1933 Act File No. 33-31259
1940 Act File No. 811-5911
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
--
Pre-Effective Amendment No. .............
--
Post-Effective Amendment No. 40 ........... X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 40 .......................... X
FEDERATED MUNICIPAL TRUST
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on February 29, 1996 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
-----------------
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and:
X filed the Notice required by that Rule on December 15, 1995; or
intends to file the Notice required by that Rule on or about ;
------------
or
during the most recent fiscal year did not sell any securities pursuant to
Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.
Copies To:
Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of FEDERATED MUNICIPAL
TRUST, which consists of fifteen portfolios: (1) Connecticut Municipal Cash
Trust, (a) Institutional Service Shares; (2) Pennsylvania Municipal Cash
Trust, (a) Cash Series Shares and (b) Institutional Service Shares; (c)
Institutional Shares (3) Minnesota Municipal Cash Trust, (a) Cash Series
Shares and (b) Institutional Shares; (4) New Jersey Municipal Cash Trust, (a)
Institutional Shares and (b) Institutional Service Shares; (5) Ohio Municipal
Cash Trust, (a) Cash II Shares (b) Institutional Shares, and (c)
Institutional Service Shares; (6) Virginia Municipal Cash Trust, (a)
Institutional Shares and (b) Institutional Service Shares; (7) Alabama
Municipal Cash Trust; (8) North Carolina Municipal Cash Trust; (9) Maryland
Municipal Cash Trust; (10) California Municipal Cash Trust, (a) Institutional
Shares and (b) Institutional Service Shares; (11) New York Municipal Cash
Trust, (a) Cash II Shares and (b) Institutional Service Shares; (12) Florida
Municipal Cash Trust, (a) Institutional Shares and (b) Cash II Shares; (13)
Massachusetts Municipal Cash Trust, (a) Institutional Service Shares and (b)
BayFunds Shares; (14) Michigan Municipal Cash Trust, (a) Institutional Shares
and (b) Institutional Service Shares; and (15) Georgia Municipal Cash, relates
to (10b) California Municipal Cash Trust, Institutional Shares, (14b) Michigan
Municipal Cash Trust, Institutional Shares and (5b) Ohio Municipal Cash Trust,
Institutional Shares, and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............(1-15) Cover Page.
Item 2. Synopsis.................(1-15) Summary of Fund Expenses.
Item 3. Condensed Financial
Information..............(1, 2a, 2b, 3-12a,13) Financial Highlights;
(1-15) Performance Information.
Item 4. General Description of
Registrant...............(1-15) General Information; (1-13a, 14,
15) Investment Information; (1-13a, 14, 15)
Investment Objective; (1-13a, 14, 15)
Investment Policies; (13b) Investment
Objective and Policies; (1) Connecticut
Municipal Securities; (2) Pennsylvania
Municipal Securities; (3) Minnesota
Municipal Securities; (4) New Jersey
Municipal Securities; (5) Ohio Municipal
Securities; (6) Virginia Municipal
Securities; (7) Alabama Municipal
Securities; (8) North Carolina Municipal
Securities; (9) Maryland Municipal
Securities; (10) California Municipal
Securities; (11) New York Municipal
Securities; (12) Florida Municipal
Securities; (13) Massachusetts Municipal
Securities; (14) Michigan Municipal
Securities; (15) Georgia Municipal
Securities; (1) Connecticut Investment
Risks; (2) Pennsylvania Investment Risks;
(3) Minnesota Investment Risks; (4) New
Jersey Investment Risks; (5) Ohio
Investment Risks; (6) Virginia Investment
Risks; (7) Alabama Investment Risks;
(8) North Carolina Investment Risks; (9)
Maryland Investment Risks; (10) California
Investment Risks; (11) New York Investment
Risks; (12b) Investment Risks;
(13) Massachusetts Investment Risks;(14)
Michigan Investment Risks; (15) Investment
Risks; (1-15) Non-Diversification; (1-13a,
14, 15) Investment Limitations;
(1-15) Regulatory Compliance.
Item 5. Management of the Fund...(1-12a, 13a, 14) Trust Information; (12b,
15) Fund Information; (1-12a, 13a, 14)
Management of the Trust; (12b) Management
of the Fund; (13b) Management, Distribution
and Administration; (1-6, 11, 12, 13a)
Distribution of Cash Series, Institutional,
Institutional Service, or Cash II Shares;
(7,8,9,10,12,15) Distribution of Shares;
(2-7, 9, 10, 11, 12b, 13a, 14, 15)
Administration of the Fund; (1, 8, 12a)
Administration of the Trust; (2c, 9, 12,
14, 15) Expenses of the Fund.
Item 6. Capital Stock and Other
Securities...............(1-12a, 13a, 14, 15) Dividends; (1-12a,
13a, 14, 15) Capital Gains; (13b) Dividends
and Distributions; (1-12a, 13a, 14, 15)
Shareholder Information; (12b) Account and
Share Information; (1-12a, 13-15) Voting
Rights; (1-12a, 13a, 14, 15) Massachusetts
Partnership Law; (1-15) Tax Information;
(1-13a, 14, 15) Federal Income Tax; (1)
Connecticut Tax Considerations; (2)
Pennsylvania Tax Considerations;
(3) Minnesota Tax Considerations; (4) New
Jersey Tax Considerations; (5) Ohio Tax
Considerations; (6) Virginia Tax
Considerations; (7) Alabama Taxes; (8)
North Carolina Taxes; (9) Maryland Tax
Considerations; (10) California State
Income Taxes; (11) New York State Tax
Considerations; (12a) Florida Tax
Considerations; (12b) Florida Intangibles
Tax; (12b) Florida State Municipal
Taxation; (13) Massachusetts Tax
Considerations; (14) Michigan Tax
Considerations; (1-13a, 14, 15) State and
Local Taxes; (2, 3, 4, 5, 6, 11, 12b, 13)
Other Classes of Shares.
Item 7. Purchase of Securities Being
Offered..................(1-15) Net Asset Value; (1, 2, 3, 4-12a,
13, 14) Shareholder Servicing Arrangements;
(2c, 15) Other Payments to Financial
Institutions; (2a, 3a, 4b, 5a, 11, 12a)
Distribution and Shareholder Services Plan;
(13b) Distribution; (1, 2bc, 3b, 4, 5c, 6-
10, 13, 14, 15) Shareholder Services Plan;
(13b) How to Buy Shares; (1, 2a, 3a, 5a, 7-
10, 11a, 12, 14, 15) How to Purchase
Shares; (15) Purchasing Shares Through a
Financial Institution, Purchasing Shares By
Wire, Purchasing Shares By Check; (2bc, 3b,
4, 5c, 6, 11b, 13a) Investing in the Fund;
(2bc, 3b, 4, 5c, 6, 11b, 13a) Share
Purchases; (1, 2a, 3a, 5a, 7-10, 11a, 12,
14,1 5) Special Purchase Features; (2bc,
3b, 4, 5c, 6, 11b, 13a) Minimum Investment
Required, (1, 2a, 3a, 5a, 7-10, 11a, 12a,
14, 15) Systematic Investment Program;
(2bc, 3b, 4, 5c, 6, 11b, 13a) Subaccounting
Services; (1-12a, 13-15 5b, 10b, 14b)
Certificates and Confirmations.
Item 8. Redemption or Repurchase.(1, 2a, 3a, 5a, 7-10, 11a, 12, 13b, 14, 15)
How to Redeem Shares; (2bc, 3b, 4, 5c, 6,
11b, 13a) Redeeming Shares; (1, 2a, 3a, 5a,
7-10, 11a, 12a, 14, 15) Redeeming Shares
Through a Financial Institution; (1, 2bc,
3b, 4, 5c, 6, 10, 11, 13a) Telephone
Redemption; (1, 2a, 3a, 5a, 7-10, 11a, 12a,
14, 15) Redeeming Shares by Telephone;
(2bc, 3b, 4, 5c, 6, 11b, 13a) By Mail; (1,
2a, 3a, 5a, 7-10, 11a, 12a, 14, 15)
Redeeming Shares by Mail; (3b, 2b, 13a, 4b)
By Writing a Check; (1, 2a, 3a, 5a, 7-10,
11a, 12, 14, 15) Special Redemption
Features, Check Writing, Debit Card, and
Systematic Withdrawal Program; (1-13a,14,
15) Accounts With Low Balances.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page...............(1-15) Cover Page.
Item 11. Table of Contents........(1-15) Table of Contents.
Item 12. General Information and
History..................(1-12a, 13, 14) General Information About
the Fund; (12b) About Federated Investors.
Item 13. Investment Objectives and
Policies.................(1-15) Investment Objective and Policies;
(1-15) Investment Limitations.
Item 14. Management of the Fund...(1-15) Federated Municipal Trust
Management.
Item 15. Control Persons and Principal
Holders of Securities....Not applicable.
Item 16. Investment Advisory and Other
Services.................(1-12a, 13-15) Investment Advisory
Services; (12b) Fund Administration; (1-14)
Administrative Services; (3a,4a,5a,11)
Distribution Plan; (3b,7b,10, 14,15)
Shareholder Services Plan; (12a)
Distribution and Shareholder Services Plan;
(12b) Distribution Plan and Shareholder
Services Agreement.
Item 17. Brokerage Allocation.....(1-15) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities...............Not applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered (1-12a, 13-14) Purchasing Shares;
(1-15) Determining Net Asset Value; (1-12a,
13-14) Redeeming Shares; (1-15) Redemption
in Kind.
Item 20. Tax Status...............(1-12a, 13-14) Tax Status; (12b, 15) The
Fund's Tax Btatus.
Item 21. Underwriters.............Not applicable.
Item 22. Calculation of Performance
Data.....................(1-15) Yield; (1-15) Effective Yield;
(1,2,3a,4-15) Tax-Equivalent Yield; (1-12a,
13-15) Performance Comparisons; (12b, 15)
Performance Information, (12b, 15) Tax-
Equivalency Table, (12b, 15) Total Return.
Item 23. Financial Statements.....(1-15) Filed in Part A (except for 5b, 10b
and 14b, for which Financial Statments are
incorprated by reference to the Prospectus
dated December 31, 1995 (File Nos. 33-31259
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 February ,
--
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-
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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
I
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PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated February , 1996
--
I
SUMMARY OF FUND EXPENSES 3
GENERAL INFORMATION 3
INVESTMENT INFORMATION 6
Investment Objective 6
Investment Policies 6
California Municipal
Securities 12
Investment Risks 13
Non-Diversification 14
Investment Limitations 15
FUND INFORMATION 15
Management of the Fund 15
Distribution of
Institutional Shares 18
Administration of the Fund19
Expenses of the Fund and
Institutional Shares 19
NET ASSET VALUE 21
HOW TO PURCHASE SHARES 21
HOW TO REDEEM SHARES 23
ACCOUNT AND SHARE INFORMATION
26
TAX INFORMATION 27
Federal Income Tax 27
State and Local Taxes 29
OTHER CLASSES OF SHARES 29
PERFORMANCE INFORMATION 30
Table of Contents
CALIFORNIA MUNICIPAL CASH
TRUST
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL
SERVICE SHARES 31
ADDRESSES 34
I
SUMMARY OF FUND EXPENSES
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)
.................................................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price) .................................. None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) ..... None
Redemption Fee (as a percentage of amount redeemed, if applicable)
.................................................... None
Exchange Fee ........................................ None
ANNUAL 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%
(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.
