Money Market Funds
[_] Boston 1784 Tax-Free Money Market Fund
[_] Boston 1784 U.S. Treasury Money
Market Fund
[_] Boston 1784 Institutional U.S. Treasury
Money Market Fund
[_] Boston 1784 Prime Money Market Fund
[_] Boston 1784 Massachusetts Municipal Cash
Trust-Boston 1784 Funds Shares
Bond Funds
[_] Boston 1784 Short-Term Income Fund
[_] Boston 1784 Income Fund
[_] Boston 1784 U.S. Government Medium-
Term Income Fund
Tax-Exempt Income Funds
[_] Boston 1784 Tax-Exempt Medium-Term
Income Fund
[_] Boston 1784 Connecticut Tax-Exempt
Income Fund
[_] Boston 1784 Florida Tax-Exempt
Income Fund
[_] Boston 1784 Massachusetts Tax-Exempt
Income Fund
[_] Boston 1784 Rhode Island Tax-Exempt
Income Fund
Stock Funds
[_] Boston 1784 Asset Allocation Fund
[_] Boston 1784 Growth and Income Fund
[_] Boston 1784 Growth Fund
[_] Boston 1784 Small Cap Equity Fund
[_] Boston 1784 International Equity Fund
Boston 1784 Funds
P.O. Box 8524
Boston, MA 02266-8524
1-800-BKB-1784
Federated Securities Corp. is the
distributor for this Fund.
Cusip 314229835
(Federated use only) G00507-01 (5/97) MF-0136 (4/97)
Massachusetts
Municipal
Cash Trust
[LOGO OF BOSTON 1784 FUNDS]
Boston 1784 Funds
Shares
Prospectus
December 31, 1996
(Revised May 27, 1997)
Massachusetts Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Boston 1784 Funds Shares
(formerly, 1784 Funds Shares and prior to that, BayFunds Shares)
PROSPECTUS
The Boston 1784 Funds Shares of Massachusetts Municipal Cash Trust
(the "Fund") offered by this prospectus represent interests in a
investment portfolio of Federated Municipal Trust (the "Trust"), an
open-end management investment company (a mutual fund). The Fund
invests primarily in short-term Massachusetts municipal securities,
including securities of states, territories, and possessions of the
United States which are not issued by or on behalf of Massachu- setts
or its political subdivisions and financing authorities, but which are
exempt from the federal regular income tax and Massachusetts state
income tax. Shareholders can invest, reinvest, or redeem Boston 1784
Funds Shares at any time with no sales loads or contingent deferred
sales charges imposed by the Fund. Shareholders have access to other
portfolios in Boston 1784 Funds. THE BOSTON 1784 FUNDS SHARES
OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
BANKBOSTON, N.A. OR ITS AFFILIATES OR SUBSIDIARIES, ARE NOT ENDORSED
OR GUARANTEED BY BANKBOSTON, N.A. OR ITS AFFILIATES OR SUBSIDIARIES,
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTING IN
THESE SHARES INVOLVES INVESTMENT RISKS INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL. 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. BECAUSE THE FUND MAY INVEST A SIGNIFICANT PORTION OF ITS
ASSETS IN SECURITIES OF A SINGLE ISSUER, AN INVESTMENT IN THE FUND MAY
INVOLVE ADDITIONAL RISKS COMPARED TO A FULLY DIVERSIFIED MONEY MARKET
FUND. This prospectus contains the information you should
read and know before you invest in Boston 1784 Funds Shares. Keep this
prospectus for future reference. The Fund has also filed a
Statement of Additional Information for Boston 1784 Funds Shares dated
December 31, 1996 (Revised May 27, 1997), with the Securities and
Exchange Commission ("SEC"). 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-BKB-1784. To obtain other information or to make inquiries about
the Fund, contact the Fund at the address listed at the back of this
prospectus. The Statement of Additional Information, material
incorporated by reference into this document, and other information
regarding the Fund is maintained electronically with the SEC at
Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated December 31, 1996 (Revised May 27, 1997)
PROSPECTUS
Table of Contents
- --------------------------------------------------------------------------------
Fund Expense Summary 1
Financial Highlights -- 1784 Funds Shares
2
General Information 3
Investment Information 5
Investment Objective and Policies 5
Acceptable Investments 5
Massachusetts Municipal Securities 8
Massachusetts Investment Risks 8
Investment Limitations 9
Shareholder Manual 10
Pricing of Shares 10
How to Buy Shares 10
Automatic Investment Program 12
How to Exchange Shares 12
How to Redeem Shares 13
Additional Information You Should Know 16
Tax Information 16
Performance Information 17
Tax-Equivalency Table 19
Management, Distribution and Administration 19
Investment Adviser 20
Distribution 21
Administration 22
Other Classes of Shares 22
Financial Highlights -- Institutional Service Shares 23
Financial Statements 24
Report of Independent Public Accountants 37
Addresses INSIDE BACK COVER
PROSPECTUS
Fund Expense Summary, Massachusetts Municipal Cash Trust
Boston 1784 Funds Shares (formerly, 1784 Funds Shares and prior to that,
BayFunds Shares)
- -------------------------------------------------------------------------------
Shareholder Transaction Expenses
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price) None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage
of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or
redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
</TABLE>
Annual Operating Expenses
(As a percentage of average net assets)
<TABLE>
<S> <C> <C>
Management Fee (after waiver) (1) 0.33%
12b-1 Fee None
Total Other Expenses 0.25%
Shareholder Services Fee (after waiver) (2) 0.00%
Total Operating Expenses (3) 0.58%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.50%
(2) The shareholder services fee has been reduced to reflect the
voluntary waiver of the shareholder services fee. The shareholder
service provider can terminate this voluntary waiver at any time at
its sole discretion. The maximum shareholder services fee is 0.25%.
(3) The Total Operating Expenses would have been 1.00% absent the
voluntary waiver of a portion of the management fee and the voluntary
waiver of the shareholder services fee. The purpose of this table
is to assist an investor in understanding the various costs and
expenses that a shareholder of Boston 1784 Funds Shares of the Fund
will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Fund
Information." Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the
end of each time period $6 $19 $32 $73
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
PROSPECTUS
Financial Highlights -- 1784 Funds Shares
- --------------------------------------------------------------------------------
REFERENCE IS MADE TO THE REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON PAGE 32.
Massachusetts Municipal Cash Trust
(formerly, BayFunds Shares)
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
NET
NET NET ASSETS,
ASSET DISTRIBUTIONS ASSET EXPENSE END
VALUE, NET FROM NET VALUE, NET WAIVER/ OF PERIOD
BEGINNING INVESTMENT INVESTMENT END TOTAL INVESTMENT REIMBURSE- (000
OF PERIOD INCOME INCOME OF PERIOD RETURN (B) EXPENSES INCOME MENT (C) OMITTED)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended October 31,
1996 $1.00 0.03 (0.03) $1.00 3.05% 0.58% 3.01% 0.42% $54,667
Year Ended October 31,
1995 $1.00 0.03 (0.03) $1.00 3.30% 0.60% 3.25% 0.45% $46,580
Year Ended October 31,
1994 $1.00 0.02 (0.02) $1.00 2.05% 0.64% 2.09% 0.35% $41,912
Year Ended October 31,
1993(a) $1.00 0.01 (0.01) $1.00 1.25% 0.65%* 1.85%* 0.43%* $18,143
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Computed on an annualized basis.
(a)Reflects operations for the period from March 8, 1993 (date of
initial public investment) to October 31, 1993. (b)Based on net asset
value, which does not reflect the sales charge or contingent deferred
sales charge, if applicable. (c)This voluntary expense decrease is
reflected in both the expense and net investment income ratios shown
above.
(See Notes which are an integral part of the Financial Statements)
PROSPECTUS
General Information
- --------------------------------------------------------------------------------
As a shareholder of the Boston 1784 Funds Shares class (the "Shares")
of the Fund, you have access to all of the portfolios of Boston 1784
Funds, an open-end, management investment company. The Boston 1784
Funds consists of seventeen separate, professionally managed
investment portfolios with distinct investment objectives and
policies. As of the date of this prospectus, Boston 1784
Funds offers shares in seventeen portfolios:
MONEY MARKET FUNDS
BOSTON 1784 U.S. TREASURY MONEY MARKET FUND; BOSTON 1784 PRIME MONEY
MARKET FUND; and BOSTON 1784 INSTITUTIONAL U.S. TREASURY MONEY MARKET
FUND seek to preserve principal value and maintain a high degree of
liquidity while providing current income. BOSTON 1784
TAX-FREE MONEY MARKET FUND seeks to preserve principal value and
maintain a high degree of liquidity while providing current income
exempt from federal income tax.
These MONEY MARKET FUNDS are designed for conservative investors who
want liquidity, current income at money market rates and stability of
principal.
BOND FUNDS
BOSTON 1784 U.S. GOVERNMENT MEDIUM-TERM INCOME FUND seeks to provide current
income consistent with preservation of capital.
BOSTON 1784 SHORT-TERM INCOME FUND; and BOSTON 1784 INCOME FUND seek to maxi-
mize current income. Preservation of capital is a secondary objective.
These BOND FUNDS are designed for investors seeking current income.
TAX-EXEMPT FUNDS
BOSTON 1784 TAX-EXEMPT MEDIUM-TERM INCOME FUND seeks to provide
current income, exempt from federal income tax, consistent with
preservation of capital. BOSTON 1784 CONNECTICUT TAX-EXEMPT
INCOME FUND seeks to provide current income exempt from both federal
and Connecticut personal income tax. Preservation of capital is a
secondary objective. BOSTON 1784 FLORIDA TAX-EXEMPT INCOME
FUND seeks to provide current income exempt from federal income tax
through Fund shares which are exempt from Florida intangible personal
property tax. Preservation of capital is a secondary objective.
BOSTON 1784 MASSACHUSETTS TAX-EXEMPT INCOME FUND seeks to provide
current income exempt from both federal and Massachusetts personal
income tax consistent with preservation of capital. BOSTON
1784 RHODE ISLAND TAX-EXEMPT INCOME FUND seeks to provide current
income exempt from federal income tax, Rhode Island personal income
tax and Rhode Island business corporation tax. Preservation of capital
is a secondary objective.
PROSPECTUS
- ------------------------------------------------------------------------------
These TAX-EXEMPT FUNDS are designed for investors seeking income that
is exempt from federal income tax, and who are seeking exemption from
certain state taxes in Connecticut, Massachusetts and Rhode Island.
STOCK FUNDS
BOSTON 1784 ASSET ALLOCATION FUND seeks to achieve a favorable rate of
return through current income and capital appreciation consistent with
preservation of capital, derived from investing in fixed income and
equity securities. BOSTON 1784 GROWTH AND INCOME FUND seeks
to provide long-term growth of capital with a secondary objective of
income. BOSTON 1784 GROWTH FUND seeks to provide capital
appreciation. Dividend income, if any, is incidental to this
objective. BOSTON 1784 SMALL CAP EQUITY FUND seeks to provide
capital appreciation. Dividend income, if any, is incidental to this
objective. BOSTON 1784 INTERNATIONAL EQUITY FUND seeks to
provide long-term growth of capital. Dividend income, if any, is
incidental to this objective. These STOCK FUNDS are designed
for long-term investors seeking high long-term returns who can
tolerate changes in the value of their investments. PROSPECTUS
Investment Information
- -------------------------------------------------------------------------------
Investment Objective and Policies
The investment objective of the Fund is to provide current income
which is exempt from federal regular income tax, and Massachusetts
state income tax consistent with stability of principal. The
investment objective cannot be changed without approval of
shareholders. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by complying with the
diversification and other requirements of Rule 2a-7 under the
Investment Company Act of 1940 which regulates money market mutual
funds and by following the investment policies described in this
prospectus.
Interest income of the Fund that is exempt from the income taxes
described above retains its tax-free status when distributed to the
Fund's shareholders. However, income distributed by the Fund may not
necessarily be exempt from state or municipal taxes in states other
than Massachusetts.
The Fund pursues its investment objective by investing primarily in a
portfolio of Massachusetts municipal securities with remaining
maturities of 13 months or less. As a matter of investment policy,
which cannot be changed without shareholder approval, at least 80% of
the Fund's annual interest income will be exempt from federal regular
income tax and Massachusetts state income tax. (Federal regular income
tax does not include the federal individual alternative minimum tax or
the federal alternative minimum tax for corporations.) The average
maturity of the securities in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated
otherwise, the investment policies may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material changes in these policies become effective.
