.94% 8.10%
4.50% 5.70% 7.18% 7.54% 8.33% 8.93% 9.11%
5.00% 6.33% 7.97% 8.38% 9.26% 9.92% 10.12%
5.50% 6.96% 8.77% 9.21% 10.19% 10.91% 11.13%

The chart above is for illustrative purposes only. It is not an indicator
of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.

TOTAL RETURN
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is computed
by multiplying the number of shares owned at the end of the period by the net
asset value per share at the end of the period. The number of shares owned at
the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends and
distributions.

The average annual total returns for the one-year and five-year periods ended
October 31, 1995, and for the period from April 3, 1989 (date of initial
public investment) through October 31, 1995 for Institutional Service Shares,
were 3.37%, 2.87%, and 3.52%, respectively. Institutional Shares did not exist
prior to February 29, 1996.

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
$31 billion in assets across approximately 43 money market funds, including 17
government, 8 prime and 18 municipal with assets approximating $17 billion,
$7.4 billion and $6.6 billion, respectively.

Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional
clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
*Source: Investment Company Institute
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios.
The marketing effort to trust clients is headed by Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.

FINANCIAL STATEMENTS

The financial statements for the fiscal year ended October 31, 1995 are
incorporated herein by reference to the Fund's Prospectus dated December 31,
1995 (File No. 811-5911). A copy of the Prospectus may be obtained without
charge by contacting the Fund at the address located on the back cover of the
prospectus.

APPENDIX

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 as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
AA Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in AAA securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term
indebtedness. However, management considers them to be of comparable
quality to securities rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "Aaa" by Moody's.

NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "Aa" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.

G00329-02 (3/96)
Cusip 314229766
Cusip 314229675

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

- --------------------------------------------------------------------------------
MICHIGAN MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS

The Institutional Shares of Michigan Municipal Cash Trust (the "Fund") offered
by this prospectus represent interests in a non-diversified portfolio of
Federated Municipal Trust (the "Trust"), an open-end management investment
company (a mutual fund). The Fund invests primarily in short-term Michigan
municipal securities, including securities of states, territories, and
possessions of the United States which are not issued by or on behalf of

Michigan, or its political subdivisions and financing authorities, but which
provide income exempt from federal regular income tax and the personal income
tax imposed by the State Michigan consistent with stability of principal and
liquidity. In addition, the Fund intends to qualify as an investment
substantially exempt from the Michigan intangibles tax.

This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.

Prospectus dated February 29, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

GENERAL INFORMATION 2

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

INVESTMENT INFORMATION 2

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

Investment Objective 2

Investment Policies 2

Michigan Municipal Securities 5
Investment Risks 5
Non-Diversification 5
Investment Limitations 6

FUND INFORMATION 6
- ------------------------------------------------------

Management of the Fund 6
Distribution of Institutional Shares 7
Administration of the Fund 8
Expenses of the Fund and
Institutional Shares 8

NET ASSET VALUE 8
- ------------------------------------------------------

HOW TO PURCHASE SHARES 9
- ------------------------------------------------------

HOW TO REDEEM SHARES 10
- ------------------------------------------------------

ACCOUNT AND SHARE INFORMATION 11

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

TAX INFORMATION 11
- ------------------------------------------------------

Federal Income Tax 11
State and Local Taxes 12

OTHER CLASSES OF SHARES 12
- ------------------------------------------------------

PERFORMANCE INFORMATION 13
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SERVICE SHARES 14

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

ADDRESSES 15
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)......... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)................................................. None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)............................... None
Redemption Fee (as a percentage of amount redeemed, if applicable).................... None
Exchange Fee.......................................................................... None
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee (after waiver)(1)...................................................... 0.00%
12b-1 Fee............................................................................. None
Total Other Expenses (after expense reimbursement).................................... 0.37%
Shareholder Services Fee (after waiver)(2)................................. 0.00%
Total Operating Expenses(3)...................................................... 0.37%
</TABLE>

(2) The maximum shareholder services fee is 0.25%.

(3) The total operating expenses are estimated to be 1.95% 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 operating expenses in the table above 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.

<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ------------------------------------------------------------------------ ------ --------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1)
5% annual return and (2) redemption at the end of each time period.... $4 $ 12
</TABLE>

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 for financial institutions acting in an
agency or fiduciary capacity as a convenient means of accumulating an interest
in a professionally managed, non-diversified portfolio investing primarily in
short-term Michigan municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Michigan taxpayers because it invests
in municipal securities of that state. A minimum initial investment of $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 and the personal income tax imposed by the state of Michigan
consistent with stability of principal and liquidity. This investment objective
cannot be changed without shareholder approval. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
complying with the various requirements of Rule 2a-7 under the Investment
Company Act of 1940 which regulates money market mutual funds and by following
the investment policies described in this prospectus. In addition, the Fund
intends to qualify as an investment substantially exempt from the Michigan
Intangibles Personal Property Tax ("intangibles tax").

INVESTMENT POLICIES

The Fund pursues its investment objective by investing in a portfolio of
Michigan municipal securities maturing in 13 months or less. As a matter of
investment policy, which cannot be changed without shareholder approval, at
least 80% of the Fund's annual interest income will be exempt from federal
regular income tax and Michigan state income and intangibles tax. (Federal
regular income tax does not include the federal individual alternative minimum

tax or the federal alternative minimum tax for corporations. The average
maturity of the securities in the Fund's portfolio, computed on a dollar-
weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies may be changed by the Trustees without shareholder approval.
Shareholders will be notified before any material change in these policies
becomes effective.

ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued
by or on behalf of Michigan and its political subdivisions and financing
authorities, and obligations of other states, territories, and possessions of
the United States, including the District of Columbia, and any political

subdivision or financing authority of any of these, the income from which is, in
the opinion of qualified legal counsel, exempt from federal regular income tax
and Michigan personal income tax ("Michigan Municipal Securities"). Examples of
Michigan Municipal Securities include, but are not limited to:

- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;

- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;

- municipal commercial paper and other short-term notes;

- variable rate demand notes;

- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and

- participation, trust, and partnership interests in any of the foregoing
obligations.

PARTICIPATION INTERESTS. The Fund may purchase interests in Michigan
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from

federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Michigan Municipal
Securities.

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.

to restrictions on resale under federal securities laws. Under criteria
established by the Trustees, certain restricted securities are determined to be
liquid. To the extent that restricted securities are not determined to be liquid
the Fund will limit their purchase, together with other illiquid securities, to
10% of its net assets.

TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines that market conditions call for a temporary defensive posture, the
Fund may invest in tax-exempt or taxable securities, all of comparable quality
to other securities in which the Fund invests, such as: obligations issued by or
on behalf of municipal or corporate issuers; obligations issued or guaranteed by
the U.S. government, its agencies, or instrumentalities; instruments issued by a
U.S. branch of a domestic bank or other deposit 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 Municipal
Securities is subject to the federal alternative minimum tax.

MICHIGAN MUNICIPAL SECURITIES

Michigan Municipal Securities are generally issued to finance public works, such
as airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also issued to

repay outstanding obligations, to raise funds for general operating expenses,
and to make loans to other public institutions and facilities.

Michigan Municipal Securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.

The two principal classifications of Michigan Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.