EXAMPLE 1 year 3 years
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and
4
(2) redemption at the end of each time period..... $2
$6
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 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
5
securities. The Fund may not be a suitable investment for retirement plans
or for non-California taxpayers because it invests in municipal securities
of that state. A minimum initial investment of $25,000 within a 90-day
period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax and the personal income taxes imposed by the State of
California consistent with stability of principal. This investment
objective cannot be changed without shareholder approval. While there is no
assurance that the Fund will achieve its investment objective, it endeavors
to do so by complying with the various requirements of Rule 2a-7 under the
Investment Company Act of 1940 which regulates money market mutual funds
and by following the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
California municipal securities maturing in 13 months or less. The average
maturity of the securities in the Fund's portfolio, computed on a dollar-
weighted basis, will be 90 days or less. As a matter of investment policy,
which cannot be changed without shareholder approval, at least 80% of the
6
Fund's annual interest income will be exempt from federal regular income
tax and California state income tax. (Federal regular income tax does not
include the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.) 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:
o tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
o bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
o municipal commercial paper and other short-term notes;
o variable rate demand notes;
7
o municipal bonds (including bonds having serial maturities and pre-
refunded bonds) and leases; and
o participation, trust, and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Most
variable rate demand notes allow the Fund to demand the repurchase of
the security on not more than seven days prior notice. Other notes only
permit the Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See "Demand Features." The
Fund treats variable rate demand notes as maturing on the later of the
date of the next interest rate adjustment or the date on which the Fund
may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in California
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
8
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.
9
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
10
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
11
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
12
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.
13
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
14
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
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
15
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
16
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
17
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
18
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 services) necessary to
operate the Fund. Federated Administrative Services provides these at an
annual rate as specified below:
Maximum Fee Average Aggregate Daily Net Assets
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.**
Federated Administrative Services may choose voluntarily to waive a portion
of its fee.
EXPENSES OF THE FUND AND INSTITUTIONAL SHARES
Holders of shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and
19
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.
20
NET ASSET VALUE
The Fund attempts to stabilize the net asset value of shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net
asset value per share is determined by subtracting liabilities attributable
to Institutional Shares from the value of Fund assets attributable to
Institutional Shares, and dividing the remainder by the number of 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
21
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 before12:00 noon Pacific time (3:00 p.m. Eastern
time) in order to begin earning dividends that same day. Federal funds
should be wired as follows: Federated Services Company, c/o State Street
Bank and Trust Company, Boston, MA; Attention: EDGEWIRE; For Credit to:
California Municipal Cash Trust-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
22
Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. . Orders
by mail are considered received when payment by check is converted into
federal funds. This is normally the next business day after the check is
received.
SUBACCOUNTING SERVICES. Financial institutions are encouraged to open
single master accounts. A subaccounting system is available through the
transfer agent to minimize internal recordkeeping requirements. The
transfer agent charges a fee based on the level of subaccounting services
rendered. Financial institutions may charge or pass through subaccounting
fees as part of or in addition to normal trust or agency account fees. They
may also charge fees for other services provided which may be related to
the ownership of Fund shares. This prospectus should, therefore, be read
together with any agreement between the customer and the financial
institution with regard to the services provided, the fees charged for
those services, and any restrictions and limitations imposed. State
securities laws may require certain financial institutions such as
depository institutions to register as dealers.
HOW TO REDEEM SHARES
Shares are redeemed at their net asset value next determined after
Federated Services Company receives the redemption request. Redemptions
will be made on days on which the Fund computes its net asset value.
23
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
24
determine it necessary to terminate or modify the telephone redemption
privilege, shareholders would be promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by mailing a
written request to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation;
the account name as registered with the Fund; the account number; and the
number of shares to be redeemed or the dollar amount requested. All owners
of the account must sign the request exactly as the shares are registered.
Normally, a check for the proceeds is mailed within one business day, but
in no event more than seven days, after the receipt of a proper written
redemption request. Dividends are paid up to and including the day that a
redemption request is processed.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than
to the shareholder of record must have their signatures guaranteed by a
commercial or savings bank, trust company or savings association whose
deposits are insured by an organization which is administered by the
Federal Deposit Insurance Corporation; a member firm of a domestic stock
exchange; or any other "eligible guarantor institution," as defined in the
25
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
Services Company maintains a share account for each shareholder. Share
certificates are not issued unless requested by contacting the Fund or
Federated Services Company in writing. Monthly confirmations are sent to
report all transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts
with low balances, the Fund may redeem shares in any account and pay the
proceeds to the shareholder if the account balance falls below a required
26
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
27
federal income tax purposes so that income (including capital gains) and
losses realized by the Trust's other portfolios will not be combined for
tax purposes with those realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations. The Fund may purchase, within the limits of its investment
policies, all types of municipal bonds, including private activity bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular
taxable income of the taxpayer increased by certain "tax preference" items
not included in regular taxable income and reduced by only a portion of the
deductions allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed as
ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
28
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 t hat 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
29
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
30
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.
31
YEAR ENDED PERIOD ENDED
OCTOBER 31, OCTOBER 31,
YEAR ENDED SEPTEMBER 30,
1995 1994(A) 1994 1993 1992 1991 1990 1989(B)
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 -- -- -- -- -- -- --
32
LESS
ISTRIBUTIONS
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%*
33
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
*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
California Municipal Cash Trust
34
Institutional Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
Distributor
Federated Securities Corp. Federated
Investors Tower
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
35
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
36
Prospectus
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated February , 1996
--
Distributor
A subsidiary of FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp.
CUSIP (Number)
G00300-01-IS (2/96)
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 , 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 , 1996
--
Federated Securities Corp.
Distributor
A subsidiary of Federated Investors
Investment Policies
Acceptable Investments
Participation Interests
Municipal Leases
Ratings
When-Issued and Delayed
Delivery Transactions
Repurchase Agreements
Credit Enhancement
California Investment Risks
Investment Limitations
Investments in Any One Issuer
Regulatory Compliance
Federated Municipal Trust
Management
Share Ownership
Trustee Compensation
Trustee Liability
Investment Advisory Services
Table of Contents
Investment Adviser
Advisory Fees
Brokerage Transactions
Other Services
Fund Administration
Custodian and Portfolio
Recordkeeper
Transfer Agent
Shareholder Services Agreement
Determining Net Asset Value
Redemption in Kind
Massachusetts Partnership Law
The Fund's Tax Status
Performance Information
Yield
II
Table of Contents
Effective Yield
Tax-Equivalent Yield
Tax-Equivalency Table
Total Return
Performance Comparisons
About Federated Investors
Mutual Fund Market
Institutional Clients
Trust Organizations
Broker/Dealers and Bank
Broker/Dealer Subsidiaries
Financial Statements
Appendix
III
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.
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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
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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
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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
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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
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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
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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
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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."
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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
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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.
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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
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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
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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
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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
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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.
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The Fund may have more than 25% of its total assets invested in securities
credit enhanced by banks.
CALIFORNIA INVESTMENT RISKS
LIMITS ON TAXING AND SPENDING AUTHORITY
Developments in California ( the "State" or "California") which constrain
the taxing and spending authority of California governmental entities could
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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
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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
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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
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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
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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.
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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
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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.
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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
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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.
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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
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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.
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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
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year 1996 appears to reflect optimism about certain revenue sources, most
notably federal government aid for illegal immigrants.
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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.
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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
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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.
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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.
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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.
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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
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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
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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
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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.
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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).
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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.
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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,
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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.
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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.
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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.
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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.
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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
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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.
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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
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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.
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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
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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
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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.
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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
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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
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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
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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.
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John T. Conroy, Jr.
Wood/IPC Commercial Department
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John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
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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.
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William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
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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
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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.
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Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
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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.
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Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
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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.;
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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
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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.
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Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Trustee
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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
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Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
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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
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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.
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Wesley W. Posvar
1202 Cathedral of Learning
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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
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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.
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Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
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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
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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
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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
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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
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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.
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John W. McGonigle
Federated Investors Tower
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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.;
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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
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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.
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David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
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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.
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*
This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
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@
Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.
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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;
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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.
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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
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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
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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.
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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.
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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.,
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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
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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
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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
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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
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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
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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
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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
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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
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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
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*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.
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++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.
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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.
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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.
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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.
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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
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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
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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.
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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.
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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
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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
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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
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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
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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
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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
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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.
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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
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OUTSTANDING COMMON STOCK AND SERVES AS A DIRECTOR OF COMMERCIAL DATA
SERVICES, INC., A COMPANY WHICH PROVIDES COMPUTER PROCESSING SERVICES TO
FEDERATED ADMINISTRATIVE SERVICES.
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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.
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TRANSFER AGENT
As transfer agent, Federated Services Company, maintains all necessary
shareholder records. For its services, the transfer agent receives a fee
based on the size, type and number of accounts and transactions made by
shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
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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
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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
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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;
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(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 , 1996.
--
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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
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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
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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
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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
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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.
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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
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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.
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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
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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
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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.
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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
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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
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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.
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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
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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.
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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 , 1996.
--
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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.
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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 , 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
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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 , 1996.
--
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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-
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free" investment can be an attractive choice for investors, particularly in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
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State of California
TAX BRACKET
Combined Federal
and State
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Tax Bracket: 21.00% 37.30% 40.30% 46.00%
49.60% 50.60%
Joint $1- $39,001-
$94,251-$143,601- $256,501- OVER
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Return $39,00 $94,250 $143,600
$256,500 $429,858
$429,858
Tax-Exempt
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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
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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
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Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state and
local taxes paid on comparable taxable investments were not used to
increase federal deductions. If you itemize deductions, your taxable yield
equivalent will be lower.
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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.
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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
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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
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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 22, 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,
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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:
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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
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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.
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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.
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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
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money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market
funds, a principal means used by money managers today to value money market
fund shares. Other innovations include the first institutional tax-free
money market fund. As of December 31, 1994, Federated Investors managed
more than $31 billion in assets across approximately 43 money market funds,
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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
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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
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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:
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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
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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
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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.
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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.
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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
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WITHOUT CHARGE BY CONTACTING THE FUND AT THE ADDRESS LOCATED ON THE BACK
COVER OF THE PROSPECTUS.
APPENDIX
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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.
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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
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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
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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.
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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
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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
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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
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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
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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
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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
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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.
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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.
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G00329-02 (2/96)
Cusip 314229766
CUSIP (Number)
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MICHIGAN MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
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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
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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.
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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
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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 , 1996, with the Securities and Exchange Commission. The
--
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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
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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
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PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated February , 1996
--
SUMMARY OF FUND EXPENSES 3
GENERAL INFORMATION 3
INVESTMENT INFORMATION 6
Investment Objective 6
Investment Policies 7
Michigan Municipal Securities
13
Investment Risks 14
Non-Diversification 15
Investment Limitations 16
FUND INFORMATION 17
Management of the Fund 17
Distribution of Institutional
Shares 19
Administration of the Fund20
Expenses of the Fund and
Institutional Shares 21
NET ASSET VALUE 22
HOW TO PURCHASE SHARES 23
Table of Contents
HOW TO REDEEM SHARES 25
ACCOUNT AND SHARE INFORMATION
28
TAX INFORMATION 29
Federal Income Tax 29
State and Local Taxes 31
OTHER CLASSES OF SHARES 32
PERFORMANCE INFORMATION 33
MICHIGAN MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES
15
ADDRESSES 36
I
SUMMARY OF FUND EXPENSES
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)
.................................................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price) .................................. None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) ..... None
Redemption Fee (as a percentage of amount redeemed, if applicable)
.................................................... None
Exchange Fee ........................................ None
ANNUAL 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%
(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 1.95% 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.