Acceptable Investments
The Fund invests primarily in debt obligations issued by or on behalf
of Mas- sachusetts and its political subdivisions and financing
authorities, and obligations of other states, territories and
possessions of the United States, including the District of Columbia,
and any political subdivision or financing authority of any of these,
the income from which is, in the opinion of qualified legal counsel,
exempt from federal regular income tax and Massachusetts state income
tax ("Massachusetts Municipal Securities").
Examples of Massachusetts municipal securities include, but are not
limited to:
. tax and revenue anticipation notes issued to finance working capital needs
in anticipation of receiving taxes or other revenues;
. bond anticipation notes that are intended to be refinanced through a later
issuance of longer-term bonds;
. municipal commercial paper and other short-term notes;
. variable rate demand notes;
PROSPECTUS
- --------------------------------------------------------------------------------
. municipal bonds (including bonds having serial maturities and pre-refunded
bonds) and leases; and
. participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES
Variable rate demand notes are long-term debt instruments that have
variable or floating interest rates and provide the Fund with the
right to tender the security for repurchase at its stated principal
amount plus accrued interest. Such securities typically bear interest
at a rate that is intended to cause the securities to trade at par.
The interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a published
interest rate or interest rate index. Most variable rate demand notes
allow the Fund to demand the repurchase of the security on not more
than seven days' prior notice. Other notes only permit the Fund to
tender the security at the time of each interest rate adjustment or at
other fixed intervals. See "Demand Features." The Fund treats variable
rate demand notes as maturing on the later of the date of the next
interest rate adjustment or the date on which the Fund may next tender
the security for repurchase.
PARTICIPATION INTERESTS
The Fund may purchase interests in Massachusetts Municipal Securities
from financial institutions such as commercial and investment banks,
savings associations and insurance companies. These interests may take
the form of participations, beneficial interests in a trust,
partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests
in order to obtain credit enhancement or demand features that would
not be available through direct ownership of the underlying
Massachusetts Municipal Securities.
MUNICIPAL LEASES
Municipal leases are obligations issued by state and local governments
or authorities to finance the acquisition of equipment and facilities.
They may take the form of a lease, an installment purchase contract, a
conditional sales contract, or a participation interest on any of the
above. Lease obligations may be subject to periodic appropriation.
Municipal leases are subject to certain specific risks in the event of
default or failure of appropriation.
CREDIT ENHANCEMENT
Certain of the Fund's acceptable investments may be credit-enhanced by
a guaranty, letter of credit or insurance. Any bankruptcy,
receivership, default, or change in the credit quality of the party
providing the credit enhancement will adversely affect the quality and
marketability of the underlying security and could cause losses to the
Fund and affect its share price. The Fund may have more than 25% of
its total assets invested in securities credit-enhanced by banks.
PROSPECTUS
- -------------------------------------------------------------------------------
DEMAND FEATURES
The Fund may acquire securities that are subject to puts and standby
commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period
(usually seven days) following a demand by the Fund. The demand
feature may be issued by the issuer of the underlying securities, a
dealer in the securities or another third party, and may not be
transferred separately from the underlying security. The Fund uses
these arrangements to provide the Fund with liquidity and not to
protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of
the demand feature, or a default on the underlying security or other
event that terminates the demand feature before its exercise, will
adversely affect the liquidity of the underlying security. Demand
features that are exercisable even after a payment default on the
underlying security may be treated as a form of credit enhancement.
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.
The Fund may dispose of a commitment prior to settlement if the
adviser deems it appropriate to do so. In addition, the Fund may enter
into transactions to sell its purchase commitments to third parties at
current market values and simultaneously acquire other commitments to
purchase similar securities at later dates. The Fund may realize
short-term profits or losses upon the sale of such commitments.
TEMPORARY INVESTMENTS
From time to time, when the investment adviser determines that market
conditions call for a temporary defensive posture, the Fund may invest
in tax-ex- empt 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; obli- gations
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 depository institution having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
and repurchase agreements (arrangements in which the organization
selling the Fund a temporary investment agrees at the time of sale to
repurchase it at a mutually agreed upon time and price).
Although the Fund is permitted to make taxable, temporary investments, there
is no current intention to do so. However, the interest from certain
PROSPECTUS
- -------------------------------------------------------------------------------
Massachusetts Municipal Securities is subject to the federal
alternative minimum tax.
Massachusetts Municipal Securities
Massachusetts Municipal Securities are generally issued to finance
public works, such as airports, bridges, highways, housing, hospitals,
mass transportation projects, schools, streets, and water and sewer
works. They are also issued to repay outstanding obligations, to raise
funds for general operating expenses, and to make loans to other
public institutions and facilities.
Massachusetts Municipal Securities include industrial development
bonds issued by or on behalf of public authorities to provide
financing aid to acquire sites or construct and equip facilities for
privately or publicly owned corporations. The availability of this
financing encourages these corporations to locate within the
sponsoring communities and thereby increases local employment.
The two principal classifications of Massachusetts Municipal
Securities are "general obligation" and "revenue" bonds. General
obligation bonds are secured by the issuer's pledge of its full faith
and credit and taxing power for the payment of principal and interest.
Interest on and principal of revenue bonds, however, are payable only
from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or charge against the general
revenues of a municipality or public authority. Industrial development
bonds are typically classified as revenue bonds.
Massachusetts Investment Risks
Yields on Massachusetts Municipal Securities depend on a variety of
factors, including: the general conditions of the short-term municipal
note market and of the municipal bond market; the size of the
particular offering; the maturity of the obligations; and the rating
of the issue. The ability of the Fund to achieve its investment
objective also depends on the continuing ability of the issuers of
Massachusetts Municipal Securities and participation interests, or the
credit enhancers of either, to meet their obligations for the payment
of interest and principal when due. In addition, from time to time,
the supply of Massachusetts Municipal Securities acceptable for
purchase by the Fund could become limited.
The Fund may invest in Massachusetts Municipal Securities which are
repayable out of revenue streams generated from economically related
projects or facilities and/or whose issuers are located in the same
state. Sizable investments in these Massachusetts Municipal Securities
could involve an increased risk to the Fund should any of these
related projects or facilities experience financial difficulties.
Obligations of issuers of Massachusetts Municipal Securities are
subject to the provisions of bankruptcy, insolvency, and other laws
affecting the rights and remedies of creditors. In addition,
PROSPECTUS
- --------------------------------------------------------------------------------
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. Due
to these risk considerations, the Fund's concentration in
Massachusetts Municipal Securities may entail a greater level of risk
than other types of money market funds.
Investment Limitations
The Fund will not borrow money or pledge securities except, under
certain circumstances, the Fund may borrow up to one-third of the
value of its total assets and pledge up to 15% of the value of total
assets to secure such borrowings. The Fund will not invest more than
10% of its net assets in securities subject to restrictions on resale
under the Securities Act of 1933. These investment limitations cannot
be changed without shareholder approval. The following limitation may
be changed without shareholder approval. The Fund will not invest more
than 10% of the value of its net assets in illiquid securities
including repurchase agreements providing for settlement in more than
seven days after notice.
PROSPECTUS
Shareholder Manual
- --------------------------------------------------------------------------------
Pricing of Shares
The Fund attempts to stabilize the net asset value of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost
method. The net asset value per share is determined by subtracting
liabilities attributable to shares from the value of Fund assets
attributable to shares, and dividing the remainder by the number of
shares outstanding. The Fund cannot guarantee that its net asset value
will always remain at $1.00 per Share.
The net asset value is determined at 12:00 noon, 1:00 p.m. (Eastern
time), and as of the close of trading (normally 4:00 p.m., Eastern
time) on the New York Stock Exchange, Monday through Friday, except on
New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
The Fund offers Shares only on days on which the New York Stock
Exchange and the Federal Reserve Bank of Boston are open for business
("Business Days"). If BankBoston, N.A. (the "Shareholder Servicing
Agent") receives your purchase order on a non-Business Day, the order
will not be executed until the next Business Day in accordance with
the Distributor's procedures. The Fund and the Distributor reserve the
right to reject any purchase request.
How to Buy Shares
MINIMUM INVESTMENT
You can become a shareholder with an initial investment of $1,000. You
must submit a completed application at the time of your initial
purchase. Subsequent investments must be in amounts of at least $250,
or if you participate in the automatic investment program, the minimum
for additional Share purchases is $50. The Fund may waive any
investment minimums from time to time. In addition, the Fund may
reduce or waive investment minimums for investors purchasing through
qualified BankBoston accounts.
If your purchase order is received in good order and accepted by the
Fund from Federated Shareholder Services Company (the "Transfer
Agent") by 1:00 p.m. (Eastern time) on a Business Day, it will be
executed at the net asset value next determined and your Shares will
begin earning dividends that day. The Transfer Agent will not
communicate your purchase order to the Fund until the Shareholder
Servicing Agent has received the purchase price in federal funds or
other immediately available funds. If your purchase order is received
in good order and accepted by the Fund from the Transfer Agent after
1:00 p.m. (Eastern time), and prior to 4:00 p.m. (Eastern time), it
will be executed at the net asset value next determined and Shares
will begin earning dividends the next Business Day. When you purchase
Shares by check, the order is considered received when the check is
converted into PROSPECTUS
- -------------------------------------------------------------------------------
federal funds, normally within two Business Days.
The Shareholder Servicing Agent is responsible for the prompt
transmission of purchase orders received in good order to the Transfer
Agent.
BY PHONE
Once you are a shareholder, you may purchase additional Shares by
calling 1- 800-BKB-1784. You must have previously authorized
the Fund in writing to accept telephone requests. If you have not done
so, call 1-800-BKB-1784 to receive the necessary form and information
on this Fund feature. The Fund uses reasonable procedures (including a
shareholder identity test and sending a written confirmation of each
telephone transaction) to confirm that instructions given by telephone
are genuine. However, the Fund is not responsible for the authenticity
of telephone instructions or for any losses caused by fraudulent or
unauthorized telephone instructions if the Fund reasonably believed
that the instructions were genuine.
For the protection of investors, all phone communications may be
recorded where not otherwise prohibited by law.
BY MAIL
If you make your initial Share purchase by mail, you must send a
completed application, and a check payable to the Fund, to:
Boston 1784 Funds P.O. Box 8524 Boston, MA 02266-8524
You may obtain an application by calling 1-800-BKB-1784.
You may make subsequent investments in the Fund at any time by sending
a check for a minimum of $250 payable to the Fund at the following
address:
Boston 1784 Funds P.O. Box 8524 Boston, MA 02266-8524
along with either (a) the detachable form that regularly accompanies
confirmation of a prior transaction, (b) a subsequent investment form
that may be enclosed in the Fund mailing or can be obtained by calling
1-800-BKB-1784, or (c) a letter stating the amount of the investment,
the name of the Fund, the exact name and address of the account, and
your account number.
If the check does not clear, your purchase order will be cancelled.
BY WIRE
Purchases may also be made by wiring money from your bank account to
your Fund account.
Call 1-800-BKB-1784 to receive wiring instructions.
Shares cannot be purchased by wire on days on which the New York Stock
Exchange and the Federal Reserve Wire System are not open for business
and on the following holidays: Martin Luther King Day, Columbus Day,
or Veterans' Day.
PROSPECTUS
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Automatic Investment Program
When you participate in the automatic investment program, you can
purchase additional Shares in minimum amounts of $50. You must
previously have authorized in writing the total dollar amount to be
deducted automatically from eligible BankBoston deposit accounts or
your deposit account maintained at a domestic financial institution
which is an automated clearing house member, and the frequency of the
deductions. The funds will be invested in Shares at the net asset
value next determined. The Fund may reduce or waive the investment
minimums for investors purchasing through qualified BankBoston
accounts.
How to Exchange Shares
Boston 1784 Funds consist of: Boston 1784 U.S. Treasury Money Market
Fund, Boston 1784 Prime Money Market Fund, Boston 1784 Institutional
U.S. Treasury Money Market Fund, Boston 1784 Tax-Free Money Market
Fund, Boston 1784 Government Medium-Term Income Fund, Boston 1784
Short-Term Income Fund, Boston 1784 Income Fund, Boston 1784
Tax-Exempt-Medium Term Income Fund, Boston 1784 Con- necticut
Tax-Exempt Income Fund, Boston 1784 Florida Tax-Exempt Income Fund,
Boston 1784 Massachusetts Tax-Exempt Income Fund, Boston 1784 Rhode
Island Tax-Exempt Income Fund, Boston 1784 Asset Allocation Fund,
Boston 1784 Growth and Income Fund, Boston 1784 Growth Fund, Boston
1784 Small Cap Equity Fund and Boston 1784 International Equity Fund.
You may redeem Shares and purchase shares of any other of the
Boston 1784 Funds ("Participating Funds") in which you have an
account. The minimum initial investment to establish an account in any
other Participating Fund is $1,000 ($100,000 for Boston 1784
Institutional U.S. Treasury Money Market Fund). Boston 1784 Funds do
not charge any fees for these transactions.