INVESTMENT RISKS

Yields on Michigan Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market and of
the municipal bond market; the size of the particular offering; the maturity of
the obligations; and the rating of the issue. The ability of the Fund to achieve
its investment objective also depends on the continuing ability of the issuers
of Michigan Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and

principal when due. In addition, from time to time, the supply of Michigan
Municipal Securities acceptable for purchase by the Fund could become limited.

The Fund may invest in Michigan Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Michigan Municipal Securities could involve an increased risk to the Fund should
any of these related projects or facilities experience financial difficulties.

Obligations of issuers of Michigan Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.

NON-DIVERSIFICATION

INVESTMENT LIMITATIONS

The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge assets to secure such borrowings. These investment limitations
cannot be changed without shareholder approval.

FUND INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. 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.

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.

DISTRIBUTION OF INSTITUTIONAL SHARES

SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to .25 of 1% of the average
daily net asset value of Institutional Shares, computed at an annual rate, to
obtain certain personal services for shareholders and provide maintenance of
shareholder accounts ("shareholder services"). From time to time and for such
periods as deemed appropriate, the amount stated above may be reduced
voluntarily.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:

<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- --------------------- ------------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>

EXPENSES OF THE FUND AND INSTITUTIONAL SHARES

Holders of shares pay their allocable portion of Fund and Trust expenses.

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

and dividing the remainder by the number of shares outstanding. The Fund cannot
guarantee that its net asset value will always remain at $1.00 per share.

The net asset value is determined at 12:00 p.m., 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

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

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: Michigan Municipal Cash
Trust--Institutional Shares; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.

PURCHASING SHARES BY CHECK. Shares may be purchased by mailing a check made
payable to Michigan Municipal Cash Trust-Institutional Shares to Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600. Orders by
mail are considered received when payment by check is converted into federal
funds. This is normally the next business day after the check is received.

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

REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by calling
the Fund provided the Fund has a properly completed authorization form. These
forms can be obtained from Federated Securities Corp. Proceeds from redemption
requests received before 12:00 p.m. (Eastern time) will be wired the same day to
the shareholder's account at a domestic commercial bank which is a member of the
Federal Reserve System, but will not include that day's dividend. Proceeds from
redemption requests received after that time include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement.

Telephone instructions may be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

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 3:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by check begin earning dividends the day after the check is converted
into federal funds.

VOTING RIGHTS. Each share of the Trust gives the shareholder one vote in
Trustee elections and other matters submitted to shareholders for vote. All
shares of all classes of each portfolio in the Trust have equal voting rights,
except that in matters affecting only a particular portfolio or class, only
shares of that portfolio or class are entitled to vote. The Trust is not
required to hold annual shareholder meetings. Shareholder approval will be
sought only for certain changes in the Trust's or the Fund's operation and for
election of Trustees under certain circumstances.

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

FEDERAL INCOME TAX

Shareholders are not required to pay the federal regular income tax on any

dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act

Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.

These tax consequences apply whether dividends are received in cash or as
additional shares.

STATE AND LOCAL TAXES

Income from the Fund is not necessarily free from taxes in states other than
Michigan. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.

MICHIGAN TAX CONSIDERATIONS. Under existing Michigan laws, distributions made
by the Fund will not be subject to Michigan personal income taxes to the extent
that such distributions qualify as exempt-interest dividends under the Internal
Revenue Code, and represent (i) interest from obligations of Michigan or any of
its political subdivisions, or (ii) income from obligations of the United States
government which are exempted from state income taxation by a law of the United
States.

The portion of a shareholder's shares in the Fund representing (i) bonds or
other similar obligations of Michigan or its political subdivisions, or (ii)
obligations of the United States which are exempt from taxation by a law of the
United States, and dividends paid by the Fund representing interest payments on
securities, will be exempt from Michigan intangibles tax. 1995 Public Act 5
repeals the intangibles tax effective January 1, 1998.

Distributions by the Fund are not subject to the Michigan Single Business Tax to
the extent that such distributions are derived from interest on obligations of
Michigan or its political subdivisions, or obligations of the United States
government that are exempt from state taxation by a law of the United States.

Certain municipalities in Michigan also impose an income tax on individuals and
corporations. However, to the extent that the dividends from the Funds are
exempt from federal regular income taxes, such dividends also will be exempt
from Michigan municipal income taxes.

OTHER CLASSES OF SHARES

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

The Fund also offers another class of shares called Institutional Service
Shares. Institutional Service Shares are sold at net asset value primarily to
financial institutions and are subject to a minimum initial investment of
$10,000 within a 90-day period.

Both classes are subject to certain of the same expenses.

Institutional Service Shares are distributed with no 12b-1 Plan but are subject
to shareholder services fees.

Expense differences between classes may affect the performance of each class.

To obtain more information and a prospectus for any other class, investors may
call 1-800-235-4669.

PERFORMANCE INFORMATION

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

From time to time, the Fund advertises its total return, yield, effective yield,
and tax-equivalent yield. The performance figures will be calculated separately
for each class of shares.

From time to time, advertisements for the Fund may refer to ratings, rankings,

and other information in certain financial publications and/or compare the

Fund's performance to certain indices.

MICHIGAN MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 1995(A)
----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.01
- ----------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Distributions from net investment income (0.01)
- ---------------------------------------------------------------------- -------------
NET ASSET VALUE, END OF PERIOD $ 1.00
- ---------------------------------------------------------------------- -------------
TOTAL RETURN (B) 1.35%
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 0.32%*
- ----------------------------------------------------------------------
Net investment income 3.67%*
- ----------------------------------------------------------------------
Expense waiver/reimbursement (c) 1.63%*
- ----------------------------------------------------------------------

SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $30,133
- ----------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from June 20, 1995 (date of initial
public investment) to October 31, 1995.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

ADDRESSES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Michigan Municipal Cash Trust
Institutional Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- ----------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
- ----------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600
Boston, MA 02266-8600
- ----------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- ----------------------------------------------------------------------------------------------
</TABLE>

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

- --------------------------------------------------------------------------------
MICHIGAN MUNICIPAL
CASH TRUST
INSTITUTIONAL SHARES
PROSPECTUS

A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company

Prospectus dated February 29, 1996

FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------

Distributor

A subsidiary of FEDERATED INVESTORS

FEDERATED INVESTORS TOWER

PITTSBURGH, PA 15222-3779

CUSIP 314229667

G01212-04-IS (3/96)

MICHIGAN 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
prospectus(es) of Michigan Municipal Cash Trust (the "Fund"), a portfolio of
Federated Municipal Trust (the "Trust") dated December 31, 1995 and February
29, 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 February 29, 1996

Federated Securities Corp.
Distributor
A subsidiary of Federated Investors

Investment Policies 3

Acceptable Investments 3
Participation Interests 3
Municipal Leases 3
Ratings 4
When-Issued and Delayed Delivery
Transactions 5
Repurchase Agreements 5
Credit Enhancement 6
Michigan Investment Risks 6

Investment Limitations 8

Regulatory Compliance 11
Federated Municipal Trust Management 12

The Funds 20
Share Ownership 21
Trustee Compensation 21
Trustee Liability 22
Investment Advisory Services 24

Investment Adviser 24
Advisory Fees 24
Brokerage Transactions 25

Other Services 26

Fund Administration 26
Custodian and Portfolio Recordkeeper26

Transfer Agent 27
Independent Public Accountants 27
Shareholder Services Agreement 27

