1933 Act File No. 33-31602
1940 Act File No. 811-5950
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
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Pre-Effective Amendment No. ..............................
Post-Effective Amendment No. 38 .............................. X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 39 ............................................. X
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MONEY MARKET OBLIGATIONS TRUST
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on January 31, 2000 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(i)
on _________________ pursuant to paragraph (a)(i)
_ 75 days after filing pursuant to paragraph (a)(ii) on _________________
pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Copies to: Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, DC 20037
ALABAMA MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the income tax imposed by the State of Alabama consistent
with stability of principal by investing in a portfolio of high-quality Alabama
tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
JANUARY 31, 2000
<PAGE>
Contents
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 7
How to Redeem Shares 9
Account and Share Information 12
Who Manages the Fund? 13
Financial Information 13
<PAGE>
34
RISK/RETURN SUMMARY
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Alabama Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value (NAV) of $1.00 per share. The Fund's
investment objective is to provide current income exempt from federal regular
income tax and the income tax imposed by the State of Alabama consistent with
stability of principal. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Alabama tax exempt securities maturing in 397
days or less. The Fund will invest so that at least 80% of its annual interest
income is exempt from federal regular and Alabama state income tax or so that at
least 80% of its net assets is invested in obligations, the interest income from
which is exempt from federal regular and Alabama state income tax. Interest from
the Fund's investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable NAV, it is possible to lose
money by investing in the Fund. 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. The Shares offered by this prospectus are not deposits or obligations of
any bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other government agency.
<PAGE>
Risk/Return Bar Chart and Table
The Bar Chart and Performance Table below reflect historical performance data
for Shares of Alabama Municipal Cash Trust (the "Former Fund") prior to its
reorganization into the Fund, which is a newly created portfolio of Money Market
Obligations Trust (the "Trust"). On the date of the reorganization, February 1,
2000, the Former Fund will be dissolved and its net assets (inclusive of
liabilities recorded on the Former Fund's records) will be transferred to the
Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Alabama Municipal Cash Trust as of the calendar year-end
for each of six years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Fund's start of business through the calendar year
ended October 31, 1999. The light gray shaded chart features six distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Fund for each calendar year is
stated directly at the top of each respective bar, for the calendar years 1994
through 1999. The percentages noted are:2.71%, 3.67%, 3.16%, 3.30%, 3.16% and
3.06%.
Historically, the Former Fund has maintained a constant $1.00 NAV per share. The
bar chart shows the variability of the Former Fund's total returns on a calendar
year-end basis.
The Former Fund's Shares were sold without a sales charge (load). The total
returns displayed above are based upon NAV.
Within the period shown in the Chart, the Former Fund's highest quarterly return
was 0.98% (quarter ended June 30, 1995). Its lowest quarterly return was 0.56%
(quarter ended March 31, 1994).
Average Annual Total Return Table
The following table represents the Former Fund's Average Annual Total Returns
for the calendar periods ended December 31, 1999.
Calendar Period Fund
1 Year 3.06%
5 Years 3.27%
Start of Performance1 3.17%
1 The Former Fund's start of performance date was December 3, 1993. The Former
Fund's 7-Day Net Yield as of December 31, 1999 was 4.25%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
<PAGE>
WHAT ARE THE FUND'S FEES AND EXPENSES?
AlabamA Municipal Cash Trust
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption None
proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a None
percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
</TABLE>
Annual Fund Operating Expenses (Before Waivers)1 Expenses That are Deducted From
Fund Assets (as a percentage of average net assets) Management Fee2 0.50%
Distribution (12b-1) Fee None Shareholder Services Fee3 0.25% Other Expenses
0.16% Total Annual Fund Operating Expenses4 0.91% 1Although not contractually
obligated to do so, the adviser and shareholder services provider expect to
waive certain amounts during the fiscal year ending October31, 2000. These
are shown below along with the net expenses the Fund expects to actually pay
for the fiscal year ending October31, 2000.
Total Waiver of Fund Expenses 0.36% Total Actual Annual Fund Operating Expenses
(after waivers) 0.55% 2The adviser expects to voluntarily waive a portion of the
management fee. The adviser can terminate this
anticipated voluntary waiver at any time. The management fee paid by the Fund
(after the anticipated voluntary waiver) is expected to be 0.15% for the
fiscal year ending October31, 2000.
3The shareholder services provider expects to voluntarily waive a portion of the
shareholder services fee. The shareholder services provider can terminate
this anticipated voluntary waiver at any time. The shareholder services fee
paid by the Fund (after the anticipated voluntary waiver) is expected to be
0.24% for the fiscal year ending October31, 2000.