Shares will be redeemed at the net asset value next determined after
the Transfer Agent receives the redemption request and Shares of the
Participating Fund to be acquired will be purchased at the net asset
value per share next determined after receipt of the redemption
proceeds by the Transfer Agent for the acquired fund on a Business
Day. If you do not have an account in the Participating Fund whose
shares you want to acquire, you must establish an account. Prior to
any such transaction, you must receive a copy of the current
prospectus of the Participating Fund into which a purchase is to be
effected. This account will be registered in the same name and you
will receive your dividends and distributions as an automatic
reinvestment in additional shares. If the new account registration
(name, address, and taxpayer identification number) is not identical
to your existing account, please call 1-800-BKB-1784 for the necessary
new account or transfer procedures.
You may find this privilege useful if your investment objectives or
market outlook should PROSPECTUS
- --------------------------------------------------------------------------------
change after you invest in the Fund or in any of the Participating Funds. You
may obtain further information on this privilege and obtain a prospectus by
calling 1-800-BKB-1784.
The exchange privilege is available to shareholders resident in any
state in which Participating Funds' shares being acquired may be sold.
Boston 1784 Funds reserves the right to terminate this privilege at any time.
Shareholders will be notified if this privilege is terminated.
Depending on the circumstances, an exchange with a fluctuating net
asset value Participating Fund may generate a short-term or long-term
capital gain or loss for federal income tax purposes.
BY PHONE
You may provide instructions to redeem Shares and purchase shares of
any Participating Funds by calling 1-800-BKB-1784. You must
have previously authorized the Fund in writing to accept telephone
requests. If you have not done so, call 1-800-BKB-1784 to receive the
necessary form and information on this Fund feature. The Fund uses
reasonable procedures (including a shareholder identity test and
sending a written confirmation of each telephone transaction) to
confirm that instructions given by telephone are genuine. However, the
Fund is not responsible for the authenticity of telephone instructions
or for any losses caused by fraudulent or unauthorized telephone
instructions if the Fund reasonably believed that the instructions
were genuine.
BY MAIL
You may send a written request to redeem Shares and purchase shares of
any Participating Funds to:
Boston 1784 Funds P.O. Box 8524 Boston, MA 02266-8524
Your written request must include your name and tax identification
number; the name of the Fund, the dollar amount or number of Shares to
be redeemed; the name of the Participating Fund in which shares are to
be purchased; and your account number. Your request must be signed by
the registered owner(s) exactly as required by the account
application. How to Redeem Shares The Fund redeems Shares at
the net asset value next determined after the Fund has received your
redemption request from the Transfer Agent in proper form. Redemption
requests can be executed only on Business Days. If your redemption
request is received by the Shareholder Servicing Agent on a
non-Business Day, the Transfer Agent will not communicate your
redemption request to the Fund until the next Business Day.
Redemption proceeds may be credited to an eligible BankBoston deposit
account, paid by check, or paid by wire, as you previously designated
in writing. The Fund ordinarily will make payment for Shares redeemed
after proper receipt from the Transfer Agent of the redemption request
and of all documents in proper form
PROSPECTUS
- -------------------------------------------------------------------------------
within one Business Day to an eligible BankBoston deposit account,
within five Business Days if you requested redemption proceeds by
check, or the same day by wire if the Fund receives your redemption
request from the Transfer Agent by 12:00 noon (Eastern time) on the
day of redemption. There is a fee for each wire and your bank may
charge an additional fee to receive the wire. Shares redeemed and
wired the same day will not receive the dividend declared on the day
of redemption.
SIGNATURE GUARANTEES
If you request a redemption for an amount in excess of $25,000, a
redemption of any amount to be sent to an address other than your
address of record with the Fund, the transfer of the registration of
Shares, or a redemption of any amount payable to someone other than
yourself as the shareholder of record, your signature must be
guaranteed on a written redemption request by a trust company or
insured commercial bank; an insured savings association or savings
bank; a member firm of a national or regional stock exchange; or any
other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934. At the Fund's discretion, signature guarantees
may also be required for other redemptions. The Transfer Agent has
adopted standards for accepting signature guarantees from the above
institutions. The Fund may elect in the future to limit eligible
signature guarantors to institutions that are members of a signature
guarantee program. The Fund does not accept signatures guaranteed by a
notary public. The Fund and the Transfer Agent reserve the right to
amend these standards at any time without notice. If you have a
question about the proper form for redemption requests, call
1-800-BKB-1784.
BY PHONE
You may redeem Shares by calling 1-800-BKB-1784.
You must have previously authorized the Fund in writing to accept
telephone requests. If you have not done so, call 1-800-BKB-1784 to
receive the necessary form.
In the event of drastic economic or market changes, you may experience
difficulty in redeeming by telephone. If this occurs, you should
consider another method of redemption, such as by mail or by wire. See
below. The Fund uses reasonable procedures (including a shareholder
identity test and sending a written confirmation of each telephone
transaction) to confirm that instructions given by telephone are
genuine. However, the Fund is not responsible for the authenticity of
telephone instructions or for any losses caused by fraudulent or
unauthorized telephone instructions if the Fund reasonably believed
that the instructions were genuine.
BY MAIL
You may redeem Shares by submitting a written request for redemption to:
Boston 1784 Funds P.O. Box 8524 Boston, MA 02266-8524
PROSPECTUS
- --------------------------------------------------------------------------------
Your written request must include your name and tax identification
number, the Fund's name, the dollar amount or number of Shares to be
redeemed, and your account number. Your request must be signed by the
registered owner(s) exactly as required by the account application.
BY WIRE
You may redeem Shares by wire by calling 1-800-BKB-1784. Redemption
proceeds will be wired directly to the domestic commercial bank and
account you previously designated in writing. You are charged a fee
for each wire redemption and the fee is deducted from your redemption
proceeds. The Fund reserves the right to wire redemption
proceeds within seven days after receiving the redemption order if, in
its judgment, an earlier payment could adversely affect the Fund. The
Fund also reserves the right to terminate or modify the telephone and
wire redemption procedures at any time. In that event, shareholders
would be promptly notified. Neither the Fund, the Transfer Agent, the
Sub-Transfer Agent, nor the Shareholder Servicing Agent will be
responsible for the authenticity of redemption instructions received
by phone.
PROSPECTUS
Additional Information You Should Know
- --------------------------------------------------------------------------------
MINIMUM BALANCE
Due to the high cost of maintaining accounts with low balances, the
Fund may redeem your Shares and send you the proceeds if, due to
shareholder redemptions your account balance falls below a minimum
value of $1,000. However, before Shares are redeemed to close an
account, the shareholder will be notified in writing and given 60 days
to purchase additional Shares to meet the minimum balance requirement.
The Fund reserves the right to amend this standard upon 60 days' prior
written notice to shareholders. The Fund also reserves the right to
redeem Shares involuntarily or make payment for redemptions in the
form of securities if it appears appropriate to do so in light of the
Fund's responsibilities under the Investment Company Act of 1940.
CONFIRMATIONS AND STATEMENTS
Confirmations of each purchase, exchange or redemption are sent to
each shareholder. Monthly statements are sent to report transactions
as well as dividends paid during the month. The Fund may suspend or
terminate its practice of confirming each transaction at any time
without notice.
DIVIDENDS AND DISTRIBUTIONS
Dividends from the Fund's net investment income are declared daily to
shareholders of record immediately following the 1:00 p.m. (Eastern
time) pricing of Shares. Dividends are paid monthly within five
Business Days after the end of such calendar month. The Fund does not
expect to realize any net long-term capital gains. However, if any
such gains are realized, they will be distributed to shareholders at
least annually.
You will receive your dividends and your distributions as an automatic
rein- vestment in additional Shares at the net asset value next
determined on the payment dates.
Tax Information
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated
investment companies and to receive the special tax treatment afforded
to such companies.
The Fund will be treated as a single, separate entity for federal
income tax purposes so that income (including capital gains) and
losses realized by the Trust's other portfolios will not be combined
for tax purposes with those realized by the Fund.
Shareholders are not required to pay the federal regular income tax on
any dividends received from the Fund that represent net interest on
tax-exempt municipal bonds. However, under the Tax Reform Act of 1986,
dividends representing net interest earned on certain "private
activity" bonds issued after August 7, 1986, may be included in
calculating the federal individual alternative minimum tax or the
federal alternative minimum tax for corporations. The Fund may
purchase all types of municipal bonds, including private activity
bonds.
PROSPECTUS
- -------------------------------------------------------------------------------
The alternative minimum tax applies when it exceeds the regular tax
for the taxable year. Alternative minimum taxable income is equal to
the regular taxable income of the taxpayer increased by certain "tax
preference" items not included in regular taxable income and reduced
by only a portion of the deductions allowed in the calculation of the
regular tax.
Dividends of the Fund representing net interest income earned on some
temporary investments and any realized net short-term gains are taxed
as ordinary income.
These tax consequences apply whether dividends are received in cash or
as additional shares.
MASSACHUSETTS TAXES
Under existing Massachusetts laws, distributions made by the Fund will
not be subject to Massachusetts personal income taxes to the extent
that such dividends qualify as exempt interest dividends under the
Internal Revenue Code, and represent (i) interest or gain on
obligations issued by the Commonwealth of Massachusetts, its political
subdivisions or agencies; or (ii) interest on obligations of the
United States, its territories or possessions to the extent exempt
from taxation by the states pursuant to federal law. Conversely, to
the extent that the distributions made by the Fund are derived from
other types of obligations, such dividends will be subject to
Massachusetts personal income taxes.
Shareholders subject to the Massachusetts corporate excise tax must
include all dividends paid by the Fund in their net income, and the
value of their shares of stock in the Fund in their net worth, when
computing the Massachu- setts excise tax.
OTHER STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from taxes in states
other than Massachusetts. Shareholders are urged to consult their own
tax advisers regarding the status of their accounts under state and
local tax laws.
Performance Information
From time to time, in advertisements or in reports to shareholders,
the performance, total return and yield of the Fund may be quoted and
compared to those of other mutual funds with similar investment
objectives and to relevant money market indices or to rankings
prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For
example, the performance of the Fund may be compared to data prepared
by Lipper Analytical Services, Inc., a widely recognized independent
service which monitors the performance of mutual funds.
National financial publications in which performance and yield data
are reported may include The Wall Street Journal, The New York Times,
Forbes, or Money magazine. Publications of a local or regional nature,
such as The Boston Globe or The Boston Herald, may also be used in
comparing the performance, total return and yield of the Fund.
PROSPECTUS
- -------------------------------------------------------------------------------
YIELD
Yield represents the annualized rate of income earned on an investment
over a seven-day period. It is the annualized dividends earned during
the period on the investment shown as a percentage of the investment.
The effective yield is calculated similarly to the yield but, when
annualized, the income earned by an investment is assumed to be
reinvested daily. The effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment.
TAX-EQUIVALENT YIELD
The tax-equivalent yield for the Fund is calculated similarly to the
yield, but is adjusted to reflect the taxable yield that the Fund
would have had to earn to equal its actual yield, assuming a 39.6%
federal tax rate and the 12% regular personal income tax rate imposed
by Massachusetts and assuming that income earned by the Fund is 100%
tax-exempt on a regular federal, state, and local basis. For the
seven day periods ended October 31, 1996, and November 30, 1996, the
tax-equivalent yields for Boston 1784 Funds Shares were 6.16% and
6.16%, respectively
TOTAL RETURN
Total return represents the change, over a specified period of time,
in the value of an investment in the Shares after reinvesting all
income distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage. Yield,
effective yield, tax-equivalent yield and total return will be
calculated separately for Boston 1784 Funds Shares and Institutional
Service Shares.
From time to time, advertisements for the Fund may refer to ratings,
rankings, and other information in certain financial publications
and/or compare the Fund's performance to certain indices.