Determining Net Asset Value 28

Redemption in Kind 29

Massachusetts Partnership Law 29

The Fund's Tax Status 30

Performance Information 30

Yield 31
Effective Yield 31
Tax-Equivalent Yield 31
Tax-Equivalency Table 32
Total Return 33
Performance Comparisons 34
About Federated Investors 35

Mutual Fund Market 36
Institutional Clients 36
Trust Organizations 36
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 37
Financial Statements 17

Appendix 18

INVESTMENT POLICIES

Unless indicated otherwise, the policies described below may be changed by the
Board of Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security; the issuer of any demand feature applicable to the security; or any
guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the Fund's
maximum maturity requirements so long as the participation interests include
the right to demand payment from the issuers of those interests. By purchasing
these participation interests, the Fund is buying a security meeting the
maturity and quality requirements of the Fund and also is receiving the tax-
free benefits of the underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments
by a governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the

appropriation for the lease. Furthermore, a lease may provide that the
participants cannot accelerate lease obligations upon default. The participants
would only be able to enforce lease payments as they became due. In the event
of a default or failure of appropriation, unless the participation interests
are credit enhanced, it is unlikely that the participants would be able to
obtain an acceptable substitute source of payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be terminated by
the lessee; the potential recovery, if any, from a sale of the leased property
upon termination of the lease; the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and prospects);
the likelihood that the lessee will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to its
operations (e.g., the potential for an "event of non-appropriation"); and any
credit enhancement or legal recourse provided upon an event of non-
appropriation or other termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations ("NRSROs") or be of comparable quality to
securities having such ratings. An NRSRO's two highest rating categories are
determined without regard for sub-categories and gradations. For example,
securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Ratings Group
("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or FIN-
1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all
considered rated in one of the two highest short-term rating categories. The
Fund will follow applicable regulations in determining whether a security rated

by more than one NRSRO can be treated as being in one of the two highest short-
term rating categories; currently, such securities must be rated by two NRSROs
in one of their two highest rating categories. See "Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund`s
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities to
the Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase price
on any sale of such securities. The Fund or its custodian will take possession
of the securities subject to repurchase agreements, and these securities will
be marked to market daily. In the event that a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Fund believes that under the regular
procedures normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Fund and allow retention or disposition of such securities. The
Fund will only enter into repurchase agreements with banks and other recognized

financial institutions, such as broker/dealers, which are deemed by the Fund's
adviser to be creditworthy pursuant to guidelines established by the Trustees.
CREDIT ENHANCEMENT
The Fund typically evaluates the credit quality and ratings of credit-enhanced
securities based upon the financial condition and ratings of the party
providing the credit enhancement (the "credit enhancer"), rather than the
issuer. However, credit-enhanced securities will not be treated as having been
issued by the credit enhancer for diversification purposes, unless the Fund has
invested more than 10% of its assets in securities issued, guaranteed or
otherwise credit enhanced by the credit enhancer, in which case the securities
will be treated as having been issued by both the issuer and the credit
enhancer.
The Fund may have more than 25% of its total assets invested in securities
credit enhanced by banks.
MICHIGAN INVESTMENT RISKS

Michigan's economy continues to be among the most cyclical of states, remaining
heavily dependent on domestic auto production and durable goods consumption.
While manufacturing comprises 23% of the total jobs in the state in 1991,
relative to 17% nationally, it comprises a lesser share than in the 1970s when
it was 35%. The automobile industry has reduced its share of employment to 6.9%
of total employment, compared with 10.8% in 1979. In fact, Michigan's economy
continues to shift away from durable goods manufacturing to a more diversified
base reliant on services and trade. This shift to jobs in service and trade
industries has, however, resulted in declines in per capita income relative to
the nation.
As of June 1995, unemployment stood at 6.2%, still above the national level of
5.6%. However, the economic recovery from the early 1990s recession has proved

hearty in Michigan as employment levels reached an all-time high, attracting
more workers into the labor force.
On August 19, 1993, the Governor of Michigan signed into law Act 145, Public
Acts of Michigan, 1993 (Act 145), a measure which significantly impacted
financing of primary and secondary school operations and which has resulted in
additional property tax and school reform legislation. Michigan's school
finance reform shifts the responsibility of funding schools away from the local
district and their real property tax bases to the state and an earmarked
portion of sales taxes. Moreover, the state government is also subject to a
revenue raising cap which is tied to the annual state personal income growth.
The margin between existing revenue and the constitutional cap is greatly
narrowed now that the state absorbs the costs of funding the local schools.
Over the long term the cap may reduce the state's flexibility to deal with
adverse financial developments.
Concerning Michigan's fiscal policy, the state has proven that it can maintain
a balanced budget, low debt levels and high reserves. While the state's Rainy
Day Fund was drawn down substantially during fiscal years 1990-92 in order to
meet budget needs of the state during fiscal stress, spending restraint and an
improved economy enabled the state to begin to restore balances in fiscal 1993.
By the end of fiscal 1994, the balances in the fund were $780 million and are
expected to reach $1.1 billion by the end of fiscal 1995. This makes the fund
one of the highest in the nation.
Because of the increased revenues in fiscal 1995, the governor proposed a tax
cut which would reduce revenues by $186 million. The governor also is proposing
that the state increase the deposit to the Rainy Day Fund by $110 million,
ending the year with a nominal $2 million surplus in the General Fund. The tax
cuts would reduce personal income taxes by increasing the personal exemption
from $2100 to $2400 and would reduce the Single Business Tax by excluding FICA,

workers compensation, and unemployment compensation from the tax liability
base. Reductions are also made to the intangibles tax. The full annual cost of
the tax cuts will be $246 million in fiscal 1996.
While Michigan's economy is in good standing now because of conservative
budgeting practices and the improved economy, the enduring effectiveness of
the state's financial management will continue to be tested by economic cycles.
INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for clearance of
transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow money
in amounts up to one-third of the value of its total assets, including the
amounts borrowed.
The Fund will not borrow money for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate management of
the portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous.The Fund will not purchase any securities while borrowings in
excess of 5% of the value of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings.

LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or hold
portfolio securities permitted by its investment objective, policies, and
limitations or the Trust's Declaration of Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited partnership
interests, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or interests in real estate.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection with
the sale of securities in accordance with its investment objective, policies,
and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in any
one industry, or in industrial development bonds or other securities the
interest upon which is paid from revenues of similar types of projects, except
that the Fund may invest 25% or more of the value of its total assets in cash,
cash items, or securities issued or guaranteed by the government of the United
States or its agencies, or instrumentalities and repurchase agreements
collateralized by such U.S. government securities.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees

without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under federal securities law, except for
restricted securities determined to be liquid under criteria established by the
Trustees.

INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies, except as
part of a merger, consolidation, or other acquisition.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers (including companies responsible for paying principal and
interest on industrial development bonds) which have records of less than three
years of continuous operations, including the operation of any predecessor.
INVESTING FOR CONTROL
The Fund will not invest in securities of a company for the purpose of
exercising control or management.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES
The Fund will not purchase or retain the securities of any issuer if the
Officers and Trustees of the Trust or its investment adviser, owning
individually more than .50 of 1% of the issuer's securities, together own more
than 5% of the issuer's securities.