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.
4
EXAMPLE 1 year 3 years
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and
(2) redemption at the end of each time period..... $4
$12
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 two classes of
5
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
6
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. The average
maturity of the securities in the Fund's portfolio, computed on a dollar-
weighted basis, will be 90 days or less. As a matter of investment policy,
which cannot be changed without shareholder approval, at least 80% of the
Fund's annual interest income will be exempt from federal regular income
tax and 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.) 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
7
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:
o tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
o bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
o municipal commercial paper and other short-term notes;
o variable rate demand notes;
o municipal bonds (including bonds having serial maturities and pre-
refunded bonds) and leases; and
o participation, trust, and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the
8
securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Most
variable rate demand notes allow the Fund to demand the repurchase of
the security on not more than seven days prior notice. Other notes only
permit the Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See "Demand Features." The
Fund treats variable rate demand notes as maturing on the later of the
date of the next interest rate adjustment or the date on which the Fund
may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Michigan
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in
a trust, partnership interests or any other form of indirect ownership
that allows the Fund to treat the income from the investment as exempt
from federal income tax. The Fund invests in these participation
interests in order to obtain credit enhancement or demand features that
would not be available through direct ownership of the underlying
Michigan Municipal Securities.
9
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
10
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
11
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
12
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.
13
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.
14
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
The Fund is non-diversified. An investment in the Fund, therefore, will
entail greater risk than would exist if it were diversified because the
15
higher percentage of investments among fewer issuers may result in greater
fluctuation in the total market value of the Fund's portfolio. Any
economic, political, or regulatory developments affecting the value of the
securities in the Fund's portfolio will have a greater impact on the total
value of the portfolio than would be the case if the portfolio were
diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue Code. This undertaking requires that, at the end of each quarter of
each taxable year, with regard to at least 50% of the Fund's total assets,
no more than 5% of its total assets are invested in the securities of a
single issuer and that with respect to the remainder of the Fund's total
assets, no more than 25% of its total assets are invested in the securities
of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its
total assets and pledge assets to secure such borrowings. These investment
limitations cannot be changed without shareholder approval.
16
FUND INFORMATION
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The
Trustees are responsible for managing the Fund's business affairs and for
exercising all the Trust's powers except those reserved for the
shareholders. An Executive Committee of the Board of Trustees handles the
Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated Management, the Fund's investment adviser, subject to direction
by the Trustees. The adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase and sale of
portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The adviser
has undertaken to reimburse the Fund up to the amount of the advisory
fee for operating expenses in excess of limitations established by
certain states. The adviser also may voluntarily choose to waive a
portion of its fee or reimburse other expenses of the Fund, but
reserves the right to terminate such waiver or reimbursement at any
time at its sole discretion.
17
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.
18
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
19
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 services) necessary to
operate the Fund. Federated Administrative Services provides these at an
annual rate as specified below:
Maximum Fee Average Aggregate Daily Net Assets
20
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.**
Federated Administrative Services may choose voluntarily to waive a portion
of its fee.
EXPENSES OF THE FUND AND INSTITUTIONAL SHARES
Holders of shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and
continuing its existence; registering the Trust with federal and state
securities authorities; Trustees' fees; auditors' fees; the cost of
meetings of Trustees; legal fees of the Trust; association membership dues;
and such non-recurring and extraordinary items as may arise.
The Fund expenses for which holders of shares pay their allocable portion
include, but are not limited to: registering the Fund and shares of the
Fund; investment advisory services; taxes and commissions; custodian fees;
21
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
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
22
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
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.
23
PURCHASING SHARES BY WIRE. Shares may be purchased by Federal Reserve wire
by calling the Fund before 1:00 p.m. (Eastern time) to place an order. The
order is considered received immediately. Payment by federal funds must be
received before 3:00 p.m. (Eastern time) that day. Federal funds should be
wired as follows: Federated Services Company, c/o State Street Bank and
Trust Company, Boston, MA; Attention: EDGEWIRE; For Credit to: 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
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
24
transfer agent to minimize internal recordkeeping requirements. The
transfer agent charges a fee based on the level of subaccounting services
rendered. Financial institutions may charge or pass through subaccounting
fees as part of or in addition to normal trust or agency account fees. They
may also charge fees for other services provided which may be related to
the ownership of Fund shares. This prospectus should, therefore, be read
together with any agreement between the customer and the financial
institution with regard to the services provided, the fees charged for
those services, and any restrictions and limitations imposed. State
securities laws may require certain financial institutions such as
depository institutions to register as dealers.
HOW TO REDEEM SHARES
Shares are redeemed at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which
the Fund computes its net asset value. Redemption requests must be received
in proper form and can be made as described below.
REDEEMING SHARES 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
25
wired the same day to the shareholder's account at a domestic commercial
bank which is a member of the Federal Reserve System, but will not include
that day's dividend. Proceeds from redemption requests received after that
time include that day's dividend but will be wired the following business
day. Proceeds from redemption requests received on holidays when wire
transfers are restricted will be wired the following business day.
Questions about telephone redemptions on days when wire transfers are
restricted should be directed to your shareholder services representative
at the telephone number listed on your account statement.
Telephone instructions may be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If this occurs, "Redeeming
Shares By Mail" should be considered. If at any time the Fund shall
determine it necessary to terminate or modify the telephone redemption
privilege, shareholders would be promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by mailing a
written request to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
26
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.
27
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.
CAPITAL GAINS. The Fund does not expect to realize any capital gains or
losses. If capital gains or losses were to occur, they could result in an
increase or decrease in dividends. The Fund will distribute in cash or
additional shares any realized net long-term capital gains at least once
every 12 months.
CERTIFICATES AND CONFIRMATIONS. As transfer agent for the Fund, Federated
Services Company maintains a share account for each shareholder. Share
certificates are not issued unless requested by contacting the Fund or
Federated Services Company in writing. Monthly confirmations are sent to
report all transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts
with low balances, the Fund may redeem shares in any account and pay the
proceeds to the shareholder if the account balance falls below a required
28
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
29
investment companies and to receive the special tax treatment afforded to
such companies. The Fund will be treated as a single, separate entity for
federal income tax purposes so that income (including capital gains) and
losses realized by the Trust's other portfolios will not be combined for
tax purposes with those realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations. The Fund may purchase, within the limits of its investment
policies, all types of municipal bonds, including private activity bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular
taxable income of the taxpayer increased by certain "tax preference" items
not included in regular taxable income and reduced by only a portion of the
deductions allowed in the calculation of the regular tax.
30
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
31
interest payments on securities, will be exempt from Michigan intangibles
tax.
Distributions by the Fund are not subject to the Michigan Single Business
Tax to the extent that such distributions are derived from interest on
obligations of Michigan or its political subdivisions, or obligations of
the United States government that are exempt from state taxation by a law
of the United States.
Certain municipalities in Michigan also impose an income tax on individuals
and corporations. However, to the extent that the dividends from the Funds
are exempt from federal regular income taxes, such dividends also will be
exempt from Michigan municipal income taxes.
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 are distributed with no 12b-1 Plan but are subject to
shareholder services fees.
32
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
33
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.
MICHIGAN MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Arthur Andersen
LLP, the Fund's independent public accountants. Their
report dated December 15, 1995 on the Fund's financial
statements for the period ended October 31, 1995 and on
the information shown below for the period 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.
34
PERIOD
ENDED
OCTOBER
1995(A)
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%*
Expnese waiver/reimbursement (c) 1.63%*
SUPPLEMENTAL DATA
35
Net assets, end of period (000 omitted) $30,133
* Computed on an annualized basis.
(a) Reflects operations for the period from June 20,
1995 (date of initial public investment) to October 31, 1995.
(b) Based on net asset value, which does not reflect
the sales charge or contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in
both the expense and net investment income ratios above.
ADDRESSES
Michigan Municipal Cash Trust
Institutional Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
36
Distributor
Federated Securities Corp. Federated
Investors Tower
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
37
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
38
MICHIGAN MUNICIPAL CASH TRUST
INSTITUTIONAL SHARES
Prospectus
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated February , 1996
--
Distributor
A subsidiary of FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp.
CUSIP (Number)
G01212-04-IS
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 , 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 , 1996
--
Federated Securities Corp.
Distributor
A subsidiary of Federated Investors
INVESTMENT POLICIES 4
Acceptable Investments 4
Participation Interests 4
Municipal Leases 5
Ratings 6
When-Issued and Delayed
Delivery Transactions 7
Repurchase Agreements 7
Credit Enhancement 8
MICHIGAN INVESTMENT RISKS 9
INVESTMENT LIMITATIONS 11
Regulatory Compliance 16
FEDERATED MUNICIPAL TRUST
MANAGEMENT 17
The Funds 28
Share Ownership 30
Trustee Compensation 31
Trustee Liability 31
INVESTMENT ADVISORY SERVICES
34
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Investment Adviser 34
Advisory Fees 35
BROKERAGE TRANSACTIONS 36
OTHER SERVICES 38
Fund Administration 38
Custodian and Portfolio
Recordkeeper 38
Transfer Agent 38
Independent Public Accountants
39
SHAREHOLDER SERVICES AGREEMENT
39
DETERMINING NET ASSET VALUE40
REDEMPTION IN KIND 42
MASSACHUSETTS PARTNERSHIP LAW
42
II
Table of Contents
THE FUND'S TAX STATUS 43
PERFORMANCE INFORMATION 44
Yield 44
Effective Yield 45
Tax-Equivalent Yield 45
Tax-Equivalency Table 46
Total Return 48
Performance Comparisons 49
ABOUT FEDERATED INVESTORS 50
Mutual Fund Market 51
Institutional Clients 51
Trust Organizations 52
Broker/Dealers and Bank
Broker/Dealer Subsidiaries52
FINANCIAL STATEMENTS 17
APPENDIX 18
III
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.
Table of Contents
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
5
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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."
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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
7
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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.
8
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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
9
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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
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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.
11
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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.
12
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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
13
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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
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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
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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.
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FEDERATED MUNICIPAL TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Municipal Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director, Trustee, or Managing
General Partner of the Funds. Mr. Donahue is the father of J. Christopher
Donahue, Executive Vice President of the Trust .
Thomas G. Bigley
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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
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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
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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
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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
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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
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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
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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.
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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.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
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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
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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
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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:
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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
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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%.
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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
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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
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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.
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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.
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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.
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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,
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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.
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OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the period from June 20, 1995 (date of
initial public investment) to October 31, 1995, Federated Administrative
Services earned $45,548. Dr. Henry J. Gailliot, an officer of Federated
Management, the adviser to the Fund, holds approximately 20% of the
outstanding common stock and serves as a director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
TRANSFER AGENT
As transfer agent, Federated Services Company maintains all necessary
shareholder records. For its services, the transfer agent receives a fee
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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
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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 16, 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
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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.