PROSPECTUS
- -------------------------------------------------------------------------------
Tax-Equivalency Table
A tax-equivalency table may be used in advertising and sales
literature. The interest earned by the municipal securities in the
Fund's portfolio generally remains free from federal regular income
tax*, and is often free from state and local taxes as well. As the
table below indicates, a "tax-free" investment is an attractive choice
for investors, particularly in times of narrow spreads between
tax-free and taxable yields.
<TABLE>
<CAPTION>
TAXABLE YIELD EQUIVALENT FOR 1996
STATE OF MASSACHUSETTS
<S> <C> <C> <C> <C> <C>
Tax
Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%
- -------------------------------------------------------
Combined
Federal
and
State 27.00% 40.00% 43.00% 48.00% 51.60%
- -------------------------------------------------------
Joint $1- $40,101- $96,901- $147,701- Over
Return: 40,100 96,900 147,700 263,750 $263,750
Single $1- $24,001- $58,151- $121,301- Over
Return: 24,000 58,150 121,300 263,750 $263,750
- -------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
TAX TAXABLE
EXEMPT YIELD
YIELD EQUIVALENT
<S> <C> <C> <C> <C> <C>
1.50% 2.05% 2.50% 2.63% 2.88% 3.10%
2.00 2.74 3.33 3.51 3.85 4.13
2.50 3.42 4.17 4.39 4.81 5.17
3.00 4.11 5.00 5.26 5.77 6.20
3.50 4.79 5.83 6.14 6.73 7.23
4.00 5.48 6.67 7.02 7.69 8.26
4.50 6.16 7.50 7.89 8.65 9.30
5.00 6.85 8.33 8.77 9.62 10.33
5.50 7.53 9.17 9.65 10.58 11.36
6.00 8.22 10.00 10.53 11.54 12.40
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were not
used to increase federal deductions.
The chart is for illustrative purposes only. It is not an indicator of
past or future performance of Fund shares.
* Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
Management, Distribution and Administration
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated September 1, 1989. The Declaration of Trust
permits the Trust to offer separate series of shares representing
interests in separate portfolios of securities. The shares in any one
portfolio may be offered in separate classes. With respect to this
Fund, as of the date of this prospectus, the Board of Trustees
("Trustees") has established two classes of shares, Boston 1784 Funds
Shares and Institutional Service Shares. This prospectus relates only
to Boston 1784 Funds Shares of the Fund which are designed primarily
for individuals, partnerships and corporations who seek a convenient
means of accumulating an interest in a professionally managed
portfolio limited to short-term Massachusetts municipal securities.
The Fund is not likely to be a suitable investment for
non-Massachusetts taxpayers or retirement plans since it intends to
invest primarily in Massachusetts municipal securities.
PROSPECTUS
- -------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Trust owned by a shareholder gives that shareholder
one vote in Trustee elections and other matters submitted to
shareholders for vote. All shares of all classes of each portfolio in
the Trust have equal voting rights except that in matters affecting
only a particular portfolio or class, only shareholders of that
portfolio or class are entitled to vote. As of December 2, 1996, John
& Co., Burlington, Massachusetts, acting in various capacities for
numerous accounts, was the owner of record of 100% of the Boston 1784
Funds shares of the Fund, and therefore, may, for certain purposes, be
deemed to control the Fund and be able to affect the outcome of
certain matters presented for a vote of shareholders.
The Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the
Trust's or the Fund's operation and for the election of Trustees under
certain circumstances. Trustees may be removed by the Trustees or by
shareholders at a special meeting. A special meeting of the
shareholders shall be called by the Trustees upon the written request
of shareholders owning at least 10% of the outstanding shares of the
Trust.
The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the business affairs of the Trust and for
exercising all of the powers of the Trust except those reserved for
the shareholders. An Executive Committee handles the Trustees'
responsibilities between meetings of the Trustees.
Investment Adviser
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 or sale of portfolio
instruments.
ADVISORY FEES
The adviser receives an annual investment advisory fee equal to .50%
of the Fund's average daily net assets. The Adviser may voluntarily
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 in- PROSPECTUS
- --------------------------------------------------------------------------------
vested 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.
Both the Fund and the Adviser have adopted strict codes of ethics
governing the conduct of all employees who manage the Fund and its
portfolio securities. These codes recognize that such persons owe a
fiduciary duty to the Fund's shareholders and must place the interests
of shareholders ahead of employees' own interest. Among other things,
the codes: require preclearance and periodic reporting of personal
securities transactions; prohibit personal transactions in securities
being purchased or sold, or being considered for purchase or 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
Federated Securities Corp. is the principal distributor (the "Distributor") for
the Shares of the Fund. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment compa-
nies. Federated Securities Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICING ARRANGEMENTS
The Distributor may pay financial institutions such as banks,
fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide certain services to shareholders. These
services may include, but are not limited to, distributing
prospectuses and other information, providing accounting assistance,
and communicating or facilitating purchases and redemptions of shares.
Any fees paid for these services by the Distributor will be reimbursed
by the Adviser and not the Fund.
The Glass-Steagall Act prohibits a depository institution (such as a
commercial bank or a savings and loan association) from being an
underwriter or distributor of most securities. In the event the
Glass-Steagall Act is deemed to prohibit depository institutions from
acting in the administrative capacities described above or should
Congress relax current restrictions on depository institutions, the
Trustees will consider appropriate changes in the administrative
services.
PROSPECTUS
- --------------------------------------------------------------------------------
Administration
ADMINISTRATIVE SERVICES
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund
at an annual rate which relates to the average aggregate daily net
assets of all funds advised by affiliates of Federated Investors
specified below:
<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE AVERAGE AGGREGATE
FEE DAILY NET ASSETS
<S> <C>
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at
least $125,000 per portfolio and $30,000 per each additional class of
shares. Federated Services Company may choose voluntarily to waive a
portion of its fee.
SHAREHOLDER SERVICING AGENT
BankBoston, N.A., Boston, Massachusetts, is the shareholder servicing
agent for Boston 1784 Funds Shares. The Fund may pay the Shareholder
Servicing Agent a fee based on the average daily net asset value
of Shares for which it provides shareholder services. These
shareholder services include, but are not limited to, distributing
prospectuses and other information, providing shareholder assistance
and communicating or facilitating purchases and redemptions of Shares.
This fee will be equal to .25% of the Fund's average daily net assets
for which the Shareholder Servicing Agent provides services; however,
the Shareholder Servicing Agent may choose voluntarily to waive all or
a portion of its fee at any time.
Other Classes of Shares
The Fund also offers another class of shares called Institutional
Service Shares. Institutional Service Shares are sold to accounts for
which financial institutions act in an agency capacity. Investments in
Institutional Service Shares are subject to a minimum initial
investment of $25,000. Institutional Service Shares are sold at net
asset value. Instututional Service Shares and Boston 1784 Funds
Shares are subject to certain of the same expenses. Institutional
Service Shares are distributed with no 12b-1 fees but are subject to
shareholder services fees. Expense differences, however, between
Institutional Service Shares and Boston 1784 Funds Shares may affect
the performance of each class.
To obtain more information and a prospectus for Institutional Service
Shares, investors may call 1-800-341-7400.
PROSPECTUS
Massachusetts Municipal Cash Trust
Financial Highlights -- Institutional Service Shares
- --------------------------------------------------------------------------------
REFERENCE IS MADE TO THE REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON PAGE 32.
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
NET
NET NET ASSETS,
ASSET DISTRIBUTIONS ASSET EXPENSE END
VALUE, NET FROM NET VALUE, NET WAIVER/ OF PERIOD
BEGINNING INVESTMENT INVESTMENT END TOTAL INVESTMENT REIMBURSE- (000
OF PERIOD INCOME INCOME OF PERIOD RETURN (B) EXPENSES INCOME MENT (C) OMITTED)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended October 31,
1996 $1.00 0.03 (0.03) $1.00 3.07% 0.55% 3.02% 0.42% $119,739
Year Ended October 31,
1995 $1.00 0.03 (0.03) $1.00 3.34% 0.55% 3.30% 0.45% $99,628
Year Ended October 31,
1994 $1.00 0.02 (0.02) $1.00 2.14% 0.55% 2.12% 0.35% $90,013
Year Ended October 31,
1993 $1.00 0.02 (0.02) $1.00 1.99% 0.53% 1.97% 0.43% $84,524
Year Ended October 31,
1992 $1.00 0.03 (0.03) $1.00 2.87% 0.34% 2.82% 0.55% $85,570
Year Ended October 31,
1991 $1.00 0.05 (0.05) $1.00 4.63% 0.30% 4.48% 0.69% $81,681
Year Ended October 31,
1990(a) $1.00 0.03 (0.03) $1.00 2.59% 0.17%* 5.66%* 0.57%* $63,483
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Computed on an annualized basis.
(a)Reflects operations for the period from May 18, 1990 (date of
initial public investment) to October 31, 1990. (b)Based on net asset
value, which does not reflect the sales charge or contingent deferred
sales charge, if applicable. (c)This voluntary expense decrease is
reflected in both the expense and net investment income ratios shown
above.