INVESTING IN OPTIONS
The Fund will not invest in puts, calls, straddles, spreads, or any combination
of them.
INVESTING IN MINERALS
The Fund will not purchase or sell interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase the
securities of issuers which invest in or sponsor such programs.
For purposes of the above limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings association having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items." Except with
respect to borrowing money, if a percentage limitation is adhered to at the
time of investment, a later increase or decrease in percentage resulting from
any change in value or net assets will not result in a violation of such
limitation.
The Fund does not intend to borrow money or pledge securities in excess of 5%
of the value of its net assets during the coming fiscal year.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in 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.

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.

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.

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.

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.

Trustee, Federated Administrative Services, Federated Services Company, and
Federated Shareholder Services; 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 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 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, Controller and Trustee, Federated Investors; Controller,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., and Passport Research, Ltd.; Senior Vice President, Federated
Shareholder Services; Vice President, Federated Administrative Services;
Treasurer of some of the Funds.

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ 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:
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Equity Funds; Federated GNMA Trust; Federated Government
Trust; Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Term Municipal Trust;
Federated Short-Term U.S. Government Trust; Federated Stock Trust; Federated
Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S. Government
Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S.
Government Securities Fund: 3-5 Years; Federated U. S. Government Securities
Fund 5-10 Years; First Priority Funds; Fixed Income Securities, Inc.; Fortress
Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund,
Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash Trust; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;

Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc. - 1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; RIMCO Monument Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust For Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; The
Virtus Funds; World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.
As of January 12, 1996, the following shareholder(s) of record owned 5% or more
of the outstanding Institutional Service Shares of the Michigan Municipal Cash
Trust: McDonald & Co. Securities Inc., Cincinnati, OH, 35.45%; ENBANCO,
Traverse City, MI, 9.51%; First MAR & Co., Marquette, MI, 7.16%; and Keith
Crane, Detroit, MI, 9.56%.

TRUSTEE 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
Glen R. Johnson $0 $0 for the Trust and
President and Trustee 9 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 $104,898 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
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
fifteen 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. For the period from June 20, 1995
(date of initial public investment) to October 31, 1995, the adviser earned
$32,107, all of which was waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses) exceed
2-1/2% per year of the first $30 million of average net assets, 2% per
year of the next $70 million of average net assets, and 1-1/2% per year of
the remaining average net assets, the adviser will reimburse the Fund for
its expenses over the limitation.

If the Fund's monthly projected operating expenses exceed this limitation,
the investment advisory fee paid will be reduced by the amount of the
excess, subject to an annual adjustment. If the expense limitation is
exceeded, the amount to be reimbursed by the adviser will be limited, in
any single fiscal year, by the amount of the investment advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better
price and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Trustees. The adviser may select brokers and
dealers who offer brokerage and research services. These services may be
furnished directly to the Fund or to the adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the adviser or its affiliates in advising the Fund and
other accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship

to the value of the brokerage and research services provided. During the period
from June 20, 1995 (date of initial public investment) to October 31, 1995,
the Fund paid no brokerage commissions.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received
by the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
OTHER SERVICES

FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the period from June 20, 1995 (date of initial
public investment) to October 31, 1995, Federated Administrative Services
earned $45,548. Dr. Henry J. Gailliot, an officer of Federated Management, the
adviser to the Fund, holds approximately 20% of the outstanding common stock
and serves as a director of Commercial Data Services, Inc., a company which
provides computer processing services to Federated Administrative Services.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.

TRANSFER AGENT

As transfer agent, Federated Shareholder Services Company maintains all
necessary shareholder records. For its services, the transfer agent receives a
fee based on on the size, type and number of accounts and transactions made by
shareholders.

INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
SHAREHOLDER SERVICES AGREEMENT

This arrangement permits the payment of fees to Federated Shareholder Services
and financial institutions to cause services to be provided which are necessary
for the maintenance of shareholder accounts and to encourage personal services
to shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may include,
but are not limited to: providing office space, equipment, telephone
facilities, and various clerical, supervisory, computer, and other personnel as
necessary or beneficial to establish and maintain shareholder accounts and
records; processing purchase and redemption transactions and automatic
investments of client account cash balances; answering routine client
inquiries; and assisting clients in changing dividend options, account
designations, and addresses. By adopting the Shareholder Services Agreement,
the Trustees expect that the Fund will benefit by: (1) providing personal
services to shareholders; (2) investing shareholder assets with a minimum of
delay and administrative detail; (3) enhancing shareholder recordkeeping

systems; and (4) responding promptly to shareholders' requests and inquiries
concerning their accounts.

For the period from June 20, 1995 (date of initial public investment) to
October 31, 1995,the Fund paid shareholder services fees in the amount of
$16,054 on behalf of Institutional Service Shares, none of which were waived.
Institutional Shares did not exist prior to February 29, 1996.

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

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

YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding
capital changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.

The Fund's yield for Insitutional Service Shares for the seven-day period ended
October 31, 1995, was 3.50%. Institutional Shares did not exist prior to
February 29, 1996.

The Fund's effective yield for Institutional Service Shares for the seven-day
period ended October 31, 1995, was 3.56%. Institutional Shares did not exist
prior to February 29, 1996.

TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Fund is calculated similarly to the yield but
is adjusted to reflect the taxable yield that the Fund would have had to earn

to equal its actual yield, assuming a 39.6% tax rate (the maximum effective
federal rate for individuals) and assuming that income is 100% exempt.

The Fund's tax-equivalent yield for Institutional Service Shares for the
seven-day period ended October 31, 1995, was 6.26%. Institutional Shares did
not exist prior to February 29, 1996.

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 MICHIGAN

COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
19.40% 32.40% 35.40% 40.40% 44.00%

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% 1.86% 2.22% 2.32% 2.52% 2.68%
2.00% 2.48% 2.96% 3.10% 3.36% 3.57%
2.50% 3.10% 3.70% 3.87% 4.19% 4.46%
3.00% 3.72% 4.44% 4.64% 5.03% 5.36%
3.50% 4.34% 5.18% 5.42% 5.87% 6.25%
4.00% 4.96% 5.92% 6.19% 6.71% 7.14%
4.50% 5.58% 6.66% 6.97% 7.55% 8.04%
5.00% 6.20% 7.40% 7.74% 8.39% 8.93%
5.50% 6.82% 8.14% 8.51% 9.23% 9.82%
6.00% 7.44% 8.88% 9.29% 10.07% 10.71%

Note: The maximum marginal tax rate for each bracket was used in calculating
the taxable yield equivalent. Furthermore, additional state and local taxes
paid on comparable taxable investments were not used to increase federal
deductions.
The chart above is for illustrative purposes only. It is not an indicator
of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.

TOTAL RETURN

Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is computed by
multiplying the number of shares owned at the end of the period by the net
asset value per share at the end of the period. The number of shares owned at
the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any additional
shares, assuming the monthly reinvestment of all dividends and distributions.
Cumulative total return reflects the Fund's total performance over a specific
period of time. For the period from June 20, 1995 (date of initial public
investment) through October 31, 1995, the cumulative total return for
Institutional Service Shares was 1.35%. This total return is representative of
only 4 months of activity since the date of initial public investment.
Institutional Shares did not exist prior to February 29, 1996.