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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
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to be given in each agreement, obligation, or instrument the Trust or its
Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations, the Trust is required by the Declaration of Trust to
use its property to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder
for any act or obligation of the Trust. Therefore, financial loss resulting
from liability as a shareholder will occur only if the Trust itself cannot
meet its obligations to indemnify shareholders and pay judgments against
them.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90%
of its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
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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.
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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 22, 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 3.56%. Institutional Shares did not
exist prior to February 22, 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 22, 1996.
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TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities in the Fund's portfolio
generally remains free from federal regular income tax,* and is often free
from state and local taxes as well. As the table below indicates, a "tax-
free" investment can be an attractive choice for investors, particularly in
times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
State of Michigan
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
19.47% 32.47% 35.47% 40.47% 44.07%
JOINT $1- $39,001- $94,251- $143,601- OVER
RETURN 39,000 94,250 143,600 256,500 256,500
SINGLE $1- $23,351- $56,551- $117,951- OVER
RETURN 23,350 56,550 117,950 256,500 256,500
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Tax-Exempt
Yield Taxable Yield Equivalent
1.50% 1.86% 2.22% 2.32% 2.52% 2.68%
2.00% 2.48% 2.96% 3.10% 3.36% 3.58%
2.50% 3.10% 3.70% 3.87% 4.20% 4.47%
3.00% 3.73% 4.44% 4.65% 5.04% 5.36%
3.50% 4.35% 5.18% 5.42% 5.88% 6.26%
4.00% 4.97% 5.92% 6.20% 6.72% 7.15%
4.50% 5.59% 6.66% 6.97% 7.56% 8.05%
5.00% 6.21% 7.40% 7.75% 8.40% 8.94%
5.50% 6.83% 8.14% 8.52% 9.24% 9.83%
6.00% 7.45% 8.88% 9.30% 10.08% 10.73%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state and
local taxes paid on comparable taxable investments were not used to
increase federal deductions.
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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 22, 1996.
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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.
49
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ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making-structured, straightforward,
and consistent. This has resulted in a history of competitive performance
with a range of competitive investment products that have gained the
confidence of thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio managers,
analysts, and traders dedicated to specific market sectors.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market
funds, a principal means used by money managers today to value money market
fund shares. Other innovations include the first institutional tax-free
money market fund. As of December 31, 1994, Federated Investors managed
more than $31 billion in assets across approximately 43 money market funds,
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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
51
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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
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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
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.
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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.
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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.
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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
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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
57
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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.
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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.
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NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.
G01212 02 REV-1(2/96)
Cusip 314229725
CUSIP (Number)
60
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.
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
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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.
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The Fund has also filed a Statement of Additional Information dated
February , 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
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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
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PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated February , 1996
--
SUMMARY OF FUND EXPENSES 3
GENERAL INFORMATION 3
INVESTMENT INFORMATION 6
INVESTMENT OBJECTIVE 6
INVESTMENT POLICIES 6
OHIO MUNICIPAL SECURITIES12
INVESTMENT RISKS 13
NON-DIVERSIFICATION 14
INVESTMENT LIMITATIONS 15
FUND INFORMATION 15
MANAGEMENT OF THE FUND 15
DISTRIBUTION OF
INSTITUTIONAL SHARES 18
ADMINISTRATION OF THE FUND19
EXPENSES OF THE FUND AND
INSTITUTIONAL SHARES 19
NET ASSET VALUE 21
HOW TO PURCHASE SHARES 21
HOW TO REDEEM SHARES 23
Table of Contents
ACCOUNT AND SHARE INFORMATION
25
TAX INFORMATION 27
FEDERAL INCOME TAX 27
STATE AND LOCAL TAXES 28
OTHER CLASSES OF SHARES 30
PERFORMANCE INFORMATION 31
OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS --
CASH II SHARES 32
OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS --
INSTITUTIONAL SERVICE SHARES
34
ADDRESSES 36
SUMMARY OF FUND EXPENSES
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)
.................................................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price) .................................. None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) ..... None
Redemption Fee (as a percentage of amount redeemed, if applicable)
.................................................... None
Exchange Fee ........................................ None
ANNUAL 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%
(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.
*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.
EXAMPLE 1 year 3 years
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and
(2) redemption at the end of each time period..... $4
$12
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. The average
maturity of the securities in the Fund's portfolio, computed on a dollar-
weighted basis, will be 90 days or less. As a matter of investment policy,
which cannot be changed without shareholder approval, at least 80% of the
Fund's annual interest income will be exempt from federal regular income
tax and 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.) 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:
o tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
o bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
o municipal commercial paper and other short-term notes;
o variable rate demand notes;
o municipal bonds (including bonds having serial maturities and pre-
refunded bonds) and leases; and
o participation, trust, and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Most
variable rate demand notes allow the Fund to demand the repurchase of
the security on not more than seven days prior notice. Other notes only
permit the Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See "Demand Features." The
Fund treats variable rate demand notes as maturing on the later of the
date of the next interest rate adjustment or the date on which the Fund
may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Ohio
Municipal Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in
a trust, partnership interests or any other form of indirect ownership
that allows the Fund to treat the income from the investment as exempt
from federal income tax. The Fund invests in these participation
interests in order to obtain credit enhancement or demand features that
would not be available through direct ownership of the underlying Ohio
Municipal Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of
equipment and facilities. They may take the form of a lease, an
installment purchase contract, a conditional sales contract, or a
participation interest in any of the above. Lease obligations may be
subject to periodic appropriation. Municipal leases are subject to
certain specific risks in the event of default or failure of
appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any
bankruptcy, receivership, or default of the party providing the credit
enhancement will adversely affect the quality and marketability of the
underlying security. The Fund may have more than 25% of its total assets
invested in securities credit-enhanced by banks.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts
and standby commitments ("demand features") to purchase the securities at
their principal amount (usually with accrued interest) within a fixed
period (usually seven days) following a demand by the Fund. The demand
feature may be issued by the issuer of the underlying securities, a dealer
in the securities, or by another third party, and may not be transferred
separately from the underlying security. The Fund uses these arrangements
to provide the Fund with liquidity and not to protect against changes in
the market value of the underlying securities. The bankruptcy,
receivership, or default by the issuer of the demand feature, or a default
on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of
credit enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete
these transactions may cause the Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering
into these transactions, and the market values of the securities purchased
may vary from the purchase prices. Accordingly, the Fund may pay more or
less than the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities laws. Under
criteria established by the Trustees, certain restricted securities are
determined to be liquid. To the extent that restricted securities are not
determined to be liquid the Fund will limit their purchase, together with
other illiquid securities, to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines that market conditions call for a temporary defensive posture,
the Fund may invest in tax-exempt or taxable securities, all of comparable
quality to other securities in which the Fund invests, such as: obligations
issued by or on behalf of municipal or corporate issuers; obligations
issued or guaranteed by the U.S. government, its agencies, or
instrumentalities; instruments issued by a U.S. branch of a domestic bank
or other deposit 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.
OHIO MUNICIPAL SECURITIES
Ohio Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works. They
are also issued to repay outstanding obligations, to raise funds for
general operating expenses, and to make loans to other public institutions
and facilities.
Ohio Municipal Securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire sites
or construct and equip facilities for privately or publicly owned
corporations. The availability of this financing encourages these
corporations to locate within the sponsoring communities and thereby
increases local employment.
The two principal classifications of Ohio Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by
the issuer's pledge of its full faith and credit and taxing power for the
payment of principal and interest. Interest on and principal of revenue
bonds, however, are payable only from the revenue generated by the facility
financed by the bond or other specified sources of revenue. Revenue bonds
do not represent a pledge of credit or create any debt of or charge against
the general revenues of a municipality or public authority. Industrial
development bonds are typically classified as revenue bonds.
INVESTMENT RISKS
Yields on Ohio Municipal Securities depend on a variety of factors,
including: the general conditions of the short-term municipal note market
and of the municipal bond market; the size of the particular offering; the
maturity of the obligations; and the rating of the issue. The ability of
the Fund to achieve its investment objective also depends on the continuing
ability of the issuers of Ohio Municipal Securities and participation
interests, or the credit enhancers of either, to meet their obligations for
the payment of interest and principal when due. In addition, from time to
time, the supply of Ohio Municipal Securities acceptable for purchase by
the Fund could become limited.
The Fund may invest in Ohio Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in
these Ohio Municipal Securities could involve an increased risk to the Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Ohio Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors. In addition, the obligations of such issuers may
become subject to laws enacted in the future by Congress, state
legislators, or referenda extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of states or municipalities to levy taxes.
There is also the possibility that, as a result of litigation or other
conditions, the power or ability of any issuer to pay, when due, the
principal of and interest on its municipal securities may be materially
affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will
entail greater risk than would exist if it were diversified because the
higher percentage of investments among fewer issuers may result in greater
fluctuation in the total market value of the Fund's portfolio. Any
economic, political, or regulatory developments affecting the value of the
securities in the Fund's portfolio will have a greater impact on the total
value of the portfolio than would be the case if the portfolio were
diversified among more issuers.
However, the Fund intends to comply with Subchapter M of the Internal
Revenue Code. This undertaking requires that, at the end of each quarter of
each taxable year, with regard to at least 50% of the Fund's total assets,
no more than 5% of its total assets are invested in the securities of a
single issuer and that with respect to the remainder of the Fund's total
assets, no more than 25% of its total assets are invested in the securities
of a single issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase
agreements (arrangements in which the Fund sells a money market instrument
for a percentage of its cash value with an agreement to buy it back on a
set date)or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge up
to 15% of the value of its total assets to secure such borrowings. These
investment limitations cannot be changed without shareholder approval.
FUND INFORMATION
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The
Trustees are responsible for managing the Fund's business affairs and for
exercising all the Trust's powers except those reserved for the
shareholders. An Executive Committee of the Board of Trustees handles the
Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by
Federated Management, the Fund's investment adviser, subject to direction
by the Trustees. The adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase and sale of
portfolio instruments.
ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .40 of 1% of the Fund's average daily net assets. The adviser
has undertaken to reimburse the Fund up to the amount of the advisory
fee for operating expenses in excess of limitations established by
certain states. The adviser also may voluntarily choose to waive a
portion of its fee or reimburse other expenses of the Fund, but
reserves the right to terminate such waiver or reimbursement at any
time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under
the Investment Advisers Act of 1940. It is a subsidiary of Federated
Investors. All of the Class A (voting) shares of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue,
Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee
of Federated Investors.
Federated Management and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies and
private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over
$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 services) necessary to
operate the Fund. Federated Administrative Services provides these at an
annual rate as specified below:
Maximum Fee Average Aggregate Daily Net Assets
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.**
Federated Administrative Services may choose voluntarily to waive a portion
of its fee.
EXPENSES OF THE FUND AND INSTITUTIONAL SHARES
Holders of shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and
continuing its existence; registering the Trust with federal and state
securities authorities; Trustees' fees; auditors' fees; the cost of
meetings of Trustees; legal fees of the Trust; association membership dues;
and such non-recurring and extraordinary items as may arise.