(See Notes which are an integral part of the Financial Statements)
PROSPECTUS
Massachausetts Municipal Cash Trust
Portfolio of Investments
- --------------------------------------------------------------------------------
OCTOBER 31, 1996
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
(A) SHORT-TERM MUNICIPALS--99.3%
MASSACHUSETTS--95.6%
$2,000,000 Attleboro, MA, 3.50% BANs, 2/6/1997 $2,000,513
----------------------------------------------------------------
2,000,000 Boston, MA Water & Sewer Commission, General Revenue Bonds (1994
Series A) Weekly VRDNs (State Street Bank and Trust Co. LOC) 2,000,000
----------------------------------------------------------------
5,000,000 (b)Clipper, MA Tax Exempt Trust Weekly VRDNs (State Street Bank
and Trust Co. LIQ) 5,000,000
----------------------------------------------------------------
3,465,000 (b)Clipper, MA Tax Exempt Trust, (Series 1993-1) Weekly VRDNs
(State Street Bank and Trust Co. LIQ) 3,465,000
----------------------------------------------------------------
3,000,000 Commonwealth of Massachusetts Weekly VRDNs (AMBAC INS)/
(Citibank NA, New York LIQ) 3,000,000
----------------------------------------------------------------
1,645,000 Commonwealth of Massachusetts, (Series B), 5.00% Bonds, 6/1/1997 1,656,134
----------------------------------------------------------------
3,200,000 Framingham, MA IDA Weekly VRDNs (Perini Corp)/(Barclays Bank
PLC, London LOC) 3,200,000
----------------------------------------------------------------
2,500,000 Gardner, MA, 4.00% BANs, 4/1/1997 2,501,986
----------------------------------------------------------------
4,300,000 Hingham, MA, 3.75% BANs, 12/20/1996 4,300,671
----------------------------------------------------------------
3,925,000 Mashpee, MA, 4.00% BANs, 2/7/1997 3,929,061
----------------------------------------------------------------
8,200,000 Massachusetts Bay Transit Authority, (Series C), 3.55% CP
(Westdeutsche Landesbank Girozentrale LOC), Mandatory Tender
11/22/1996 8,200,000
----------------------------------------------------------------
700,000 Massachusetts HEFA Weekly VRDNs (Harvard University) 700,000
----------------------------------------------------------------
6,800,000 Massachusetts HEFA, (Series A) Weekly VRDNs (Brigham & Women's
Hospital)/(Sanwa Bank Ltd, Osaka LOC) 6,800,000
----------------------------------------------------------------
2,200,000 Massachusetts HEFA, (Series A) Weekly VRDNs (Endicott College)/
(Baybank, Burlington, MA LOC) 2,200,000
----------------------------------------------------------------
</TABLE>
PROSPECTUS
Massachusetts Municipal Cash Trust
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
(A) SHORT-TERM MUNICIPALS--CONTINUED
MASSACHUSETTS--CONTINUED
$3,320,000 Massachusetts HEFA, (Series A) Weekly VRDNs (New England Home
For Little Wanderers)/(First National Bank of Boston, MA LOC) $3,320,000
-------------------------------------------------------------
2,600,000 Massachusetts HEFA, (Series B) Weekly VRDNs (Clark
University)/(Sanwa Bank Ltd, Osaka LOC) 2,600,000
-------------------------------------------------------------
2,300,000 Massachusetts HEFA, (Series E) Weekly VRDNs (Williams
College, MA) 2,300,000
-------------------------------------------------------------
7,200,000 Massachusetts HEFA, (Series F) Weekly VRDNs (Children's
Hospital of Boston) 7,200,000
-------------------------------------------------------------
5,500,000 Massachusetts HEFA, (Series G) Weekly VRDNs (Massachusetts
Institute of Technology) 5,500,000
-------------------------------------------------------------
5,000,000 Massachusetts HEFA, 3.65% CP (Harvard University), Mandatory
Tender 1/8/1997 5,000,000
-------------------------------------------------------------
500,000 Massachusetts IFA Weekly VRDNs (Berkshire, MA
School)/(National Westminster Bank, PLC, London LOC) 500,000
-------------------------------------------------------------
1,300,000 Massachusetts IFA Weekly VRDNs (Groton School)/(National
Westminster Bank, PLC, London LOC) 1,300,000
-------------------------------------------------------------
1,350,000 Massachusetts IFA Weekly VRDNs (Kendall Square Entity)/(State
Street Bank and Trust Co. LOC) 1,350,000
-------------------------------------------------------------
1,910,000 Massachusetts IFA, (1995 Series A) Weekly VRDNs (Bradford
College Issue)/ (First National Bank of Boston, MA LOC) 1,910,000
-------------------------------------------------------------
300,000 Massachusetts IFA, (Series 1992) Weekly VRDNs (Holyoke Water
Power Co.)/ (Canadian Imperial Bank of Commerce, Toronto LOC) 300,000
-------------------------------------------------------------
2,000,000 Massachusetts IFA, (Series 1992A) Weekly VRDNs (Ogden
Haverhill)/ (Union Bank of Switzerland, Zurich LOC) 2,000,000
-------------------------------------------------------------
5,000,000 Massachusetts IFA, (Series 1992B), 3.60% CP (New England
Power Co.), Mandatory Tender 1/13/1997 5,000,000
-------------------------------------------------------------
</TABLE>
PROSPECTUS
Massachusetts Municipal Cash Trust
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Principal
Amount Value
(A) SHORT-TERM MUNICIPALS--CONTINUED
MASSACHUSETTS--CONTINUED
$3,000,000 Massachusetts IFA, (Series 1992B), 3.70% CP (New England
Power Co.), Mandatory Tender 12/11/1996 $3,000,000
-------------------------------------------------------------
5,000,000 Massachusetts IFA, (Series 1993A), 3.60% CP (New England
Power Co.), Mandatory Tender 1/10/1997 5,000,000
-------------------------------------------------------------
5,000,000 Massachusetts IFA, (Series 1995) Weekly VRDNs (Goddard
House)/ (Fleet Bank of New York LOC) 5,000,000
-------------------------------------------------------------
5,800,000 Massachusetts IFA, (Series 1995) Weekly VRDNs (Whitehead
Institute for Biomedical Research) 5,800,000
-------------------------------------------------------------
4,000,000 Massachusetts IFA, (Series 1996) Weekly VRDNs (Newbury
College)/(Baybank, Burlington, MA LOC) 4,000,000
-------------------------------------------------------------
1,525,000 Massachusetts IFA, (Series A) Weekly VRDNs (Hockomock YMCA)/
(Bank of Nova Scotia, Toronto LOC) 1,525,000
-------------------------------------------------------------
4,000,000 Massachusetts IFA, (Series B) Weekly VRDNs (Williston North
Hampton School)/(National Westminster Bank, PLC, London LOC) 4,000,000
-------------------------------------------------------------
1,495,000 Massachusetts IFA, Museum Revenue Refunding Bonds (1996
Issue), 3.80% Bonds (Museum of Fine Arts, Boston)/(MBIA INS),
1/1/1997 1,496,697
-------------------------------------------------------------
2,310,000 Massachusetts IFA, Refunding Revenue Bonds 1994 Project Daily
VRDNs (Showa Womens Institute Boston, Inc.)/(Bank of America
NT and SA, San Francisco LOC) 2,310,000
-------------------------------------------------------------
6,255,000 Massachusetts IFA, Revenue Bonds (Series 1995) Weekly VRDNs
(Emerson College Issue)/(Baybank, Burlington, MA LOC) 6,255,000
-------------------------------------------------------------
5,000,000 Massachusetts IFA, Revenue Bonds (Series 1995C) Weekly VRDNs
(Edgewood Retirement Community Project)/(Dresdner Bank Ag,
Frankfurt LOC) 5,000,000
-------------------------------------------------------------
</TABLE>
PROSPECTUS
Massachusetts Municipal Cash Trust
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Principal
Amount Value
(A) SHORT-TERM MUNICIPALS--CONTINUED
MASSACHUSETTS--CONTINUED
$1,800,000 Massachusetts Municipal Wholesale Electric Company, Power
Supply System Revenue Bonds (1994 Series C) Weekly VRDNs
(Canadian Imperial Bank of Commerce, Toronto LOC) $1,800,000
--------------------------------------------------------------
4,000,000 Massachusetts State HFA, (Series 50), 3.70% TOBs (Bayerische
Landesbank Girozentrale INV), Mandatory Tender 6/2/1997 4,000,000
--------------------------------------------------------------
2,500,000 Massachusetts Water Resources Authority, (Series 1994), 3.65%
CP (Morgan Guaranty Trust Co., New York LOC), Mandatory Tender
12/11/1996 2,500,000
--------------------------------------------------------------
2,000,000 Medway, MA, 4.50% BANs, 6/13/1997 2,008,980
--------------------------------------------------------------
757,140 Melrose, MA, 4.09% GANs, 4/8/1997 757,744
--------------------------------------------------------------
2,300,000 Melrose, MA, 4.25% BANs, 8/22/1997 2,304,472
--------------------------------------------------------------
3,080,000 Middleton, MA, 4.10% BANs, 9/5/1997 3,084,990
--------------------------------------------------------------
6,000,000 North Andover, MA, 4.00% BANs, 1/23/1997 6,003,004
--------------------------------------------------------------
3,773,100 North Andover, MA, 4.10% BANs, 9/11/1997 3,774,009
--------------------------------------------------------------
4,500,000 Springfield, MA , 4.50% BANs (Fleet National Bank, Providence,
R.I. LOC), 6/27/1997 4,514,094
--------------------------------------------------------------
1,725,000 Stoughton, MA, 3.51% BANs, 1/30/1997 1,725,244
--------------------------------------------------------------
2,514,160 Stoughton, MA, 3.75% BANs, 3/7/1997 2,517,093
--------------------------------------------------------------
1,148,837 Yarmouth, MA, 3.40% RANs, 3/4/1997 1,149,287
-------------------------------------------------------------- -----------
Total 166,758,979
-------------------------------------------------------------- -----------
PUERTO RICO--3.7%
--------------------------------------------------------------
5,000,000 Puerto Rico Government Development Bank, 3.65% CP, Mandatory
Tender 2/14/1997 5,000,000
--------------------------------------------------------------
</TABLE>
PROSPECTUS
Massachusetts Municipal Cash Trust
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Principal
Amount Value
(A) SHORT-TERM MUNICIPALS--CONTINUED
PUERTO RICO--CONTINUED
$1,500,000 Puerto Rico Industrial, Tourist, Education, Medical &
Environmental Control Finance Authority, (Series 1994A), 3.80%
CP (Inter American University of Puerto Rico)/(Banque Paribas,
Paris LOC), Mandatory Tender 12/9/1996 $ 1,500,000
-------------------------------------------------------------- ------------
Total $ 6,500,000
-------------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $173,258,979
-------------------------------------------------------------- ------------
</TABLE>
(a) The Fund may only invest in securities rated in one of the two
highest short-term rating categories by nationally recognized
statistical rating organizations ("NRSRO's") or unrated securities
of comparable quality. 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 &
Poors Corporation, MIG-1, or MIG-2 by Moody's Investors Service,
Inc., F-1+, F-1 and F-2 by Fitch Investors Service, Inc. are
considered rated in one of the two highest short-term rating
categories.
Securities rated in the highest short-term rating category (and
unrated securities of comparable quality) are identified as First
Tier securities. Securities rated in the second highest short-term
rating category (and unrated securities of comparable quality) are
identified as Second Tier securities. The Fund follows application
regulations in determining whether a security is rated and whether a
security rated by multiple NRSRO's in different rating categories
should be identified as a First or Second Tier security.
At October 31, 1996, the portfolio securities were rated as follows:
TIER RATING PERCENTAGE BASED ON TOTAL MARKET VALUE (UNAUDITED)
<TABLE>
<CAPTION>
FIRST TIER SECOND TIER
<S> <C>
97.2% 2.8%
</TABLE>
(b) Denotes a restricted security which is subject to restrictions on
resale under Federal Securities laws. At October 31, 1996, these
securities amounted to $8,465,000 which represents 4.85% of net
assets.
(c) Also represents cost for federal tax purposes.
PROSPECTUS
Massachusetts Municipal Cash Trust
- --------------------------------------------------------------------------------
Note: The categories of investments are shown as a percentage of net assets
($174,406,321) at October 31, 1996.
The following acronyms are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
INV--Investment Agreement
BANs--Bond Anticipation Notes LIQ--Liquidity Agreement
CP--Commercial Paper LOC--Letter of Credit
GANs--Grant Anticipation Notes MBIA--Municipal Bond Investors
Assurance
HEFA--Health and Education Facilities Authority
HFA--Housing Finance Authority PLC--Public Limited Company
IDA--Industrial Development Authority RANs--Revenue Anticipation Notes
IFA--Industrial Finance Authority SA--Support Agreement
INS--Insured TOBs--Tender Option Bonds
VRDNs--Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
PROSPECTUS
Massachusetts Municipal Cash Trust
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
OCTOBER 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in
securities, at
amortized cost and
value $173,258,979
- ------------------------
Cash 238,291
- ------------------------
Income receivable 1,159,659
- ------------------------
Receivable for shares
sold 3,665
- ------------------------ ------------
Total assets 174,660,594
- ------------------------
LIABILITIES:
Payable for
shares
redeemed $ 5,151
- -------------
Income
distribution
payable 184,990
- -------------
Payable to
transfer
agent 23,413
- -------------
Accrued
expenses 40,719
- ------------- ---------
Total liabilities 254,273
- ------------------------ ------------
Net Assets for
174,406,321 shares
outstanding $174,406,321
- ------------------------ ------------
NET ASSET VALUE,
OFFERING PRICE, AND
REDEMPTION PROCEEDS
PER SHARE:
INSTITUTIONAL SERVICE
SHARES:
$119,738,845 /
119,738,845 shares
outstanding $1.00
- ------------------------ ------------
1784 FUNDS SHARES:
$54,667,476 /
54,667,476 shares
outstanding $1.00
- ------------------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PROSPECTUS
Massachusetts Municipal Cash Trust
Statement of Operations
- --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1996
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $6,129,748
- ----------------------------------------------------------------
EXPENSES:
Investment advisory fee $ 856,487
- ----------------------------------------------------
Administrative personnel and services fee 155,108
- ----------------------------------------------------
Custodian fees 26,446
- ----------------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 60,024
- ----------------------------------------------------
Sub-transfer agent fees--1784 Funds Shares 13,090
- ----------------------------------------------------
Directors'/Trustees' fees 2,603
- ----------------------------------------------------
Auditing fees 13,561
- ----------------------------------------------------
Legal fees 4,491
- ----------------------------------------------------
Portfolio accounting fees 59,116
- ----------------------------------------------------
Shareholder services fee--Institutional Service
Shares 299,707
- ----------------------------------------------------
Shareholder services fee--1784 Funds Shares 128,514
- ----------------------------------------------------
Share registration costs 42,821
- ----------------------------------------------------
Printing and postage 20,600
- ----------------------------------------------------
Insurance premiums 4,302
- ----------------------------------------------------
Miscellaneous 1,899
- ---------------------------------------------------- ----------
Total expenses 1,688,769
- ------------------------------------------
Waivers--
- ------------------------------------------
Waiver of investment advisory fee $(297,835)
- ------------------------------------------
Waiver of shareholder services fee--
Institutional Service Shares (299,707)
- ------------------------------------------
Waiver of shareholder services fee--1784
Funds Shares (128,514)
- ------------------------------------------ ---------
Total waivers (726,056)
- ---------------------------------------------------- ----------
Net expenses 962,713
- ---------------------------------------------------------------- ----------
Net investment income $5,167,035
- ---------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PROSPECTUS
Massachusetts Municipal Cash Trust
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations--
- -------------------------------------------
Net investment income $ 5,167,035 $ 4,506,984
- ------------------------------------------- ------------- -------------
Distributions to Shareholders
- -------------------------------------------
Distributions from net investment income
- -------------------------------------------
Institutional Service Shares (3,622,277) (3,066,535)
- -------------------------------------------
1784 Funds Shares (1,544,758) (1,440,449)
- ------------------------------------------- ------------- -------------
Change in net assets resulting from
distributions to shareholders (5,167,035) (4,506,984)
- ------------------------------------------- ------------- -------------
SHARE TRANSACTIONS--
- -------------------------------------------
Proceeds from sale of shares 533,103,977 371,068,422
- -------------------------------------------
Net asset value of shares issued to
shareholders in payment of distributions
declared 2,757,964 2,255,146
- -------------------------------------------
Cost of shares redeemed (507,663,326) (359,040,754)
- ------------------------------------------- ------------- -------------
Change in net assets resulting from share
transactions 28,198,615 14,282,814
- ------------------------------------------- ------------- -------------
Change in net assets 28,198,615 14,282,814
- -------------------------------------------
NET ASSETS:
Beginning of period 146,207,706 131,924,892
- ------------------------------------------- ------------- -------------
End of period $ 174,406,321 $ 146,207,706
- ------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PROSPECTUS
Massachusetts Municipal Cash Trust
Notes to Financial Statements
- --------------------------------------------------------------------------------
OCTOBER 31, 1996
(1) Organization
Federated Municipal Trust (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of sixteen
portfolios. The financial statements included herein are only those of
Massachusetts Municipal Cash Trust (the "Fund"). The financial
statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest
is limited to the portfolio in which shares are held. The Fund offers
two classes of shares: Institutional Service Shares and 1784 Funds
Shares (formerly BayFunds Shares). The investment objective of the
Fund is current income exempt from federal regular income tax and
Massachusetts state income tax consistent with stability of principal.