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 $31 billion in assets
across approximately 43 money market funds, including 17 government, 8 prime
and 18 municipal with assets approximating $17 billion, $7.4 billion and $6.6
billion, respectively.

J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional
clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios.
The marketing effort to trust clients is headed by Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
*Source: Investment Company Institute

FINANCIAL STATEMENTS

APPENDIX

STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group ("S&P") note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.

VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a variable rate demand feature. The first rating (long-term
rating) addresses the likelihood of repayment of principal and interest when
due, and the second rating (short-term rating) describes the demand
characteristics. Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The
definitions for the long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
LONG-TERM DEBT RATINGS
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS

Moody's Investors Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below)). The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.

VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity.
In this case, two ratings are usually assigned, (for example, Aaa/VMIG-1); the
first representing an evaluation of the degree of risk associated with
scheduled principal and interest payments, and the second representing an
evaluation of the degree of risk associated with the demand feature. The VMIG
rating can be assigned a 1 or 2 designation using the same definitions
described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1 Issuers rated PRIME-1 (or related supporting institutions) have
a superior capacity for repayment of short- term promissory
obligations. PRIME-1 repayment capacity will normally be evidenced by the
following characteristics: leading market positions in well
established industries, high rates of return on funds employed,

conservative capitalization structure with moderate reliance on debt and
ample asset protection, broad margins in earning coverage of fixed
financial charges and high internal cash generation, well-
established access to a range of financial markets and assured sources of
alternate liquidity.
P-2 Issuers rated PRIME-2 (or related supporting institutions) have
a strong capacity for repayment of short- term promissory
obligations. This will normally be evidenced by many of the characteristics
cited above, but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is
maintained.
LONG-TERM DEBT RATINGS
AAA Bonds which are rated AAA are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger
than in AAA securities.

A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to
securities rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "Aaa" by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "Aa" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.

G01212 02 REV-1(3/96)
Cusip 314229725
Cusip 314229667

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

- --------------------------------------------------------------------------------
OHIO MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES

PROSPECTUS

The Institutional Shares of Ohio Municipal Cash Trust (the "Fund") offered by
this prospectus represent interests in a non-diversified portfolio of Federated
Municipal Trust (the "Trust"), an open-end management investment company (a
mutual fund). The Fund invests primarily in short-term Ohio municipal
securities, including securities of states, territories, and possessions of the
United States which are not issued by or on behalf of Ohio, or its political
subdivisions and financing authorities, but which provide current income exempt
from federal regular income tax and the personal income taxes imposed by the
State of Ohio and Ohio municipalities consistent with stability of principal.

This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.

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.

Prospectus dated February 29, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Objective 2
Investment Policies 2
Ohio Municipal Securities 5
Investment Risks 5
Non-Diversification 5
Investment Limitations 6

FUND INFORMATION 6
- ------------------------------------------------------

Management of the Fund 6
Distribution of Institutional Shares 7
Administration of the Fund 8
Expenses of the Fund and Institutional
Shares 8

NET ASSET VALUE 9
- ------------------------------------------------------

HOW TO PURCHASE SHARES 9
- ------------------------------------------------------

HOW TO REDEEM SHARES 10

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

ACCOUNT AND SHARE INFORMATION 11

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

TAX INFORMATION 11
- ------------------------------------------------------

Federal Income Tax 11
State and Local Taxes 12

OTHER CLASSES OF SHARES 13
- ------------------------------------------------------

PERFORMANCE INFORMATION 13
- ------------------------------------------------------

OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--CASH II SHARES 14
- ------------------------------------------------------

OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SERVICE SHARES 15
- ------------------------------------------------------

ADDRESSES 16
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES

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

<TABLE>
<S> <C> <C>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)................................................. None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds, as applicable)...................... None
Redemption Fee (as a percentage of amount redeemed, if applicable).................... None
Exchange Fee.......................................................................... None
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee (after waiver)(1)...................................................... 0.16%
12b-1 Fee............................................................................. None
Total Other Expenses.................................................................. 0.21%
Shareholder Services Fee (after waiver)(2)................................. 0.00%
Total Operating Expenses (3)................................................... 0.37%
</TABLE>

(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can terminate
this anticipated voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.40%.

(2) The maximum shareholder services fee is 0.25%.

(3) The total operating expenses are estimated to be 0.86% absent the
anticipated voluntary waivers of a portion of the management fee and the
shareholder services fee.

<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ------------------------------------------------------------------------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1)
5% annual return and (2) redemption at the end of each time period..... $4 $12
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE
IS BASED ON ESTIMATED DATA FOR 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 three classes of shares known as Institutional Shares,
Institutional Service Shares and Cash II Shares. This prospectus relates only to
Institutional Shares of the Fund, which are designed primarily for financial
institutions acting in a fiduciary or agency capacity as a convenient means of
accumulating an interest in a professionally managed, non-diversified portfolio
investing primarily in short-term Ohio municipal securities. The Fund may not be
a suitable investment for retirement plans or for non-Ohio taxpayers because it
invests in municipal securities of that state. A minimum initial investment of
$25,000 within a 90-day period is required.

The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Fund is current income exempt from federal
regular income tax and the personal income taxes imposed by the State of Ohio
and Ohio municipalities consistent with stability of principal. This investment
objective cannot be changed without shareholder approval. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by complying with the various requirements of Rule 2a-7 under the
Investment Company Act of 1940 which regulates money market mutual funds and by
following the investment policies described in this prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing in a portfolio of Ohio
municipal securities maturing in 13 months or less. As a matter of investment
policy, which cannot be changed without shareholder approval, at least 80% of
the Fund's annual interest income will be exempt from federal regular income tax
and Ohio state income taxes (Federal regular income tax does not include the
federal individual alternative minimum tax or the federal alternative minimum
tax for corporations.) The average maturity of the securities in the Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less. Unless
indicated otherwise, the investment policies may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material

change in these policies becomes effective.

ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued by
or on behalf of Ohio and its political subdivisions and financing authorities,
and obligations of other states, territories, and possessions of the United
States, including the District of Columbia, and any political subdivision or
financing authority of any of these, the income from which is, in the opinion of
qualified legal counsel, exempt from federal regular income tax and Ohio state
income tax imposed upon non-

corporate taxpayers ("Ohio Municipal Securities"). Examples of Ohio Municipal
Securities include, but are not limited to:

- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;

- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;

- municipal commercial paper and other short-term notes;

- variable rate demand notes;

- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases; and

- participation, trust, and partnership interests in any of the foregoing
obligations.

PARTICIPATION INTERESTS. The Fund may purchase interests in Ohio Municipal
Securities from financial institutions such as commercial and investment
banks, savings associations, and insurance companies. These interests may
take the form of participations, beneficial interests in a trust,
partnership interests or any other form of indirect ownership that allows
the Fund to treat the income from the investment as exempt from federal
income tax. The Fund invests in these participation interests in order to
obtain credit enhancement or demand features that would not be available
through direct ownership of the underlying Ohio Municipal Securities.

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

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.

10% of its net assets.

OHIO MUNICIPAL SECURITIES

Ohio Municipal Securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.

Ohio Municipal Securities include industrial development bonds issued by or on

behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.

The two principal classifications of Ohio Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.