The Fund expenses for which holders of shares pay their allocable portion
include, but are not limited to: registering the Fund and shares of the
Fund; investment advisory services; taxes and commissions; custodian fees;
insurance premiums; auditors' fees; and such non-recurring and
extraordinary items as may arise.
At present, no expenses are allocated to the shares as a class. However,
the Trustees reserve the right to allocate certain expenses to holders of
shares as they deem appropriate ("class expenses"). In any case, class
expenses would be limited to: 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
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 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
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is open for business. Shares may be purchased either by wire or by
check. The Fund reserves the right to reject any purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone. The
minimum initial investment is $25,000. However, an account may be opened
with a smaller amount as long as the minimum is reached within 90 days. .
Minimum investments will be calculated by combining all accounts maintained
with the Fund. Financial institutions may impose different minimum
investment requirements on their customers.
PURCHASING SHARES BY WIRE. Shares may be purchased by Federal Reserve wire
by calling the Fund before 1:00 p.m. (Eastern time) to place an order. The
order is considered received immediately. Payment by federal funds must be
received before 3:00 p.m. (Eastern time) that day. Federal funds should be
wired as follows: Federated Services Company, c/o State Street Bank and
Trust Company, Boston, MA; Attention: EDGEWIRE; For Credit to: Ohio
Municipal Cash Trust-Institutional Shares; Fund Number (this number can be
found on the account statement or by contacting the Fund); Group Number or
Order Number; Nominee or Institution Name; and ABA Number 011000028. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.
PURCHASING SHARES BY CHECK. Shares may be purchased by mailing a check made
payable to Ohio Municipal Cash Trust-Institutional Shares to Federated
Services Company, P.O. Box 8600, Boston, MA 02266-8600. . Orders by mail
are considered received when payment by check is converted into federal
funds. This is normally the next business day after the check is received.
SUBACCOUNTING SERVICES. Financial institutions are encouraged to open
single master accounts. A subaccounting system is available through the
transfer agent to minimize internal recordkeeping requirements. The
transfer agent charges a fee based on the level of subaccounting services
rendered. Financial institutions may charge or pass through subaccounting
fees as part of or in addition to normal trust or agency account fees. They
may also charge fees for other services provided which may be related to
the ownership of Fund shares. This prospectus should, therefore, be read
together with any agreement between the customer and the financial
institution with regard to the services provided, the fees charged for
those services, and any restrictions and limitations imposed. State
securities laws may require certain financial institutions such as
depository institutions to register as dealers.
HOW TO REDEEM SHARES
Shares are redeemed at their net asset value next determined after
Federated Services Company receives the redemption request. Redemptions
will be made on days on which the Fund computes its net asset value.
Redemption requests must be received in proper form and can be made as
described below.
REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by
calling the Fund provided the Fund has a properly completed authorization
form. These forms can be obtained from Federated Securities Corp. Proceeds
from redemption requests received before 12:00 p.m. (Eastern time) will be
wired the same day to the shareholder's account at a domestic commercial
bank which is a member of the Federal Reserve System, but will not include
that day's dividend. Proceeds from redemption requests received after that
time include that day's dividend but will be wired the following business
day. Proceeds from redemption requests received on holidays when wire
transfers are restricted will be wired the following business day.
Questions about telephone redemptions on days when wire transfers are
restricted should be directed to your shareholder services representative
at the telephone number listed on your account statement.
Telephone instructions may be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If this occurs, "Redeeming
Shares By Mail" should be considered. If at any time the Fund shall
determine it necessary to terminate or modify the telephone redemption
privilege, shareholders would be promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by mailing a
written request to: Federated Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.
The written request should state: the Fund name and the class designation;
the account name as registered with the Fund; the account number; and the
number of shares to be redeemed or the dollar amount requested. All owners
of the account must sign the request exactly as the shares are registered.
Normally, a check for the proceeds is mailed within one business day, but
in no event more than seven days, after the receipt of a proper written
redemption request. Dividends are paid up to and including the day that a
redemption request is processed.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than
to the shareholder of record must have their signatures guaranteed by a
commercial or savings bank, trust company or savings association whose
deposits are insured by an organization which is administered by the
Federal Deposit Insurance Corporation; a member firm of a domestic stock
exchange; or any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934. The Fund does not accept signatures
guaranteed by a notary public.
ACCOUNT AND SHARE INFORMATION
DIVIDENDS. Dividends are declared daily and paid monthly. Dividends are
automatically reinvested on payment dates in additional shares of the Fund
unless cash payments are requested by writing to the Fund. Shares purchased
by wire before 3:00 p.m. (Eastern time) begin earning dividends that day.
Shares purchased by check begin earning dividends the day after the check
is converted into federal funds.
CAPITAL GAINS. The Fund does not expect to realize any capital gains or
losses. If capital gains or losses were to occur, they could result in an
increase or decrease in dividends. The Fund will distribute in cash or
additional shares any realized net long-term capital gains at least once
every 12 months.
CERTIFICATES AND CONFIRMATIONS. As transfer agent for the Fund, Federated
Services Company maintains a share account for each shareholder. Share
certificates are not issued unless requested by contacting the Fund or
Federated Services Company in writing. Monthly confirmations are sent to
report all transactions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts
with low balances, the Fund may redeem shares in any account and pay the
proceeds to the shareholder if the account balance falls below a required
minimum value of $25,000 due to shareholder redemptions. Before shares are
redeemed to close an account, the shareholder is notified in writing and
allowed 30 days to purchase additional shares to meet the minimum
requirement.
VOTING RIGHTS. Each 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.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations. The Fund may purchase, within the limits of its investment
policies, all types of municipal bonds, including private activity bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular
taxable income of the taxpayer increased by certain "tax preference" items
not included in regular taxable income and reduced by only a portion of the
deductions allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed as
ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states other
than 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.
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.
OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS - CASH II SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report dated December 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.
YEAR ENDED OCTOBER 31,
1995 1994 1993 1992 1991(A)
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
* 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.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income rations shown above.
OHIO MUNICIPAL CASH TRUST
FINANCIAL HIGHLIGHTS -INSTITUTIONAL SERVICE SHARES (FORMERLY, INSTITUTIONAL
SHARES)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Arthur Andersen LLP, the Fund's
independent public accountants. Their report dated December 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.
YEAR ENDED OCTOBER 31,
1995 1994 1993 1992 1991(A)
NET ASSET VALUE, BEGINNING
OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.04 0.02 0.02 0.03 0.02
LESS DISTRIBUTIONS
Distributions from net
investment income (0.04) (0.02) (0.02) (0.03) (0.02)
NET ASSET VALUE, END OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN(B) 3.61% 2.41% 2.33% 3.21% 2.40%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.57% 0.55% 0.48% 0.46% 0.35%*
Net investment income 3.56% 2.36% 2.30% 3.10% 4.46%*
Expense waiver/
reimbursement (c) 0.29% 0.07% 0.19% 0.25% 0.32%*
SUPPLEMENTAL DATA
Net assets, end of
period(000 omitted) $72,931 $62,499 $81,748 $74,342 $44,771
* 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.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income rations shown above.
ADDRESSES
Ohio Municipal Cash Trust
Institutional Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
Distributor
Federated Securities Corp. Federated
Investors Tower
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
OHIO MUNICIPAL CASH TRUST
INSTITUTIONAL SHARES
Prospectus
A Non-Diversified Portfolio of Federated
Municipal Trust, an Open-End Management
Investment Company
Prospectus dated February , 1996
--
Distributor
A subsidiary of FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp.
CUSIP (Number)
G0211-01-IS
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 , 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 , 1996
--
39
Federated Securities Corp.
Distributor
A subsidiary of Federated Investors
40
INVESTMENT POLICIES
Acceptable Investments
Participation Interests
Municipal Leases
Ratings
When-Issued and Delayed
Delivery Transactions
Repurchase Agreements
Reverse Repurchase Agreements
Credit Enhancement
OHIO INVESTMENT RISKS
INVESTMENT LIMITATIONS
Investing in Restricted
Securities
Regulatory Compliance
FEDERATED MUNICIPAL TRUST
MANAGEMENT
Share Ownership
Trustees Compensation
Table of Contents
Trustee Liability
INVESTMENT ADVISORY SERVICES
Investment Adviser
Advisory Fees
BROKERAGE TRANSACTIONS
OTHER SERVICES
Fund Administration
Custodian and Portfolio
Recordkeeper
Transfer Agent
Independent Public Accountants
DISTRIBUTION PLAN AND
SHAREHOLDER SERVICES
AGREEMENT
DETERMINING NET ASSET VALUE
REDEMPTION IN KIND
II
Table of Contents
MASSACHUSETTS PARTNERSHIP LAW
THE FUND'S TAX STATUS
PERFORMANCE INFORMATION
Yield
Effective Yield
Tax-Equivalent Yield
Tax-Equivalency Table
Total Return
Performance Comparisons
ABOUT FEDERATED INVESTORS
Mutual Fund Market
Institutional Clients
Trust Organizations
Broker/Dealers and Bank
Broker/Dealer Subsidiaries
FINANCIAL STATEMENTS
III
Table of Contents
APPENDIX
IV
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by
the Board of Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security; the issuer of any demand feature applicable to the security; or
any guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation interests
include the right to demand payment from the issuers of those interests. By
purchasing these participation interests, the Fund is buying a security
meeting the maturity and quality requirements of the Fund and also is
receiving the tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or the
nature of the appropriation for the lease. Furthermore, a lease may provide
that the participants cannot accelerate lease obligations upon default. The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be terminated
by the lessee; the potential recovery, if any, from a sale of the leased
property upon termination of the lease; the lessee's general credit
strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of non-appropriation"); and any credit enhancement
or legal recourse provided upon an event of non-appropriation or other
termination of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations ("NRSROs") or be of comparable quality to
securities having such ratings. An NRSRO's two highest rating categories
are determined without regard for sub-categories and gradations. For
example, securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Ratings
Group ("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc.
("Moody's"), or FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating categories. The Fund will follow applicable regulations in
determining whether a security rated by more than one NRSRO can be treated
as being in one of the two highest short-term rating categories; currently,
such securities must be rated by two NRSROs in one of their two highest
rating categories. See "Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund`s records at the trade date. These assets are
marked to market daily and are maintained until the transaction has been
settled. The Fund does not intend to engage in when-issued and delayed
delivery transactions to an extent that would cause the segregation of more
than 20% of the total value of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them at
a mutually agreed upon time and price. To the extent that the seller does
not repurchase the securities from the Fund, the Fund could receive less
than the repurchase price on any sale of such securities. The Fund or its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. In the
event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending court
action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by the
Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument in
return for a percentage of the instrument's market value in cash and agrees
that on a stipulated date in the future the Fund will repurchase the
portfolio instrument by remitting the original consideration plus interest
at an agreed upon rate. The use of reverse repurchase agreements may
enable the Fund to avoid selling portfolio instruments at a time when a
sale may be deemed to be disadvantageous, but does not ensure this result.
When effecting reverse repurchase agreements, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are: segregated on the Fund's records at the trade date; marked
to market daily; and maintained until the transaction is settled.