(2) Significant Accounting Policies
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS
The Fund's use of the amortized cost method to value its portfolio
securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and
discount, if applicable, are amortized as required by the Internal
Revenue Code, as amended (the "Code"). Distributions to shareholders
are recorded on the ex-dividend date.
FEDERAL TAXES
It is the Fund's policy to comply with the pro- visions of the Code
applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly,
no provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions.
The Fund records when- issued securities on the trade date and
maintains security positions such that sufficient liquid assets will
be available to make payment for the securities purchased. Securities
purchased on a when-issued or delayed delivery basis are marked to
market daily and begin earning interest on the settlement date.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon
registration under federal securities laws or in transactions exempt
from such registration. Many restricted securities may be resold in
the secondary market in transactions exempt from registration. In some
cases, the restricted securities may be resold without registration
upon exercise of a demand feature.
PROSPECTUS
Massachusetts Municipal Cash Trust
- --------------------------------------------------------------------------------
Such restricted securities may be determined to be liquid under
criteria established by the Board of Trustees (the "Trustees"). The
Fund will not incur any registration costs upon such resales.
Restricted securities are valued at amortized cost in accordance with
Rule 2a-7 under the Act.
Additional information on each restricted security held at October 31,
1996 is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Clipper, MA Tax Exempt Trust Weekly VRDNs 5/15/95 $5,000,000
Clipper, MA Tax Exempt Trust, (Series 1993-
1) Weekly VRDNs 6/30/95 $3,465,000
</TABLE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual
results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
(3) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without
par value) for each class of shares.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1996 1995
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES
Shares sold 489,456,450 337,436,671
Shares issued to shareholders in payment of
distributions declared 1,214,590 814,368
Shares redeemed (470,559,983) (328,636,637)
------------ ------------
Net change resulting from Institutional Service
Share transactions 20,111,057 9,614,402
------------ ------------
1784 FUNDS SHARES
Shares sold 43,647,527 33,631,751
Shares issued to shareholders in payment of
distributions declared 1,543,374 1,440,778
Shares redeemed (37,103,343) (30,404,117)
------------ ------------
Net change resulting from 1784 Funds Share
transactions 8,087,558 4,668,412
------------ ------------
Net change resulting from share transactions 28,198,615 14,282,814
------------ ------------
</TABLE>
At October 31, 1996, capital paid-in aggregated $174,406,321.
(4) Investment Advisory Fee and Other Transactions with Affiliates
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"),
receives for its services an annual investment advisory fee equal to
.50% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can
modify or PROSPECTUS
Massachusetts Municipal Cash Trust
- --------------------------------------------------------------------------------
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative
Services Agreement, provides the Fund with administrative personnel
and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received
during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of
shares.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated
Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25% of
average daily net assets of the Institutional Service Shares for the
period. Under the terms of a Shareholder Services Agreement with
BayBank Systems, Inc., the Fund will pay BayBank Systems, Inc., up to
.25% of average daily net assets of 1784 Funds Shares for the period.
These fees are used to finance certain services for shareholders and
to maintain shareholder accounts. FSS and BayBank Systems, Inc. may
voluntarily choose to waive any portion of their fees. FSS and BayBank
Systems, Inc. can modify or terminate these voluntary waivers at any
time at their sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the
Fund. The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a
fee. The fee is based on the level of the Fund's average daily net
assets for the period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS
During the period ended October 31, 1996, the Fund engaged in purchase
and sale transactions with funds that have a common investment adviser
(or affiliated investment advisers), common Directors/Trustees, and/or
common Officers. These purchase and sale transactions were made at
current market value pursuant to Rule 17a-7 under the Act amounting to
$198,450,000 and $196,600,000, respectively.
GENERAL
Certain of the Officers and Directors of the Corporation are Officers
and Directors or Trustees of the above companies.
PROSPECTUS
Massachusetts Municipal Cash Trust
- --------------------------------------------------------------------------------
(5) Concentration of Credit Risk
Since the Fund invests a substantial portion of its assets in issuers
located in one state, it will be more susceptible to factors adversely
affecting issuers of that state than would be a comparable tax-exempt
mutual fund that invests nationally. In order to reduce the credit
risk associated with such factors, at October 31, 1996, 45.4% of the
securities in the portfolio of investments are backed by letters of
credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The percentage of investments
insured by or supported (backed) by a letter of credit from any one
institution or agency did not exceed 7.2% of total investments.
(6) Subsequent Event
Effective November 25, 1996, BayFunds Shares were renamed 1784 Funds
Shares.
PROSPECTUS
Report of Independent Public Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of FEDERATED MUNICIPAL TRUST
(Massachusetts Municipal Cash Trust):
We have audited the accompanying statement of assets and liabilities
of Massa- chusetts Municipal Cash Trust (an investment portfolio of
Federated Municipal Trust, a Massachusetts business trust), including
the schedule of portfolio investments, as of October 31, 1996, the
related statement of operations for the year then ended and the
statement of changes in net assets and the financial highlights (see
pages 2 and 19 of the prospectus) for the periods presented. These
financial statements and financial highlights are the responsibility
of the Trust's management. Our responsibility is to express an opinion
on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of Oc- tober 31, 1996, by
correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Mas- sachusetts Municipal Cash Trust (an
investment portfolio of Federated Municipal Trust) as of October 31,
1996, the results of its operations for the year then ended and the
changes in its net assets and the financial highlights for the periods
presented, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
December 13, 1996
PROSPECTUS
Addresses
- --------------------------------------------------------------------------------
Massachusetts Municipal Cash Trust
Boston 1784 Funds Shares
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Distributor Shareholder Servicing Agent
Federated Securities Corp.
Federated Investors Tower BankBoston, N.A.
Pittsburgh, Pennsylvania 15222-3779 100 Federal Street
Boston, Massachusetts 02110
Investment Adviser Custodian
Federated Management State Street Bank and Trust Company
Federated Investors Tower P.O. Box 1119
Pittsburgh, Pennsylvania 15222-3779
Boston, Massachusetts 02266
Transfer Agent and Dividend Independent Public Accountants
Disbursing Agent Arthur Andersen LLP
Federated Shareholder Services Company 2100 One PPG Place
P.O. Box 8600 Pittsburgh, Pennsylvania 15222
Boston, Massachusetts 02266-8600
Sub-Transfer Agent
Boston Financial Data Services,
Inc.
Two Heritage Drive
Quincy, Massachusetts 02171
PROSPECTUS
Massachusetts Municipal Cash Trust
(A Portfolio of Federated Municipal Trust)
Boston 1784 Funds Shares
(formerly, 1784 Fund Shares and prior to that, BayFunds Shares)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus for Boston 1784 Funds Shares of Massachusetts
Municipal Cash Trust (the "Fund"), a portfolio of Federated
Municipal Trust (the "Trust") dated December 31, 1996 (Revised
May 27, 1997). 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-BKB-1784.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated December 31, 1996
(Revised May 27, 1997)
FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 314229832
0032603B (5/97)
<PAGE>
Table of Contents
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
Ratings 1
When-Issued and Delayed Delivery Transactions 2
Repurchase Agreements 2
Credit Enhancement 2
Investment Limitations 2
Regulatory Compliance 4
Massachusetts Investment Risks 4
Federated Municipal Trust Management 5
Share Ownership 9
Trustees Compensation 10
Trustee Liability 11
Investment Advisory Services 11
Adviser to the Fund 11
Advisory Fees 11
Brokerage Transactions 11
Other Services 12
Fund Administration 12
Custodian 12
Transfer Agent and Dividend Disbursing Agent 12
Sub-Transfer Agent 12
Independent Public Accountants 12
Shareholder Servicing Agent 12
Exchanging Securities for Shares 13
Determining Net Asset Value 13
Redemption in Kind 13
Massachusetts Partnership Law 14
The Fund's Tax Status 14
Massachusetts State Income Tax 14
Performance Information 14
Yield 15
Effective Yield 15
Total Return 15
Performance Comparisons 15
Economic and Market Information 15
About Federated Investors 16
Appendix 18
<PAGE>
- --------------------------------------------------
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.
Effective May 27, 1997, the name of the class of shares of the Fund
has changed from "1784 Funds Shares" to "Boston 1784 Funds Shares."
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer
of the security, the issuer of any demand feature applicable to the
security, or any guarantor of either the security or any demand
feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial
institution irrevocable letters of credit or guarantees and give the
Fund the right to demand payment of the principal amounts of the
participation interests plus accrued interest on short notice (usually
within seven days). The municipal securities subject to the
participation interests are not limited to the Fund's maximum maturity
requirements so long as the participation interests include the right
to demand payment from the issuers of those interests. By purchasing
participation interests, the Fund is buying a security meeting the
maturity and quality requirements of the Fund and also is receiving
the tax-free benefits of the underlying securities.
Municipal Leases
The Fund may purchase municipal securities in the form of
participation interests that represent an undivided proportional
interest in lease payments by a governmental or nonprofit entity. The
lease payments and other rights under the lease provide for and secure
payments on the certificates. Lease obligations may be limited by
municipal charter or the nature of the appropriation for the lease.
Furthermore, a lease may provide that the participants cannot
accelerate lease obligations upon default. The participants would only
be able to enforce lease payments as they became due. In the event of
a default or failure of appropriation, unless the participation
interests are credit enhanced, it is unlikely that the participants
would be able to obtain an acceptable substitute source of payment.
In determining the liquidity of municipal lease securities, the
investment adviser, under the authority delegated by the Trustees,
will base its determination on the following factors: whether the
lease can be terminated by the lessee; the potential recovery, if any,
from a sale of the leased property upon termination of the lease; the
lessee's general credit strength (e.g., its debt, administrative,
economic and financial characteristics and prospects); the likelihood
that the lessee will discontinue appropriating funding for the leased
property because the property is no longer deemed essential to its
operations (e.g., the potential for an "event of non-appropriation");
and any credit enhancement or legal recourse provided upon an event of
non-appropriation or other termination of the lease.
Ratings
The securities in which the Fund invests must be rated in one of the
two highest short-term rating categories by one or more nationally
recognized statistical rating organizations ("NRSROs") or be of
comparable quality to securities having such ratings. An NRSRO's two
highest rating categories are determined without regard for
sub-categories and gradations. For example, securities rated SP-1+,
SP-1 or SP-2 by Standard & Poor's Ratings Group ("S&P"), or MIG-1 or
MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or F-1+, F-1 and
F-2 by Fitch Investor Services, 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 categories. See
"Regulatory Compliance."