INVESTMENT RISKS

Yields on Ohio Municipal Securities depend on a variety of factors, including:
the general conditions of the short-term municipal note market and of the
municipal bond market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue. The ability of the Fund to achieve its
investment objective also depends on the continuing ability of the issuers of
Ohio Municipal Securities and participation interests, or the credit enhancers
of either, to meet their obligations for the payment of interest and principal
when due. In addition, from time to time, the supply of Ohio Municipal
Securities acceptable for purchase by the Fund could become limited.

The Fund may invest in Ohio Municipal Securities which are repayable out of

revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in these
Ohio Municipal Securities could involve an increased risk to the Fund should any
of these related projects or facilities experience financial difficulties.

Obligations of issuers of Ohio Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors. In addition, the obligations of such issuers may become
subject to laws enacted in the future by Congress, state legislators, or
referenda extending the time for payment of principal and/or interest, or
imposing other constraints upon enforcement of such obligations or upon the
ability of states or municipalities to levy taxes. There is also the possibility
that, as a result of litigation or other conditions, the power or ability of any
issuer to pay, when due, the principal of and interest on its municipal
securities may be materially affected.

NON-DIVERSIFICATION

INVESTMENT LIMITATIONS

The Fund will not borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for a percentage
of its cash value with an agreement to buy it back on a set date)or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 15% of the value of
its total assets to secure such borrowings. These investment limitations cannot
be changed without shareholder approval.

FUND INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .40 of 1% of the Fund's average daily net assets. The adviser has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.

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

value of Institutional Shares, computed at an annual rate, to obtain certain
personal services for shareholders and provide maintenance of shareholder
accounts ("shareholder services"). From time to time and for such periods as
deemed appropriate, the amount stated above may be reduced voluntarily.

ADMINISTRATION OF THE FUND

<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- --------------------- -----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>

EXPENSES OF THE FUND AND INSTITUTIONAL SHARES

Holders of shares pay their allocable portion of Fund and Trust expenses.

NET ASSET VALUE
- --------------------------------------------------------------------------------

HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------

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: Ohio Municipal Cash
Trust -- Institutional Shares; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.

PURCHASING SHARES BY CHECK. Shares may be purchased by mailing a check made
payable to Ohio Municipal Cash Trust-Institutional Shares to Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600. Orders by
mail are considered received when payment by check is converted into federal
funds. This is normally the next business day after the check is received.

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

REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by calling
the Fund provided the Fund has a properly completed authorization form. These
forms can be obtained from Federated Securities Corp. Proceeds from redemption
requests received before 12:00 p.m. (Eastern time) will be wired the same day to
the shareholder's account at a domestic commercial bank which is a member of the
Federal Reserve System, but will not include that day's dividend. Proceeds from
redemption requests received after that time include that day's dividend but
will be wired the following business day. Proceeds from redemption requests
received on holidays when wire transfers are restricted will be wired the
following business day. Questions about telephone redemptions on days when wire
transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement.

Telephone instructions may be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

promptly notified.

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 3:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by check begin earning dividends the day after the check is converted
into federal funds.

$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.

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.

Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.

These tax consequences apply whether dividends are received in cash or as
additional shares.

STATE AND LOCAL TAXES

Income from the Fund is not necessarily free from taxes in states other than
Ohio. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.

OHIO TAXES. Under existing Ohio laws, distributions made by the Fund will not be
subject to Ohio individual income taxes to the extent that such distributions
qualify as exempt-interest dividends under the Internal Revenue Code, and
represent (i) interest from obligations of Ohio or its subdivisions which is
exempt from federal income tax; or (ii) interest or dividends from obligations
issued by the United States and its territories or possessions or by any
authority, commission or instrumentality of the United States which are exempt
from state income tax under federal laws. Conversely, to the extent that
distributions made by the Fund are derived from other types of obligations, such
distributions will be subject to Ohio individual income taxes.

Distributions made by the Fund will not be subject to Ohio corporation franchise
tax to the extent that such distributions qualify as exempt-interest dividends
under the Internal Revenue Code, and represent (i) interest from obligations of
Ohio or its subdivisions which is exempt from federal income tax; or (ii) net

interest income from obligations issued by the United States and its territories
or possessions or by any authority, commission or instrumentality of the United
States, which is included in federal taxable income and which is exempt from
state income tax under federal laws.

Exempt-interest dividends that represent interest from obligations held by the
Fund which are issued by Ohio or its political subdivisions will be exempt from
any Ohio municipal income tax (even if the municipality is permitted under Ohio
law to levy a tax on intangible income).

OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------

The Fund offers two other classes of shares called Institutional Service Shares
and Cash II Shares. Institutional Service Shares are sold at net asset value
primarily to financial institutions and are subject to a minimum initial
investment of $25,000 within a 90-day period. Cash II Shares are sold at net
asset value primarily to retail customers of financial institutions and are
subject to a minimum initial investment of $25,000 within a 90-day period.

All classes are subject to certain of the same expenses.

Institutional Service Shares are distributed with no 12b-1 Plan but are subject
to shareholder services fees.

Cash II Shares are distributed under a 12b-1 Plan adopted by the Fund and also
are subject to shareholder services fees.

Expense differences between classes may affect the performance of each class.

To obtain more information and a prospectus for any other class, investors may
call 1-800-235-4669.

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

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.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

OHIO MUNICIPAL CASH TRUST

FINANCIAL HIGHLIGHTS--CASH II SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------
1995 1994 1993 1992 1991(A)
----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------
Net investment income 0.03 0.02 0.02 0.03 0.02
- -----------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------
Distributions from net investment income (0.03) (0.02) (0.02) (0.03) (0.02)
- ----------------------------------------------- ----- ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------- ----- ----- ----- ----- ------
TOTAL RETURN (B) 3.30% 2.10% 2.02% 2.90% 2.27%
- -----------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------
Expenses 0.87% 0.85% 0.78% 0.76% 0.63%*
- -----------------------------------------------
Net investment income 3.25% 2.09% 2.01% 2.86% 4.18%*
- -----------------------------------------------
Expense waiver/reimbursement (c) 0.29% 0.24% 0.19% 0.25% 0.34%*

- -----------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------
Net assets, end of period (000 omitted) $188,234 $156,051 $127,017 $133,877 $94,081
- -----------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from April 22, 1991 (date of initial
public investment) to October 31, 1991.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sale charge, if applicable.

OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
(FORMERLY, INSTITUTIONAL SHARES)
- --------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

notes thereto, which may be obtained free of charge from the Fund.