CREDIT ENHANCEMENT
The Fund typically evaluates the credit quality and ratings of credit-
enhanced securities based upon the financial condition and ratings of the
party providing the credit enhancement (the "credit enhancer"), rather than
the issuer. However, credit-enhanced securities will not be treated as
having been issued by the credit enhancer for diversification purposes,
unless the Fund has invested more than 10% of its assets in securities
issued, guaranteed or otherwise credit enhanced by the credit enhancer, in
which case the securities will be treated as having been issued by both the
issuer and the credit enhancer.
The Fund may have more than 25% of its total assets invested in securities
credit enhanced by banks.
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.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director, Trustee, or Managing
General Partner of the Funds. Mr. Donahue is the father of J. Christopher
Donahue, Executive Vice President of the Trust .
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee, or Managing General Partner of
the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of the
Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.
Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the
Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; founding Chairman,
National Advisory Council for Environmental Policy and Technology and
Federal Emergency Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Administrative Services, Federated
Services Company, and Federated Shareholder Services; President or
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.
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 +
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 fiscal
years ended October 31, 1995, 1994, and 1993, the adviser earned $957,142,
$818,724, and $813,048, respectively, of which $95,512, $133,035, and
$392,961, respectively, were waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses) exceed
2-1/2% per year of the first $30 million of average net assets, 2% per year
of the next $70 million of average net assets, and 1-1/2% per year of the
remaining average net assets, the adviser will reimburse the Fund for its
expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this limitation,
the investment advisory fee paid will be reduced by the amount of the
excess, subject to an annual adjustment. If the expense limitation is
exceeded, the amount to be reimbursed by the adviser will be limited, in
any single fiscal year, by the amount of the investment advisory fees.
This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Trustees. The adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the Fund
or to the adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may be
used by the adviser or its affiliates in advising the Fund and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have paid,
it would tend to reduce their expenses. The adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. During the fiscal years ended October 31, 1995, 1994,
1993, the Fund paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the type
the Fund may make may also be made by those other accounts. When the Fund
and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
OTHER SERVICES
FUND ADMINISTRATION
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated
Administrative Services, Inc., also a subsidiary of Federated Investors,
served as the Fund's Administrator. (For purposes of this Statement of
Additional Information, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred to
as the "Administrators".) For the fiscal year ended October 31, 1995,
Federated Administrative Services earned $181,139. For the fiscal year
ended ended October 31, 1994, the Administrators collectively earned
$209,077. For the fiscal year ended ended October 31, 1993, Federated
Administrative Services, Inc., earned $325,056. Dr. Henry J. Gailliot, an
officer of Federated Management, the adviser to the Fund, holds
approximately 20% of the outstanding common stock and serves as a director
of Commercial Data Services, Inc., a company which provides computer
processing services to Federated Administrative Services.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. It also provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
TRANSFER AGENT
As transfer agent, Federated Services Company maintains all necessary
shareholder records. For its services, the transfer agent receives a fee
based on the size, type and number of accounts and transactions made by
shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Fund are Arthur Andersen LLP,
Pittsburgh, PA.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT
With respect to Cash II Shares, the Fund has adopted a Distribution Plan
pursuant to Rule 12b-1 which was promulgated by the Securities and Exchange
Commission pursuant to the Investment Company Act of 1940. Additionally,
the Fund has adopted a Shareholder Service Agreement with respect to 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 22, 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
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect
its shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of its shareholders for acts or
obligations of the Trust. These documents require notice of this disclaimer
to be given in each agreement, obligation, or instrument the Trust or its
Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations, the Trust is required by the Declaration of Trust to
use its property to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a shareholder
for any act or obligation of the Trust. Therefore, financial loss resulting
from liability as a shareholder will occur only if the Trust itself cannot
meet its obligations to indemnify shareholders and pay judgments against
them.
THE FUND'S TAX STATUS
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90%
of its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its
net income earned during the year.
PERFORMANCE INFORMATION
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Fund, the performance will be reduced for those
shareholders paying those fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any additional
shares purchased with dividends earned from the original one share and all
dividends declared on the original and any purchased shares; dividing the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.
For the seven-day period ended October 31, 1995, the yields for Cash II
Shares and Institutional Service Shares (formerly called Institutional
Shares) were 3.29% and 3.59%, respectively. Institutional Shares did not
exist prior to February 22, 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.
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 22, 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.
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 22, 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 1995
State of Ohio
FEDERAL TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND STATE TAX BRACKET:
19.457% 33.201% 37.900% 43.500% 47.100%
SINGLE $1- $23,351- $56,551- $117,951- OVER
RETURN 23,350 56,550 117,950 256,500 256,500
Tax-Exempt
Yield Taxable Yield Equivalent
1.50% 1.86% 2.25% 2.42% 2.65% 2.84%
2.00% 2.48% 2.99% 3.22% 3.54% 3.78%
2.50% 3.10% 3.74% 4.03% 4.42% 4.73%
3.00% 3.72% 4.49% 4.83% 5.31% 5.67%
3.50% 4.35% 5.24% 5.64% 6.19% 6.62%
4.00% 4.97% 5.99% 6.44% 7.08% 7.56%
4.50% 5.59% 6.74% 7.25% 7.96% 8.51%
5.00% 6.21% 7.49% 8.05% 8.85% 9.45%
5.50% 6.83% 8.23% 8.86% 9.73% 10.40%
6.00% 7.45% 8.98% 9.66% 10.62% 11.34%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state and
local taxes paid on comparable taxable investments were not used to
increase federal deductions.
The chart above is for illustrative purposes only. It is not an indicator
of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, adjusted over the
period by any additional shares, assuming the monthly reinvestment of all
dividends and distributions.
For 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
19, 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, 1994, Federated Investors managed
more than $31 billion in assets across approximately 43 money market funds,
including 17 government, 8 prime and 18 municipal with assets approximating
$17 billion, $7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed
income management. Henry A. Frantzen, Executive Vice President, oversees
the management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $2 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds for
a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and mutual
funds for a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt
entities, foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional clients is
headed by John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than
1,500 banks and trust organizations. Virtually all of the trust divisions
of the top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
*Source: Investment Company Institute
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
STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS)
RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a variable rate demand feature. The first rating (long-
term rating) addresses the likelihood of repayment of principal and
interest when due, and the second rating (short-term rating) describes the
demand characteristics. Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The
definitions for the long-term and the short-term ratings are provided
below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365
days.
A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
LONG-TERM DEBT RATINGS
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest
rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
MOODY'S INVESTORS SERVICE, INC.
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG
or VMIG ratings is to provide investors with a simple system by which the
relative investment qualities of short-term obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS)
RATINGS
Short-term ratings on issues with demand features are differentiated by the
use of the VMIG symbol to reflect such characteristics as payment upon
periodic demand rather than fixed maturity dates and payment relying on
external liquidity.
In this case, two ratings are usually assigned, (for example, Aaa/VMIG-1);
the first representing an evaluation of the degree of risk associated with
scheduled principal and interest payments, and the second representing an
evaluation of the degree of risk associated with the demand feature. The
VMIG rating can be assigned a 1 or 2 designation using the same definitions
described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1 Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries,
high rates of return on funds employed, conservative capitalization structure
with moderate reliance on debt and ample asset protection, broad margins in
earning coverage of fixed financial charges and high internal cash
generation, well-established access to a range of financial markets and
assured sources of alternate liquidity.
P-2 Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
LONG-TERM DEBT RATINGS
AAA Bonds which are rated AAA are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes 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 (2/96)
Cusip 314229840
Cusip 314229857
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements: (1-15) Filed in Part A (except for 5b,
10b and 14b, for which Financial Statements are incorporated by
reference to the Prospectus Dated December 31, 1995 (File Nos.
33-31259 and 811-5911)).
(b) Exhibits:
(1) Copy of Declaration of Trust of the Registrant (1);
(i)Conformed copy of Amendment No. 4, dated September 1,
1989, to the Declaration of Trust (7);
(ii) Copy of Amendment No. 10, dated November 18, 1992,
to the Declaration of Trust (12);
(iii)Conformed copy of Amendment No. 12, dated Nov. 22,
1993, to the Declaration of Trust (17);
(iv)Conformed copy of Amendment No. 13, dated February
24, 1994, to the Declaration of Trust (17);
(v)Conformed copy of Amendment No. 14, dated August 25,
1994 (20);
(vi)..........Conformed copy of Amendment No. 17 dated
September 1, 1989 (28);
(2) Copy of By-Laws of the Registrant (7);
(3) Not applicable;
1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed on September 29, 1989 (File Nos. 33-31259 and
811-5911).
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed on November 6, 1990 (File Nos. 33-31259
and 811-5911).
12.Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed on December 23, 1992 (File Nos. 33-
31251 and 811-5911).
17.Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed on March 2, 1994 (File Nos. 33-31251
and 811-5911).
20.Response is incorporated by reference to Registrant's
PostEffective Amendment No. 30 on Form N-1A filed on
September 19, 1994 (File Nos. 33-31251 and 811-5911)
Response is incorporated by reference to Registrant's Post Effective
Amendment No 39 on Form N-1A filed on December 26, 1995 (File Nos. 33-31259
and 811-5911)
(4) (i) Copy of Specimen Certificates for Shares of
Beneficial Interest of Alabama Municipal Cash Trust,
Minnesota Municipal Cash Trust (Cash Series Shares and
Institutional Shares), Pennsylvania Municipal Cash Trust
(Cash Series Shares and Institutional Service Shares),
Virginia Municipal Cash Trust (Institutional Service
Shares and Institutional Shares), North Carolina Municipal
Cash Trust, Ohio Municipal Cash Trust (Cash II Shares and
Institutional Shares), Massachusetts Municipal Cash Trust
(Institutional Service Shares and BayFunds Shares), and
New Jersey Municipal Cash Trust (Institutional Shares and
Institutional Service Shares) (16);
(ii) Copy of Specimen Certificate for Maryland Municipal
Cash Trust (17);
(iii)Copy of Specimen Certificate for Florida Municipal
Cash Trust (20)
(iv) Copy of Specimen Certificate for Michigan Municipal
Cash Trust (24);
(v) Copy of Specimen Certificate for Pennsylvania
Municipal Cash Trust- Institutional Shares (25);
(vi) Copy of Speciment Certificate for Georgia Municipal
Cash Trust (26);
(5) Copy of Investment Advisory Contract of the
Registrant (7);
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed on November 6, 1990 (File Nos. 33-31259
and 811-5911).
16.Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed on December 29, 1993 (File Nos. 33-
31251 and 811-5911).
17.Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed on March 2, 1994 (File Nos. 33-31251
and 811-5911).
20.Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 on Form N-1A filed on September 19, 1994 (File Nos. 33-
31251 and 811-5911).
24.Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 34 on Form N-1A filed on April 13, 1995 (File Nos. 33-31251
and 811-5911).
25.Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 35 on Form N-1A filed on May 19, 1995 (File Nos. 33-31251 and
811-5911)
26.Response is incorporated by reference to Registrant's Post
-Effective Amendment No. 36 on Form N-1A filed on May 31, 1995
(File Nos. 33-31251 and 811-5911).