<PAGE>
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price and yield for the Fund. No fees or other expenses,
other than normal transaction costs, are incurred. However, liquid
assets of the Fund in a dollar amount sufficient to make payment for
the securities to be purchased are segregated on the Fund's records at
the trade date; marked to market daily and maintained until the
transaction has been settled. The Fund does not intend to engage in
when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its
assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant
to repurchase agreements. Repurchase agreements are arrangements in
which banks, broker/dealers, and other recognized financial
institutions sell securities to the Fund and agree at the time of sale
to repurchase them at a mutually agreed upon time and price. The Fund
or its custodian will take possession of the securities subject to
repurchase agreements and these securities will be marked to market
daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities. In the event that
such a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of the Fund and allow retention or disposition of
such securities. The Fund will only enter into repurchase agreements
with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be
creditworthy, pursuant to guidelines established by the Trustees.
Credit Enhancement
The Fund typically evaluates the credit quality and ratings of
credit-enhanced securities based upon the financial condition and
ratings of the party providing the credit enhancement (the "credit
enhancer"), rather than the issuer. However, credit-enhanced
securities will not be treated as having been issued by the credit
enhancer for diversification purposes, unless the Fund has invested
more than 10% of its assets in securities issued, guaranteed or
otherwise credit enhanced by the credit enhancer, in which case the
securities will be treated as having been issued by both the issuer
and the credit enhancer.
The Fund may have more than 25% of its total assets invested in
securities credit enhanced by banks.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits
as are necessary for the clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the
Fund may borrow money in amounts up to one-third of the value
of its total assets, including the amounts borrowed.
The Fund will not borrow money for investment leverage, but
rather as a temporary, extraordinary, or emergency measure or
to facilitate management of the portfolio by enabling the
Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities
while borrowings in excess of 5% of the value of its total
assets are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except as necessary to secure permitted borrowings. In those
cases, it may pledge assets having a market value not
exceeding the lesser of the dollar amounts borrowed or 15% of
the value of total assets at the time of the pledge.
<PAGE>
Lending Cash or Securities
The Fund will not lend any of its assets, except that it may
acquire publicly or non-publicly issued Massachusetts
Municipal Securities or temporary investments or enter into
repurchase agreements, in accordance with its investment
objective, policies, and limitations or Declaration of Trust.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts.
Investing in Real Estate
The Fund will not purchase or sell real estate or real estate
limited partnerships, although it may invest in securities of
issuers whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or
interests in real estate.
Underwriting
The Fund will not underwrite any issue of securities, except
as it may be deemed to be an underwriter under the Securities
Act of 1933 in connection with the sale of securities in
accordance with its investment objective, policies, and
limitations.
Investing in Restricted Securities
The Fund will not invest more than 10% of its net assets in
securities subject to restrictions on resale under the
Securities Act of 1933.
Concentration of Investments
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would
be invested in any one industry, or in industrial development
bonds or other securities the interest upon which is paid
from revenues of similar types of projects. However, the Fund
may invest as temporary investments more than 25% of the
value of its assets in cash or cash items, securities issued
or guaranteed by the U.S. government, its agencies or
instrumentalities, or instruments secured by these money
market instruments, such as repurchase agreements.
Diversification of Investments
With regard to at least 50% of its total assets, no more than
5% of its total assets are to be invested in the securities
of a single issuer, and no more than 25% of its total assets
are to be invested in the securities of a single issuer at
the close of each quarter of each fiscal year.
Under this limitation, each governmental subdivision,
including states, territories, possessions of the United
States, or their political subdivisions, agencies,
authorities, instrumentalitites, or similar entities will be
considered a separate issuer if its assets and revenues are
separate from those of the governmental body creating it and
the security is backed only by its own assets and revenues.
Industrial development bonds backed only by the assets and
revenues of a non-governmental issuer are considered to be
issued solely by that issuer. If, in the case of an
industrial development bond or government issued security, a
governmental or other entity guarantees the security, such
guarantee would be considered a separate security issued by
the guarantor, as well as the other issuer, subject to
limited exclusions allowed by the Investment Company Act of
1940.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified
before any material change in these limitations becomes effective.
<PAGE>
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment
companies except as part of a merger, consolidation,
reorganization, or other acquisition.
Investing for Control
The Fund will not invest in securities of a company for the
purpose of exercising control or management.
Investing in Options
The Fund will not purchase or sell puts, calls, straddles,
spreads, or any combination of them.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its
net assets in illiquid securities including repurchase
agreements providing for settlement in more than seven days
after notice.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not
result in a violation of such restriction.
The Fund did not borrow money or pledge securities in excess of 5% of
the value of its net assets during the last fiscal year and has no
present intent to do so during the coming fiscal year.
For purposes of 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.
Regulatory Compliance
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth
in the prospectus and this Statement of Additional Information, in
order to comply with applicable laws and regulations, including the
provisions of and regulations under the Investment Company Act of
1940. In particular, the Fund will comply with the various
requirements of Rule 2a-7, which regulates money market mutual funds.
The Fund will determine the effective maturity of its investments, as
well as its ability to consider a security as having received the
requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may change these operational policies to reflect changes in the
laws and regulations without the approval of its shareholders.
Massachusetts Investment Risks
The Fund invests in obligations of Massachusetts issuers which results
in the Fund's performance being subject to risks associated with the
overall economic conditions present within Massachusetts (the
"Commonwealth"). The following information is a brief summary of the
recent prevailing economic conditions and a general summary of the
Commonwealth's financial status. This information is based on official
statements relating to securities that have been offered by
Massachusetts issuers and from other sources believed to be reliable
but should not be relied upon as a complete description of all
relevant information.
The Commonwealth has a diverse economy with manufacturing, education,
health care, computers and financial services all being significant
contributors. Massachusetts is generally considered the leader in
research and development within the biotechnology, software and
robotics industries as well as having many highly prestigious
universities. In addition to a highly skilled and educated workforce,
the Commonwealth has one of the higher average per capita incomes in
this country.
<PAGE>
Beginning in the late 1980's, economic growth in the New England
region and Massachusetts, in particular, slowed and showed pronounced
deterioration in the construction, real estate, financial and
manufacturing sectors. Between 1988 and 1992, there were extensive job
losses that resulted in a 10% reduction in the work force. Also, over
the same period, property values in the region experienced a similar
decline. More recently, the Massachusetts economy has experienced a
slight recovery, however, at a slower pace than the nation and there
are signs that this recovery may be slowing. In addition, after years
of above average property value growth, property values have decreased
an estimated 6% over the same period.
The two major revenue sources available to cities and towns in
Massachusetts are local property taxes and local aid from the
Commonwealth. Property taxes are subject to limitations imposed by a
state-wide initiative approved by the voters in November, 1980
(commonly known as Proposition 2-1/2), which limits the property taxes
that may be levied by any city or town in any fiscal year to the
lesser of (i) 2.5% of the full valuation of the real estate and
personal property therein or (ii) 2.5% over the previous year's levy
limit plus any growth in the tax base from new construction. In recent
years the decrease in property values due to the recession and the
limitations of tax levy growth imposed by Proposition 2-1/2 have
resulted in budget constraints for many cities and towns.
The overall financial condition of the Commonwealth can also be
illustrated by the changes of its debt ratings. During the period in
which the Commonwealth has experienced its financial difficulties
beginning in 1988, its general obligation long-term debt ratings as
determined by Moody's and S & P's decreased from Aa and AA+ to Baa and
BBB respectively. Since then the Commonwealth has had its debt ratings
raised by the two rating agencies to A1 and A+ by Moody's and S&P,
respectively, reflecting improved fiscal performance.
The Fund's concentration in securities issued by the Commonwealth and
its political subdivisions provides a greater level of risk than a
fund which is diversified across numerous states and municipal
entities. The ability of the Commonwealth or its municipalities to
meet their obligations will depend on the availability of tax and
other revenues; economic, political, and demographic conditions within
the Commonwealth; and the underlying fiscal condition of the
Commonwealth and its municipalities.
Federated Municipal Trust Management
Officers and Trustees are listed with their addresses, birthdates,
present positions with Federated Municipal Trust, and principal
occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors,
Federated Advisers, Federated Management, and
Federated Research; Chairman and Director,
Federated Research Corp. and Federated Global
Research Corp.; Chairman, Passport Research,
Ltd.; Chief Executive Officer and Director or
Trustee of the Funds.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly,
Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.;
Trustee, University of Pittsburgh; Director or Trustee of the Funds.
<PAGE>
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; Partner or Trustee
in private real estate ventures in Southwest
Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village
Development Corporation; Director or Trustee of
the Funds.
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.;
formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC Bank
Corp.; Director, Ryan Homes, Inc.; Director or Trustee of the Funds.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany
Fund, Inc.; Director or Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, 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 or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N
Park Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A.,
Western Region; Director or Trustee of the Funds.
<PAGE>
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.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative,
Commonwealth of Massachusetts; formerly,
President, State Street Bank and Trust Company
and State Street Boston Corporation; Director or
Trustee of the Funds.
Gregor F. Meyer
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney, Member of Miller, Ament, Henny &
Kochuba; Chairman, Meritcare, Inc.; Director,
Eat'N Park Restaurants, Inc.; Director or
Trustee 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 or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., National Defense University, U.S. Space
Foundation and Czech Management Center; President Emeritus, University
of Pittsburgh; Founding Chairman, National Advisory Council for
Environmental Policy and Technology, Federal Emergency Management
Advisory Board and Czech Management Center; Director or Trustee of the
Funds.
<PAGE>
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/Marketing/Conference Planning, Manchester Craftsmen's
Guild; Restaurant Consultant, Frick Art & History Center; Conference
Coordinator, University of Pittsburgh Art History Department; Director
or Trustee 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 Shareholder Services
Company, and Federated Shareholder Services;
Director, Federated Services Company; President
or Executive Vice President of the Funds;
Director or Trustee of some of the Funds. Mr.
Donahue is the son of John F. Donahue, Chairman
and Trustee of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., Federated Global Research Corp.
and Passport Research, Ltd.; Executive Vice President and Director,
Federated Securities Corp.; Trustee, Federated Shareholder Services
Company; 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 , Secretary and
Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated
Research; Director, Federated Research Corp. and Federated Global
Research Corp.; Trustee, Federated Shareholder Services Company;
Director, Federated Services Company; President and Trustee, Federated
Shareholder Services; Director, Federated Securities Corp.; Executive
Vice President and Secretary of the Funds; Treasurer of some of the
Funds.
<PAGE>
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.
* This Trustee is deemed to be an "interested person" as
defined in the Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee
of the Board of Trustees handles the responsibilities of
the Board between meetings of the Board.
As referred to in the list of Trustees and
Officers, "Funds" includes the following
investment companies: 111 Corcoran Funds;
Annuity Management Series; Arrow Funds;
Automated Government Money Trust; Blanchard
Funds; Blanchard Precious Metals Fund, Inc.;
Cash Trust Series II; Cash Trust Series, Inc. ;
DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate
U.S. Government Fund, Inc.; Federated American
Leaders Fund, Inc.; Federated ARMs Fund;
Federated Equity Funds; Federated Equity Income
Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust;
Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield
Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated
Insurance Series; Federated Investment
Portfolios; Federated Investment Trust;
Federated Master Trust; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal
Trust; Federated Short-Term Municipal Trust;
Federated Short-Term U.S. Government Trust;
Federated Stock and Bond Fund, Inc.; Federated
Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S.
Government Securities Fund: 2-5 Years; Federated
U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority
Funds; Fixed Income Securities, Inc.; High Yield
Cash Trust; Intermediate Municipal Trust;
International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty
Term Trust, Inc. - 1999; Liberty U.S. Government
Money Market Trust; Liquid Cash Trust; Managed
Series Trust; Money Market Management, Inc.;
Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument
Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; The Planters Funds; The
Starburst Funds; The Starburst Funds II; The
Virtus Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for
U.S. Treasury Obligations; and World Investment
Series, Inc.
Share Ownership
Officers and Trustees as a group own less than 1% of the Fund`s
outstanding shares.
As of December 2, 1996, the following shareholders of record owned 5%
or more of the outstanding Boston 1784 Funds Shares of Massachusetts
Municipal Cash Trust:John & Co., Burlington, Massachusetts, acting in
various capacities for numerous accounts, owned approximately
53,216,829 shares (100%). As of the same date, the following
shareholders of record owned 5% or more of the oustanding
Institutional Service Shares of the Fund: State Street Bank and Trust
Company, acting in various capacities for numerous accounts, owned
approximately 55,042,437 shares (38.98%); and John & Co. owned
approximately 17,474,106 shares (12.37%).