<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------
1995 1994 1993 1992 1991(A)
----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- -----------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------
Net investment income 0.04 0.02 0.02 0.03 0.02
- -----------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------
Distributions from net investment income (0.04) (0.02) (0.02) (0.03) (0.02)
- ----------------------------------------------- ----- ----- ----- ----- ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
- ----------------------------------------------- ----- ----- ----- ----- ------
TOTAL RETURN (B) 3.61% 2.41% 2.33% 3.21% 2.40%
- -----------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------
Expenses 0.57% 0.55% 0.48% 0.46% 0.35%*
- -----------------------------------------------
Net investment income 3.56% 2.36% 2.30% 3.10% 4.46%*
- -----------------------------------------------
Expense waiver/reimbursement (c) 0.29% 0.07% 0.19% 0.25% 0.32%*

- -----------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------
Net assets, end of period (000 omitted) $72,93 $62,49 $81,74 $74,34 $44,771
- -----------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from April 22, 1991 (date of initial
public investment) to October 31, 1991.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

ADDRESSES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Ohio Municipal Cash Trust
Institutional Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- -----------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- -----------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- -----------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
- -----------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600
Boston, MA 02266-8600
- -----------------------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- -----------------------------------------------------------------------------------------------
</TABLE>

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

- --------------------------------------------------------------------------------
OHIO MUNICIPAL
CASH TRUST
INSTITUTIONAL SHARES

PROSPECTUS

A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company

Prospectus dated February 29, 1996

FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------

Distributor

A subsidiary of FEDERATED INVESTORS

FEDERATED INVESTORS TOWER

PITTSBURGH, PA 15222-3779

CUSIP 314229659

G0211-01-IS (3/96)

OHIO MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
CASH II SHARES
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the
prospectus(es) of Ohio Municipal Cash Trust (the "Fund"), a portfolio of
Federated Municipal Trust (the "Trust") dated December 31, 1995 and
February 29, 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 February 29, 1996

Federated Securities Corp.
Distributor
A subsidiary of Federated Investors

Investment Policies 1

Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
Ratings 1
When-Issued and Delayed Delivery
Transactions 1
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Credit Enhancement 2
Ohio Investment Risks 2

Investment Limitations 3

Investing in Restricted Securities 3
Regulatory Compliance 4
Federated Municipal Trust Management 5

Share Ownership 9
Trustees Compensation 10
Trustee Liability 10
Investment Advisory Services 11

Investment Adviser 11
Advisory Fees 11
State Expense Limitations 11

Brokerage Transactions 11

Other Services 12

Fund Administration 12
Custodian and Portfolio Recordkeeper12
Transfer Agent 12
Independent Public Accountants 12

Distribution Plan and Shareholder
Services Agreement 12

Determining Net Asset Value 13

Redemption in Kind 13

Massachusetts Partnership Law 13

The Fund's Tax Status 13

Performance Information 14

Yield 14
Effective Yield 14
Tax-Equivalent Yield 14
Tax-Equivalency Table 14
Total Return 15
Performance Comparisons 15
About Federated Investors 16

Mutual Fund Market 16
Institutional Clients 16
Trust Organizations 16
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 16
Financial Statements 17

Appendix 18

INVESTMENT POLICIES

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.
OHIO INVESTMENT RISKS

The Fund invests in obligations of Ohio (the "State") issuers which result in
the Fund's performance being subject to risks associated with the overall
conditions present within the State. The following information is a brief
summary of the prevailing economic conditions and general summary of the
State's financial condition. This information is based on official statements
relating to securities that are believed to be reliable but should not be
considered as a complete description of all relevant information.
The Ohio economy is largely composed of manufacturing which is concentrated
in the automobile sector and other durable goods. The exposure to these
industries, particularly the auto sector, leaves the State vulnerable to an
economic slowdown associated with business cycles. The State has diversified
its economy somewhat over the past decade with services and trade composing
roughly 50% of the economy. Unemployment in Ohio over the past two years has
been below the national average, but population growth, as in many great lakes
states, has been stagnant.
The State fully depleted the budget stabilization fund that exceeded $300
million, to achieve balanced budgets as a result of the most recent recession.
The State acted promptly in addressing the fall in revenue with an expansion
of the sales tax and cuts in appropriations. As a result of prudent financial
management, the State restored $21 million to the budget stabilization fund
in fiscal 1993. Strong performance in fiscal 1994 and 1995 resulted in reserve

levels that are well above the levels of 1990. Ohio's budget stabilization
fund is now above $800 million.
The overall condition of the State is further demonstrated by its debt
ratings. Ohio, rated Aaa by Moody's Investors Service, Inc. in the 1970's, was
downgraded to Aa in 1979 and has maintained this rating since the downgrade.
Standard & Poor's Ratings Group first rated the State in 1984 at AA; that has
remained unchanged.
The Fund's concentration in securities issued by the State and its political
subdivisions provides a greater level of risk than a fund whose assets are
diversified across numerous states and municipal issuers. The ability of the
State or its municipalities to meet their obligations will depend on the
availability of tax and other revenues; economic, political, and demographic
conditions within the State; and the underlying fiscal condition of the State,
its counties, and its municipalities.
INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for clearance
of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements in amounts up to one-
third of the value of its total assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is

deemed to be inconvenient or disadvantageous.The Fund will not purchase any
securities while borrowings in excess of 5% of the value of its total assets
are outstanding. During the period any reverse repurchase agreements are
outstanding, the Fund will restrict the purchase of portfolio securities to
money market instruments maturing on or before the expiration date of the
reverse repurchase agreements, but only to the extent necessary to assure
completion of the reverse repurchase agreements.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings. In those cases, it may pledge assets
having a market value not exceeding the lesser of the dollar amounts borrowed
or 15% of the value of total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may acquire publicly
or nonpublicly issued Ohio municipal securities or temporary investments or
enter into repurchase agreements, in accordance with its investment objective,
policies, limitations, and its Declaration of Trust.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its net assets in securities subject
to restrictions on resale under the Securities Act of 1933.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited partnership
interests, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are
secured by real estate or interests in real estate.

UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase, 25% or
more of the value of its total assets would be invested in any one industry or
in industrial development bonds or other securities, the interest upon which
is paid from revenues of similar types of projects. However, the Fund may
invest as temporary investments more than 25% of the value of its assets in
cash or cash items, securities issued or guaranteed by the U.S. government,
its agencies, or instrumentalities, or instruments secured by these money
market instruments, such as repurchase agreements.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies, except as
part of a merger, consolidation, or other acquisition.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers (including companies responsible for paying principal
and interest on industrial development bonds) which have records of less than

three years of continuous operations, including the operation of any
predecessor.
INVESTING FOR CONTROL
The Fund will not invest in securities of a company for the purpose of
exercising control or management.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES
The Fund will not purchase or retain the securities of any issuer if the
Officers and Trustees of the Trust or its investment adviser, owning
individually more than .50 of 1% of the issuer's securities, together own more
than 5% of the issuer's securities.
INVESTING IN OPTIONS
The Fund will not invest in puts, calls, straddles, spreads, or any
combination of them.
INVESTING IN MINERALS
The Fund will not purchase or sell interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase the
securities of issuers which invest in or sponsor such programs.
For purposes of the above limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic
bank or savings association having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items." Except
with respect to borrowing money, if a percentage limitation is adhered to at
the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the
value of its net assets during the last fiscal year and has no present intent
to do so during the coming fiscal year.

REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940. In particular, the Fund
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. The Fund will determine the effective maturity of its
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The Fund
may change these operational policies to reflect changes in the laws and
regulations without the approval of its shareholders.

FEDERATED MUNICIPAL TRUST MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Municipal Trust, and principal occupations.

the Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust .

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.

Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director, Trustee, or Managing General Partner of the Funds.

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.

J. Christopher Donahue
Federated Investors Tower

Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Administrative Services, Federated Services Company, and
Federated Shareholder Services; President or 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.

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 Services Company; President and Trustee, Federated
Shareholder Services; Director, Federated Securities Corp.; Executive Vice
President and Secretary of the Funds.

David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer

Senior Vice President, Controller and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice President,
Federated Shareholder Services; Vice President, Federated Administrative
Services; Treasurer of some of the Funds.