(i) Conformed copy of Exhibit G to Investment Advisory
Contract for Virginia Municipal Cash Trust (18);
(ii)Conformed copy of Exhibit H to Investment Advisory
Contract for Alabama Municipal Cash Trust (19);
(iii)..........Conformed copy of Exhibit I to Investment
Advisory Contract for North Carolina Municipal Cash
Trust (19);
(iv)Conformed copy of Exhibit J to Investment Advisory
Contract for Maryland Municipal Cash Trust (19);
(v)Conformed copy of Exhibit K to Investment Advisory
Contract for New York Municipal Cash Trust; (22)
(vi)Conformed copy of Exhibit L to Investment Advisory
Contract for California Municipal Cash Trust; (22)
(vii)Conformed copy of Exhibit M to the Investment
Advisory Contract for Florida Municipal Cash Trust;
(22)
(viii)Conformed copy of Exhibit O to the Investment
Advisory Contract for Michigan Municipal Cash Trust
(27);
(ix) Conformed copy of Exhibit N to the Investment
Advisory Contract for Georgia Municipal Cash Trust
(27);
(6) Copy of Distributor's Contract of the
Registrant(7);
(i)Conformed copy of Exhibit M to Distributor's
Contract; (22)
(ii)Conformed copy of Exhibit N to the Distributor's
Contract for Virginia Municipal Cash Trust (19);
(iii)Conformed copy of Exhibit O to the Distributor's
Contract for Alabama Municipal Cash Trust (19);
(iv)Conformed copy of Exhibit P to the Distributor's
Contract for North Carolina Municipal Cash Trust
(19);
+ All exhibits have been filed electronically.
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed on November 6, 1990 (File Nos. 33-
31259 and 811-5911).
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed on June 1, 1994 (File Nos. 33-31259
and 811-5911).
19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 on Form N-1A filed on June 28, 1994 (File Nos. 33-31259
and 811-5911).
22. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 32 on Form N-1A filed on December 28, 1994 (File Nos. 33-
31259 and 811-5911).
27. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 37 on Form N-1A filed on July 18, 1995 (File Nos. 33-31259
and 811-5911).
(v)Conformed copy of Exhibit Q to the Distributor's
Contract for Maryland Municipal Cash Trust (19);
(vi)Conformed copy of Exhibit R to the Distributor's
Contract for New York Municipal Cash Trust, Cash II
Shares (21);
(vii)Conformed copy of Exhibit S to the Distributor's
Contract for New York Municipal Cash Trust,
Institutional Service Shares (21);
(viii)Conformed copy of Exhibit T to the Distributor's
Contract for California Municipal Cash Trust (21);
(ix)Conformed copy of Exhibit U to the Distributor's
Contract for Florida Municipal Cash Trust; (22)
(x)Conformed copy of Exhibit W to the Distributor's
Contract for Michigan Municipal Cash Trust (27);
(xi)Conformed copy of Exhibit X to the Distributor's
Contract for Pennsylvania Municipal Cash Trust-
Institutional Shares (27);
(xii)Conformed copy of Exhibit V to the Distributor's
Contract for Georgia Municipal Cash Trust (27);
(xiii) Conformed copy of specimen Mutual Funds Sales and
Service Agreeement (27);
(xiv)Conformed copy of specimen Mutual Funds Service
Agreement (27);
(xv) Conformed copy of specimen Plan Trustee/Mutual Funds
Service Agreement (27);
(xvi)Conformed copy of Exhibit Y to the Distributor's
Contract for Florida Municipal Cash Trust-CashII
Shares;+
(7) Not applicable;
(8) (i) Conformed copy of Custodian Agreement of the
Registrant (22);
(ii) Copy of Exhibit 1 to the Custodian
Agreement (27);
+ All exhibits have been filed electronically.
19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 on Form N-1A filed on June 28, 1994 (File Nos. 33-31259
and 811-5911).
21. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 on Form N-1A filed on October 24, 1994 (File Nos. 33-
31259 and 811-5911).
22. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 32 on Form N-1A filed on December 28, 1994 (File Nos. 33-
31259 and 811-5911).
27. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 37 on Form N-1A filed on July 18, 1995 (File Nos. 33-31259
and 811-5911).
(9) (i) Conformed copy of Agreement for Fund
Accounting, Shareholder Recordkeeeping, and
Custody Services Procurement (27);
(ii) Conformed copy of Sub-Transfer Agency Agreement of
the Registrant (Massachusetts Municipal Cash Trust--
BayFunds Shares only)(15);
(iii) Conformed copy of Shareholder Services Agreement of
the Registrant (Massachusetts Municipal Cash Trust--
BayFunds Shares only) (15);
(iv)Conformed copy of Shareholder Services Agreement of
the Registrant; (22)
(v) The response and exhibits described in Item 24(b)(6)
are hereby incorporated by reference;
(vi) Conformed copy of Administrative Services Agreement
of the Registrant; (22)
(10) (i) Copy of Opinion and Consent of Counsel as to the
legality of shares for Minnesota Municipal Cash Trust
(5);
(ii) Copy of Opinion and Consent of Counsel as to the
legality of shares for New Jersey Municipal Cash
Trust (7);
(11) Conformed copy of Consent of Independent Public
Accountants;+
(12) Not applicable;
(13) Copy of Initial Capital Understanding (2);
(14) Not applicable.
+ All exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed on October 31, 1989 (File Nos. 33-
31259 and 811-5911).
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 on Form N-1A filed August 3, 1990 (File Nos. 33-31259 and
811-5911).
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed on November 6, 1990 (File Nos. 33-
31259 and 811-5911).
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 on Form N-1A filed on October 1, 1993 (File Nos. 33-
31259 and 811-5911).
22. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 32 on Form N-1A filed on December 28, 1994 (File Nos. 33-
31259 and 811-5911).
27. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 37 on Form N-1A filed on July 18, 1995 (File Nos. 33-31259
and 811-5911).
(15) (i)Copy of Rule 12b-1 Plan of the Registrant (7);
Additional Exhibits to the Rule 12b-1 Plan have been
executed to reflect the coverage of subsequently
created portfolios and/or classes under these
documents. Because these exhibits are substantially
identical but differ only as to the Fund name, dates,
and any other Fund - specific information, pursuant
to Rule 8b-31 of the Investment Company Act they need
not be filed.
(ii) Conformed copy of Exhibit H to 12b-1 Plan for New
York Municipal Cash Trust, Cash II Shares (21);
(iii) Conformed copy of Exhibit I to 12b-1 Plan for New
York Municipal Cash Trust, Institutional Service
Shares (21);
(iv) Conformed copy of Exhibit J to 12b-1 Plan for
Florida Municipal Cash Trust; (22)
(v) The response and exhibits described in Item 24 (b)
(6) are hereby incorporated by reference.
(vi)..........Conformed copy of Exhibit K to 12b-1 Plan
for Florida Municipal Cash Trust-Cash II Shares;+
+ All exhibits have been filed electronically.
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed on November 6, 1990 (File Nos. 33-
31259 and 811-5911).
21. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 on Form N-1A filed on October 24, 1994 (File Nos. 33-
31259 and 811-5911).
22. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 32 on Form N-1A filed on December 28, 1994 (File Nos. 33-
31259 and 811-5911).
(16) Schedules for Computation of Performance Data;
(i)New Jersey Municipal Cash Trust (Institutional Shares
and Institutional Service Shares) (23);
(ii)Ohio Municipal Cash Trust (23);
(iii)Virginia Municipal Cash Trust (Institutional Share
and Institutional Service Shares) (16);
(iv)Alabama Municipal Cash Trust (18);
(v)North Carolina Municipal Cash Trust (18);
(vi)Maryland Municipal Cash Trust (21);
(vii)Florida Municipal Cash Trust (23);
(viii)..........Michigan Municipal Cash Trust;+
(ix)..........Georgia Municipal Cash Trust;+
(17) Not Applicable;
(18) Not Applicable;
(19) Conformed copy of Power of Attorney (27).
+ All exhibits have been filed electronically.
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed on December 29, 1993 (File Nos. 33-
31259 and 811-5911).
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed on June 1, 1994 (File Nos. 33-31259
and 811-5911).
21. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 on Form N-1A filed on October 24, 1994 (File Nos. 33-
31259 and 811-5911).
23. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 33 on Form N-1A filed on February 13, 1995 (File Nos. 33-
31259 and 811-5911).
27. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 37 on Form N-1A filed on July 18, 1995 (File Nos. 33-31259
and 811-5911).
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders as of
Title of Class December 4, 1995
Shares of beneficial
interest (no par value)
Connecticut Municipal Cash Trust
Institutional Service Shares 1,523
Pennsylvania Municipal Cash Trust
Cash Series Shares 829
Institutional Service Shares 453
Institutional Shares 15
Minnesota Municipal Cash Trust
Cash Series Shares 4,204
Insitutional Shares 57
New Jersey Municipal Cash Trust
Institutional Service Shares 204
Institutional Shares 47
Ohio Municipal Cash Trust
Institutional Service Shares 71
Cash II Shares 192
Institutional Shares 0
Virginia Municipal Cash Trust
Institutional Service Shares 846
Institutional Shares 25
Alabama Municipal Cash Trust 589
North Carolina Municipal Cash Trust 528
Maryland Municipal Cash Trust 321
California Municipal Cash Trust
Institutional Shares 0
Institutional Service Shares 776
New York Municipal Cash Trust
Cash II Shares 148
Institutional Service Shares 611
Florida Municipal Cash Trust
Institutional Shares 248
Massachusetts Municipal Cash Trust
Institutional Service Shares 415
BayFunds Shares 5
Michigan Municipal Cash Trust
Institutional Shares 0
Institutional Service Shares 40
Georgia Municipal Cash Trust 74
Item 27. Indemnification: (3.)
Item 28. Business and Other Connections of Investment Adviser:
For a description of the other business of the investment adviser,
see the section entitled "Fund Information - Management of the Fund" in Part
A. The affiliations with the Registrant of four
of the Trustees and one of the Officers of the investment adviser are included
in Part B of this Registration Statement under "Federated Municipal
Trust Management - Officers and Trustees." The remaining
Trustee of the investment adviser, his position with the
investment adviser, and, in parentheses, his principal
occupation is: Mark D. Olson (Partner, Wilson, Halbrook &
Bayard), 107 W. Market Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are: William D.
Dawson, III, J. Thomas Madden, and Mark L. Mallon, Executive Vice
Presidents; Henry J. Gailliot, Senior Vice President-Economist;
Peter R. Anderson, Drew J. Collins, Jonathan C. Conley, Mark E.
Durbiano, J. Alan Minteer and Mary Jo Ochson,, Senior Vice
Presidents; J. Scott Albrecht, Joseph M. Balestrino, Randall A.
Bauer, David A. Briggs, Kenneth J. Cody, Deborah A. Cunningham,
Michael P. Donnelly, Linda A. Duessel, Kathleen M. Foody-Malus,
Thomas M. Franks, Edward C. Gonzales, Timothy E. Keefe, Stephen A.
Keen, Mark S. Kopinski, Jeff A. Kozemchak, Marian R. Marinack, Susan
M. Nason, Robert J. Ostrowski, Frederick L. Plautz, Jr., Charles A.
Ritter, James D. Roberge, Frank Semack, William F. Stotz, Sandra L.