<PAGE>
<TABLE>
<CAPTION>
Trustees Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
<S> <C> <C>
John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 54 other investment companies in the Fund Complex
Thomas G. Bigley++ $3,611 $86,331 for the Trust and
Trustee 54 other investment companies in the Fund Complex
John T. Conroy, Jr. $3,934 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund Complex
William J. Copeland $3,934 $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 14 other investment companies in the Fund Complex
James E. Dowd $3,934 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $3,611 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex
Edward L. Flaherty, Jr. $3,934 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund Complex
Peter E. Madden $3,611 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex
Gregor F. Meyer $3,611 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex
John E. Murray, Jr., $3,611 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex
Wesley W. Posvar $3,611 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex
Marjorie P. Smuts $3,611 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund Complex
</TABLE>
*Information is furnished for the fiscal year
ended October 31, 1996.
#The aggregate compensation is provided for the
Trust which is comprised of 16 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.
<PAGE>
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees will not
be liable for errors of judgment or mistakes of fact or law. However,
they are not protected against any liability to which they would
otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the
conduct of their office.
Investment Advisory Services
Adviser to the Fund
The Fund's investment adviser is Federated
Management (the "Adviser"). It is a subsidiary
of Federated Investors. All of the voting
securities of Federated Investors are owned by a
trust, the trustees of which are John F.
Donahue, his wife, and his son, J. Christopher
Donahue.
The Adviser shall not be liable to the Trust, the Fund, or any
shareholder of the Fund for any losses that may be sustained in the
purchase, holding, or sale of any security, or for anything done or
omitted by it, except acts or omissions involving willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Trust.
Advisory Fees
For its advisory services, the Adviser receives an annual investment
advisory fee as described in the prospectus. During the fiscal years
ended October 31, 1996, 1995, and 1994, the Adviser earned $856,487,
$686,918, and $643,293, respectively, of which $297,835, $276,299, and
$445,711, respectively, were voluntarily waived because of
undertakings to limit the Fund's expenses.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order at a favorable price. In working with dealers, the adviser will
generally use those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can
be obtained elsewhere. The adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to guidelines
established by the Board of Trustees. The adviser may select brokers
and dealers who offer brokerage and research services. These services
may be furnished directly to the Fund or to the adviser and may
include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services.
Research services provided by brokers and dealers may be used by the
adviser or its affiliates in advising the Trust and other accounts. To
the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions.
They determine in good faith that commissions charged by such persons
are reasonable in relationship to the value of the brokerage and
research services provided. During the fiscal year ended October 31,
1996, 1995, and 1994, the Trust paid no brokerage commissions.
<PAGE>
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 Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee
as described in the prospectus. From March 1, 1994 to March 1, 1996,
Federated Administrative Services served as the Fund's Administrator.
Prior to March 1, 1994, Federated Administrative Services, Inc. served
as the Fund's Administrator. Both former Administrators are
subsidiaries of Federated Investors. For purposes of this Statement of
Additional Information, Federated Services Company, Federated
Administrative Services and Federated Administrative Services, Inc.
may hereinafter collectively be referred to as the "Administrators."
For the fiscal year ended October 31, 1996, 1995, and 1994, the
Administrators earned $155,108, $155,000, and $195,483, respectively.
Custodian
State Street Bank and Trust Company, Boston,
Massachusetts, is custodian for the securities
and cash of the Fund.
Transfer Agent
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary
shareholder records. For its services, the transfer agent receives a
fee based on size, type, and number of accounts and transactions made
by shareholders.
Sub-Transfer Agent
Boston Financial Data Services, Inc., Quincy,
Massachusetts, is the sub-transfer agent for the
Boston 1784 Funds Shares of the Fund. The
Institutional Service Shares class has no
sub-transfer agent.
Independent Public Accountants
The independent public accountants for the Fund are Arthur Andersen
LLP, Pittsburgh, Pennsylvania.
Shareholder Servicing Agent
Under a Shareholder Servicing Plan, the Fund may pay a fee to
BankBoston, N.A., as shareholder servicing agent, for services
provided which are necessary for the maintenance of shareholder
accounts. These activities and services may include, but are not
limited to: providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other personnel as
necessary or beneficial to establish and maintain shareholder accounts
and records; processing purchase and redemption transactions and
automatic investments of client account cash balance; answering
routine client inquiries; and assisting clients in changing dividend
options, account designations, and addresses. For the fiscal year
ended October 31, 1996, the Fund paid no shareholder services fees on
behalf of the Boston 1784 Funds Shares.
<PAGE>
Exchanging Securities for Shares
The Fund may accept securities in exchange for Shares. The Fund will
allow such exchanges only upon the prior approval of the Fund and a
determination by the Fund and the Adviser that the securities to be
exchanged are acceptable.
Any securities exchanged must meet the investment objective and
policies of the Fund, must have a readily ascertainable market value.
The Fund acquires the exchanged securities for investment and not for
resale. The market value of any securities exchanged in an initial
investment plus any cash, must be at least $25,000.
Securities accepted by the Fund will be valued in the same manner as
the Fund values its assets. The basis of the exchange will depend upon
the net asset value of Shares on the day the securities are valued.
One Share of the Fund will be issued for each equivalent amount of
securities accepted.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the
property of the Fund, along with the securities.
Determining Net Asset Value
The Trustees have decided that the best method for determining the
value of portfolio instruments is amortized cost. Under this method,
portfolio instruments are valued at the acquisition cost as adjusted
for amortization of premium or accumulation of discount rather than at
current market value. Accordingly, neither the amount of daily income
nor the net asset value is affected by any unrealized appreciation or
depreciation of the portfolio. In periods of declining interest rates,
the indicated daily yield on shares of the Fund computed by dividing
the annualized daily income on the Fund's portfolio by the net asset
value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market
prices and estimates. In periods of rising interest rates, the
opposite may be true.
The Fund's use of the amortized cost method of valuing portfolio
instruments depends on its compliance with certain conditions in Rule
2a-7 (the "Rule") promulgated by the Securities and Exchange
Commission under the Investment Company Act of 1940. Under the Rule,
the Trustees must establish procedures reasonably designed to
stabilize the net asset value per share, as computed for purposes of
distribution and redemption, at $1.00 per share, taking into account
current market conditions and the Fund's investment objective. The
procedures include monitoring the relationship between the amortized
cost value per share and the net asset value per share based upon
available indications of market value. The Trustees will decide what,
if any, steps should be taken if there is a difference of more than
.50% 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.
<PAGE>
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally
liable under Massachusetts law for obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with
Massachusetts that expressly disclaim the liability of shareholders
for acts or obligations of the Trust. These documents require notice
of this disclaimer to be given in each agreement, obligation, or
instrument that the Trust or its Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations, the Trust is required 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.
Massachusetts State Income Tax
Individual shareholders of the Fund who are subject to Massachusetts
income taxation will not be required to pay Massachusetts income tax
on that portion of their dividends which are attributable to: interest
earned on Massachusetts tax-free municipal obligations; gain from the
sale of certain of such obligations; and interest earned on
obligations of United States territories or possessions, to the extent
interest on such obligations is exempt from taxation by the state
pursuant to federal law. All remaining dividends will be subject to
Massachusetts income tax.
If a shareholder of the Fund is a Massachusetts business corporation
or any foreign business corporation which exercises its charter,
qualifies to do business, actually does business or owns or uses any
part of its capital, plant or other property in Massachusetts, then it
will be subject to Massachusetts excise taxation either as a tangible
property corporation or as an intangible property corporation. If the
corporate shareholder is a tangible property corporation, it will be
taxed upon its net income allocated to Massachusetts and the value of
certain tangible property. If it is an intangible property
corporation, it will be taxed upon its net income and net worth
allocated to Massachusetts. Net income is gross income less allowable
deductions for federal income tax purposes, subject to specified
modifications.
Dividends received from the Fund are includable in gross income and
generally may not be deducted by a corporate shareholder in computing
its net income. The corporation's shares in the Fund are not
includable in the computation of the tangible property base of a
tangible property corporation, but are includable in the computation
of the net worth base of an intangible property corporation.
Shares of Massachusetts Municipal Cash Trust will be exempt from local
property taxes in Massachusetts.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested; changes in interest rates; changes in expenses; and the
relative amount of cash flow. To the extent that financial
institutions and broker/dealers charge fees in connection with
services provided in conjunction with an investment in shares of the
Fund, the performance will be reduced for those shareholders paying
those fees.
<PAGE>
Yield
The Fund calculates its yield based upon the seven days ending on the
day of the calculation, called the "base period." This yield is
computed by: determining the net change in the value of a hypothetical
account with a balance of one share at the beginning of the base
period, with the net change excluding capital changes but including
the value of any additional shares purchased with dividends earned
from the original one share and all dividends declared on the original
and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period
to determine the base period return; and multiplying the base period
return by 365/7.
The yield for the seven-day period ended October 31, 1996 for the
Boston 1784 Funds Shares of the Fund was 2.98%.
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 effective yield for the seven-day period ended October 31, 1996
for the Boston 1784 Funds
Shares of the Fund was 3.02%.
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, 1996, and for the period
from March 8, 1993 (date of initial public investment) to October 31,
1996, the average annual total returns were 3.05% and 2.62%,
respectively, for the Boston 1784 Funds
Shares of the Fund.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a
more complete view of the Fund's performance. When comparing
performance, investors should consider all relevant factors such as
the composition of any index used, prevailing market conditions,
portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may
include:
o Lipper Analytical Services, Inc.
ranks funds in various fund
categories based on total return,
which assumes the reinvestment of
all income dividends and capital
gains distributions, if any.
o IBC/Donoghue's Money Fund Report publishes annualized
yields of money market funds weekly. Donoghue's Money
Market Insight publication reports monthly and
12-month-to-date investment results for the same money
funds.
o Money, a monthly magazine, regularly ranks money market
funds in various categories based on the latest available
seven-day effective yield.
From time to time as it deems appropriate, the Fund may advertise the
performance of its shares using charts, graphs and description,
compared to federally insured bank products, including certificates of
deposit and time deposits, and to money market funds using the Lipper
Analytical Services money market instruments average. Unlike federally
insured bank products, the shares of the Fund are not insured.
<PAGE>
Advertising and other promotional literature may include charts,
graphs and other illustrations using the Fund`s returns, or returns in
general, that demonstrate basic investment concepts such as
tax-deferred compounding, dollar-cost averaging and systematic
investment. In addition, the Fund can compare its performance, or
performance for the types of securities in which it invests, to a
variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
Economic and Market Information
Advertising and sales literature for the Fund may include discussions
of economic, financial and political developments and their effect on
the securities market. Such discussions may take the form of
commentary on these developments by the Fund portfolio mangers and
their views and analysis on how such developments could affect the
Funds. In addition, advertising and sales literature may quote
statistics and give general information about the mutual fund
industry, including growth of the industry, from sources such as the
Investment Company Institute.
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.
These traders handle trillions of dollars in annual trading volume.
In the money market sector, Federated Investors gained prominence in
the mutual fund industry in 1974 with the creation of the first
institutional money market fund. Simultaneously, the company pioneered
the use of the amortized cost method of accounting for valuing shares
of money market funds, a principal means used by money managers today
to value money market fund shares. Other innovations include the first
institutional tax-free money market fund. As of December 31, 1995,
Federated Investors managed more than $40.2 billion in assets across
approximately 47 money market funds, including 17 government, 10 prime
and 20 municipal with assets approximating $20.9 billion, $11.5
billion and $7.8 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated
Investors' equity and high yield corporate bond management while
William D. Dawson, Executive Vice President, oversees Federated
Investors' domestic fixed income management. Henry A. Frantzen,
Executive Vice President, oversees the management of Federated
Investors' international portfolios.
Mutual Fund Market
Twenty-seven percent of American households are pursuing their
financial goals through mutual funds. These investors, as well as
businesses and institutions, have entrusted over $3 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.
<PAGE>
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. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed
by DALBAR, Inc. DALBAR is recognized as the industry benchmark for
service quality measurement. The marketing effort to these firms is
headed by James F. Getz, President, Broker/Dealer Division.
*Source: Investment Company Institute
<PAGE>
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-l+, AA/A-I+, 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.
MOODYS 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.
<PAGE>
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.
FITCH INVESTORS SERVICES, INC.
SHORT-TERM DEBT RATING DEFINITIONS
F-1+ Exceptionally Strong Credit Quality.
Issues assigned this rating are
regarded as having the strongest degree
of assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating
reflect an assurance for timely payment, only slightly less
in degree than issues rated F-1+.
F-2 Good Credit Quality. Issues carrying this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned F-1+
and F-1 ratings.