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
ARMs Fund; Federated Equity Funds; Federated GNMA Trust; Federated Government
Trust; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Master Trust; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated Stock
Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.;
Federated U.S. Government Bond Fund; Federated U.S. Government Securities
Fund: 1-3 Years; Federated U.S. Government Securities Fund: 3-5 Years;
Federated U.S. Government Securities Fund 5-10 Years; First Priority Funds;
Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund,
Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund

for U.S. Government Securities, Inc.; Government Income Securities, Inc.; High
Yield Cash Trust; Insurance Management Series; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty Municipal Securities Fund, Inc.; Liberty U.S. Government Money Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.; Liquid
Cash Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; 111 Corcoran Funds; Peachtree Funds; The Planters Funds; RIMCO
Monument Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock
and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Trademark Funds; Trust for Financial Institutions; Trust
For Government Cash Reserves; Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; The Virtus Funds; World Investment
Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.
As of January 12, 1996, the following shareholder(s) of record owned 5% or
more of the outstanding Institutional Service Shares (formerly called
Institutional Shares) of the Ohio Municipal Cash Trust: Key Trust Co.,
Cleveland, OH, 5.39%; and Parcol & Co., Akron, OH, 10.09%.
As of January 12, 1996, the following shareholder(s) of record owned 5% or
more of the outstanding Cash II Shares of the Ohio Municipal Cash Trust:
Gradison & Company Inc., Cincinnati, OH, 55.53%.

TRUSTEES COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

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
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

++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

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

services may be furnished directly to the Fund or to the adviser and may
include: advice as to the advisability of investing in securities; security
analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research services
provided by brokers and dealers may be used by the adviser or its affiliates
in advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses. The adviser and
its affiliates exercise reasonable business judgment in selecting brokers who
offer brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided. During the fiscal years ended October 31, 1995, 1994, 1993, the Fund
paid no brokerage commissions.
Although investment decisions for the Fund are made independently from those
of the other accounts managed by the adviser, investments of the type the Fund
may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by the adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.

OTHER SERVICES

FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated Administrative
Services, Inc., also a subsidiary of Federated Investors, served as the Fund's
Administrator. (For purposes of this Statement of Additional Information,
Federated Administrative Services and Federated Administrative Services, Inc.
may hereinafter collectively be referred to as the "Administrators".) For the
fiscal year ended October 31, 1995, Federated Administrative Services earned
$181,139. For the fiscal year ended ended October 31, 1994, the Administrators
collectively earned $209,077. For the fiscal year ended ended October 31,
1993, Federated Administrative Services, Inc., earned $325,056.
Dr. Henry J. Gailliot, an officer of Federated Management, the adviser to the
Fund, holds approximately 20% of the outstanding common stock and serves as a
director of Commercial Data Services, Inc., a company which provides computer
processing services to Federated Administrative Services.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
TRANSFER AGENT

As transfer agent, Federated 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 PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT

With respect to Cash II Shares, the Fund has adopted a Distribution Plan
pursuant to Rule 12b-1 which was promulgated by the Securities and Exchange
Commission pursuant to the Investment Company Act of 1940. Additionally, the
Fund has adopted a Shareholder Service Agreement with respect to Cash II
Shares, Institutional Service Shares and Institutional Shares.
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other personnel as necessary
or beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and
assisting clients in changing dividend options, account designations, and
addresses.
By adopting the Distribution Plan, the Trustees expect that the Fund will be
able to achieve a more predictable flow of cash for investment purposes and to
meet redemptions. This will facilitate more efficient portfolio management and
assist the Fund in pursuing its investment objective. By identifying potential
investors whose needs are served by the Fund's objective, and properly

servicing these accounts, it may be possible to curb sharp fluctuations in
rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; and (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.

For the fiscal period ending October 31, 1995, payments in the amount of
$493,611 were made pursuant to the Distribution Plan on behalf of Cash II
Shares, of which $411,342 was waived. In addition, for this period, the Fund's
Cash II Shares and Institutional Service Shares (formerly called Institutional
Shares) paid shareholder services fees in the amount of $411,342 and $186,871,
respectively, of which $0 and $186,871, respectively, were waived.
Institutional Shares did not exist prior to February 29, 1996.

DETERMINING NET ASSET VALUE

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

PERFORMANCE INFORMATION

For the seven-day period ended October 31, 1995, the yields for Cash II
Shares and Institutional Service Shares (formerly called Institutional
Shares) were 3.29% and 3.59%, respectively. Institutional Shares did not
exist prior to February 29, 1996.

For the seven-day period ended October 31, 1995, the effective yields for
Cash II Shares and Institutional Service Shares (formerly called
Institutional Shares) were 3.34% and 3.65%, respectively. Institutional
Shares did not exist prior to February 29, 1996.
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TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Fund is calculated similarly to the yield but
is adjusted to reflect the taxable yield that the Fund would have had to earn
to equal its actual yield, assuming a 39.6% tax rate (the maximum effective
federal rate for individuals) and assuming that income is 100% exempt.

For the seven-day period ended October 31, 1995, the tax-equivalent yields
for Cash II Shares and Institutional Service Shares (formerly called
Institutional Shares) were 6.22% and 6.79%, respectively. Institutional Shares
did not exist prior to February 29, 1996.

TAXABLE YIELD EQUIVALENT FOR 1996

STATE OF OHIO

FEDERAL TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%

COMBINED FEDERAL AND STATE TAX BRACKET:
19.457% 33.201% 37.900% 43.500% 47.100%

SINGLE $1- $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% 1.86% 2.25% 2.42% 2.65% 2.84%
2.00% 2.48% 2.99% 3.22% 3.54% 3.78%
2.50% 3.10% 3.74% 4.03% 4.42% 4.73%
3.00% 3.72% 4.49% 4.83% 5.31% 5.67%
3.50% 4.35% 5.24% 5.64% 6.19% 6.62%
4.00% 4.97% 5.99% 6.44% 7.08% 7.56%
4.50% 5.59% 6.74% 7.25% 7.96% 8.51%
5.00% 6.21% 7.49% 8.05% 8.85% 9.45%
5.50% 6.83% 8.23% 8.86% 9.73% 10.40%

6.00% 7.45% 8.98% 9.66% 10.62% 11.34%

Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state
and local taxes paid on comparable taxable investments were not used to
increase federal deductions.
The chart above is for illustrative purposes only. It is not an indicator
of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.

For the one-year period ended October 31, 1995, and for the period from April
22, 1991 (date of initial public investment) through October 31, 1995, the
average annual total returns for Cash II Shares were 3.30% and 2.79%,
respectively, and average annual total returns for Institutional Service
Shares (formerly called Institutional Shares) were 3.61% and 3.09%,
respectively. Institutional Shares did not exist prior to February 29, 1996.

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.

clients include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios.
The marketing effort to trust clients is headed by Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
*Source: Investment Company Institute

FINANCIAL STATEMENTS

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.

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 as can be

visualized are most unlikely to impair the fundamentally strong position
of such issues.
AA Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in AAA securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in AAA securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term
indebtedness. However, management considers them to be of comparable
quality to securities rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "Aaa" by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "Aa" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.

1030105B (3/96)
Cusip 314229840

Cusip 314229857
Cusip 314229659