Weber, and Christopher H. Wiles, Vice Presidents; Thomas R. Donahue,
Treasurer; Stephen A. Keen, Secretary. The business address of each
of the Officers of the investment adviser is Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779. These individuals are
also officers of a majority of the investment advisers to the Funds
listed in Part B of this Registration Statement.
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed on March 22, 1990 (File Nos. 33-31259
and 811-5911).
Item 29. Principal Underwriters:
(a)Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following
open-end investment companies: American Leaders Fund, Inc.;
Annuity Management Series; Arrow Funds; Automated Government
Money Trust; BayFunds; The Biltmore Funds; The Biltmore
Municipal Funds; Blanchard Funds; Blanchard Precious Metals Fund,
Inc.; Cash Trust Series, Inc.; Cash Trust Series II; 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;
Independence One Mutual Funds; Insurance Management Series;
Intermediate Municipal Trust; International Series Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty
Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty Municipal Securities Fund, Inc.; Liberty U.S. Government
Money Market Trust; Liberty Utility Fund, Inc.; Liquid Cash
Trust; Managed Series Trust; Marshall Funds, Inc.; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market
Trust; The Monitor Funds; Municipal Securities Income Trust;
Newpoint Funds; 111 Corcoran Funds; Peachtree Funds; The Planters
Funds; RIMCO Monument Funds; SouthTrust Vulcan Funds; Star Funds;
The Starburst Funds; The Starburst Funds II; Stock and Bond Fund,
Inc.; Targeted Duration Trust; Tax-Free Instruments Trust; Tower
Mutual 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; Vision Group of Funds, Inc.; and World Investment Series,
Inc.
Federated Securities Corp. also acts as principal underwriter for
the following closed-end investment company: Liberty Term Trust,
Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive ViceExecutive Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.
John W. McGonigle Director, Federated Executive Vice
Federated Investors Tower Securities Corp. President and
Pittsburgh, PA 15222-3779 Secretary
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joeseph Kenedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Steven A. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John C. Shelar, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Timothy Radcliff Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Thomas R. Donahue Asstistant Secretary, --
Federated Investors Tower Assistant Treasurer,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Joseph M. Huber Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Assistant Secretary, Treasurer
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Item 30. Location of Accounts and Records:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Services Company P.O. Box 8600
("Transfer Agent, Dividend Boston, MA 02266-8600
Disbursing Agent and Portfolio
Recordkeeper")
Federated Administrative Services Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779
Federated Management Federated Investors Tower
("Adviser") Pittsburgh, PA 15222-3779
State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, MA 02266-8600
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED MUNICIPAL TRUST
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on the
30th day of January, 1996.
FEDERATED MUNICIPAL TRUST
BY: /s/ Charles H. Field
Charles H. Field, Assistant Secretary
Attorney in Fact for John F. Donahue
January 30, 1996
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By:/s/ Charles H. Field
Charles H. Field Attorney In Fact January 30, 1996
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Glen R. Johnson* President and Trustee
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
David M. Taylor* Treasurer (Principal
Financial and Accounting
Officer)
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit (11) under N-1A
Exhibit 23 under Item 601/Reg SK
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in Post-
Effective Amendment No. 40 to Form N-1A Registration Statement of Ohio Municipal
Cash Trust, Michigan Municipal Cash Trust and California Municipal Cash Trust
(portfolios of Federated Municipal Trust) of our report dated December 15, 1995,
on the financial statements as of October 31, 1995, included in or made apart of
this registration statement.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
January 25, 1996
Exhibit (15)(vi) on Form N-1A
Exhibit (10) under Item 6, Reg. S-K
EXHIBIT K
to the
Plan
FEDERATED MUNICIPAL TRUST
FLORIDA MUNICIPAL CASH TRUST
CASH II SHARES
This Plan is adopted by FEDERATED MUNICIPAL TRUST with respect to
the Shares of the Portfolio of the Trust set forth above.
In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of .25 of 1% of the
average aggregate net asset value of Shares of Florida Municipal Cash Trust
held during the month.
Witness the due execution hereof this 1st day of December, 1995.
FEDERATED MUNICIPAL TRUST
By: /s/ Glen R. Johnson
Glen R. Johnson
President
Exhibit (6)(xvi) on Forn N-1A
Exhibit (10) under Item 6, Reg. S-K
Exhibit Y
to the
Distributor's Contract
FEDERATED MUNICIPAL TRUST
FLORIDA MUNICIPAL CASH TRUST
CASH II SHARES
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 31st day of August, 1990, between Federated
Municipal Trust and Federated Securities Corp. with respect to Classes of the
Funds set forth above.
1. The Trust hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the above-listed Portfolio
("Shares"). Pursuant to this appointment, FSC is authorized to select a group
of brokers ("Brokers") to sell Shares at the current offering price thereof as
described and set forth in the respective prospectuses of the Trust, and to
render administrative support services to the Trust and its shareholders. In
addition, FSC is authorized to select a group of administrators
("Administrators") to render administrative support services to the Trust and
its shareholders.
2. Administrative support services may include, but are not limited to,
the following functions: 1) account openings: the Broker or Administrator
communicates account openings via computer terminals located on the Broker's
or Administrator's premises; 2) account closings: the Broker or Administrator
communicates account closings via computer terminals; 3) enter purchase
transactions: purchase transactions are entered through the Broker's or
Administrator's own personal computer or through the use of a toll-free
telephone number; 4) enter redemption transactions: Broker or Administrator
enters redemption transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges to provide
accounting support for all transactions. Broker or Administrator also wires
funds and receives funds for Trust share purchases and redemptions, confirms
and reconciles all transactions, reviews the activity in the Trust's accounts,
and provides training and supervision of its personnel; 6) interest posting:
Broker or Administrator posts and reinvests dividends to the Trust's accounts;
7) prospectus and shareholder reports: Broker or Administrator maintains and
distributes current copies of prospectuses and shareholder reports; 8)
advertisements: the Broker or Administrator continuously advertises the
availability of its services and products; 9) customer lists: the Broker or
Administrator continuously provides names of potential customers; 10) design
services: the Broker or Administrator continuously designs material to send
to customers and develops methods of making such materials accessible to
customers; and 11) consultation services: the Broker or Administrator
continuously provides information about the product needs of customers.
3. During the term of this Agreement, the Trust will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the annual rate
of .25% of the average aggregate net asset value of the Shares held during the
month. For the month in which this Agreement becomes effective or terminates,
there shall be an appropriate proration of any fee payable on the basis of the
number of days that the Agreement is in effect during the month.
4. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Classes' expenses exceed
such lower expense limitation as FSC may, by notice to the Trust, voluntarily
declare to be effective.
5. FSC will enter into separate written agreements with various
firms to provide certain of the services set forth in Paragraph 1 herein.
FSC, in its sole discretion, may pay Brokers and Administrators a periodic fee
in respect of Shares owned from time to time by their clients or customers.
The schedules of such fees and the basis upon which such fees will be paid
shall be determined from time to time by FSC in its sole discretion.
6. FSC will prepare reports to the Board of Trustees of the Trust
on a quarterly basis showing amounts expended hereunder including amounts paid
to Brokers and Administrators and the purpose for such payments.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated August 31, 1990 between Federated Municipal Trust and Federated
Securities Corp., Federated Municipal Trust executes and delivers this Exhibit
on behalf of the Funds, and with respect to the separate Classes of Shares
thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of December, 1995.
ATTEST: FEDERATED MUNICIPAL TRUST
/s/ John W. McGonigle By: /s/ Glen R. Johnson
John W. McGonigle Glen R. Johnson
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ Byron F. Bowman By: /s/ Edward C. Gonzales
Byron F. Bowman Edward C. Gonzales
Secretary Executive Vice President
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Georgia Muni Cash Trust Price/
Share= $1.00
Return Since Inception
ending 10/31/95 NAV= $1.00
FYE: October 31, 1995
<TABLE>
<CAPTIO>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Begin Capital Reinvest Ending Total
DECLARED: DAILY Reinvest Period Dividend Gain Price Period Ending Invest
PAID: MONTHLY Dates Shares /Share /Share /Share Shares Price Value
8/31/95 1000.000 0.001014341 0.00000 $1.00 1001.014 $1.00 $1,001.01
9/30/95 1001.014 0.003133390 0.00000 $1.00 1004.151 $1.00 $1,004.15
10/31/95 1004.151 0.003179361 0.00000 $1.00 1007.343 $1.00 $1,007.34
</TABLE>
Schedule for computation of Yield Calculation
Georgia Municipal Cash Trust
This example illustrates the yield
quotation for the seven-day period ended: 31-Oct-95
Value of a hypothetical pre-existing
account with exactly $1.000000000
one share at the beginning of the base period
Value of same account (excluding capital
changes) at end $1.000732173
of the seven-day base period*
Net change in account value
Base Period Return:
Net change in account value divided by the
beginning account value $0.000732173
($ .000732173 / $1.000000000)
Annualized Current Net Yield ( .000732173 x 365/7)
Effective Yield ** (.000732173 + 1 ) ^ (365/7) - 1
* This value includes the value of additional shares purchased with
dividends from the original share, and dividends declared on both the
original share and any such additional shares.
** This value may change to include shares purchased with dividends
reinvested on a less frequent basis.
Tax Equivalent Yield (Assumes individual does not itemize on Federal Return)
100% minus the Federal and Georgia taxable %'s (100% - 28% - 6% = 66%)
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Michigan Muni Cash Trust Price/
Share= $1.00
Return Since Inception
ending 10/31/95 NAV= $1.00
FYE: October 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Begin Capital Reinvest Ending Total
DECLARED: DAILY Reinvest Period Dividend Gain Price Period Ending Invest
PAID: MONTHLY Dates Shares /Share /Share /Share Shares Price Value
6/30/95 1000.000 0.001262960 0.00000 $1.00 1001.263 $1.00 $1,001.26
7/31/95 1001.263 0.003073736 0.00000 $1.00 1004.341 $1.00 $1,004.34
8/31/95 1004.341 0.003110292 0.00000 $1.00 1007.464 $1.00 $1,007.46
9/30/95 1007.464 0.002986842 0.00000 $1.00 1010.474 $1.00 $1,010.47
10/31/95 1010.474 0.002975021 0.00000 $1.00 1013.480 $1.00 $1,013.48
$1,000 (1+T) = End Value
T = 1.35%
</TABLE>
Schedule for computation of Yield Calculation
Michigan Municipal Cash Trust
This example illustrates the yield
quotation for the seven-day period ended: 31-Oct-95
Value of a hypothetical pre-existing
account with exactly $1.000000000
one share at the beginning of the
base period
Value of same account (excluding capital
changes) at end $1.000671537
of the seven-day base period*
Net change in account value
Base Period Return:
Net change in account value divided
by the beginning account value $0.000671537
($ .000671537 / $1.000000000)
Annualized Current Net Yield ( .000671537 x 365/7)
Effective Yield ** (.000671537 + 1 ) ^ (365/7) - 1
* This value includes the value of additional shares purchased with
dividends from the original share, and dividends declared on both the
original share and any such additional shares.
** This value may change to include shares purchased with dividends
reinvested on a less frequent basis.
Tax Equivalent Yield (Assumes individual does not itemize on Federal Return)
100% minus the Federal and Michigan taxable %'s (100% - 28% - 4.47% = 67.53%)