4For the fiscal year ended October31, 1999, prior to the reorganization of the
Former Fund as a portfolio of the Trust, the Total Annual Fund Operating
Expenses and Total Actual Annual Fund Operating Expenses (after waivers) for
the Former Fund's Shares were 0.91% and 0.55%, respectively.
Example
This Example is intended to help you compare the cost of investing in the Fund's
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses are before waivers as estimated in the table and
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year $ 93
3 Years $ 290
5 Years $ 504
10 Years $1,120
WHAT ARE THE FUND'S INVESTMENT STRATEGIES?
The Fund invests in a portfolio of high-quality Alabama tax exempt securities
maturing in 397 days or less. The Fund will invest so that at least 80% of its
annual interest income is exempt from federal regular and Alabama state income
tax or so that at least 80% of its net assets is invested in obligations, the
interest income from which is exempt from federal regular and Alabama state
income tax. Interest from the Fund's investments may be subject to AMT. The
dollar-weighted average maturity of the Fund's portfolio will be 90 days or
less. The Adviser actively manages the Fund's portfolio, seeking to limit the
credit risk taken by the Fund and select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
Temporary Defensive Investments
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and Alabama income tax. It
may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
Variable Rate Demand Instruments
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
Municipal Notes
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
Investment 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 NRSROs or be of comparable quality
to securities having such ratings.
WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?
Credit Risks
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as
Standard & Poor's and Moody's Investors Service. These services assign ratings
to securities by assessing the likelihood of issuer default. Lower credit
ratings correspond to higher credit risk. If a security has not received a
rating, the Fund must rely entirely on the Adviser's credit assessment.
Interest Rate Risks
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
Sector Risks
A substantial part of the Fund's portfolio may be comprised of securities issued
by Alabama issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
Alabama Sector Risks
Since the Fund invests primarily in issuers from Alabama, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Alabama's economy continues to experience moderate economic growth and
diversification. While the economy continues to experience declines in its
traditional manufacturing industries (textiles, apparels and food processing),
they have been partially offset by growth in high technology, health and
business services, and new durable goods manufacturing.
WHAT DO SHARES COST?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge. NAV is determined at 12:00 noon and 1:00 p.m.
(Eastern time) and as of the end of regular trading (normally 4:00 p.m. Eastern
time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $10,000 minimum
is reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
HOW IS THE FUND SOLD?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-Alabama
taxpayers because it invests in Alabama municipal securities.
The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals for
marketing and servicing Shares. The Distributor is a subsidiary of Federated
Investors, Inc. (Federated).
HOW TO PURCHASE SHARES
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
n Establish an account with the investment professional; and
n Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
n Establish your account with the Fund by submitting a completed New
Account Form; and
n Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
<PAGE>
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
HOW TO REDEEM SHARES
You should redeem Shares:
n through an investment professional if you purchased Shares through an
investment professional; or
n directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for
same-day payment of redemption proceeds, without that day's dividend, for
redemption requests received before 2:00 p.m. (Eastern time).
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317 All requests must include:
n Fund Name and Share Class, account number and account registration;
n amount to be redeemed; and
n signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees Signatures must be guaranteed if:
n your redemption will be sent to an address other than the address of
record;
n your redemption will be sent to an address of record that was changed
within the last 30 days; or
n a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
n an electronic transfer to your account at a financial institution that is
an ACH member; or
n wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
n to allow your purchase to clear;
n during periods of market volatility; or
n when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
ACCOUNT AND SHARE INFORMATION
Account Activity
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the Alabama taxes discussed above to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
WHO MANAGES THE FUND?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
Advisory Fees
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
ALABAMA MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
January 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual Report and
Semi-Annual Report to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report, the Semi-Annual Report and other information without charge,
and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1- 202-942-8090 for
information on the Public Reference Room's operations and copying fees.
Investment Company Act File No. 811-5950
Cusip 60934N260
3090802A (1/00)
Statement of Additional Information
ALABAMA MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Alabama Municipal Cash Trust (Fund),
dated January 31, 2000. This SAI incorporates by reference the Fund's Annual
Report. Obtain the prospectus or the Annual Report without charge by calling
1-800-341-7400.
January 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip 60934N260
3090802B(1/00)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on December 1, 1993,
will be reorganized as a portfolio of the Trust on February 1, 2000.
The Fund's investment adviser is Federated Investment Management Company
(Adviser). Effective March 31, 1999, Federated Management, former adviser to the
Fund, became Federated Investment Management Company (formerly, Federated
Advisers).
SECURITIES IN WHICH THE FUND INVESTS
The Fund's principal securities are described in its prospectus. Additional
securities, and further details regarding the principal securities, are outlined
below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its
charter or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues
received by the issuer such as specific taxes, assessments, tolls or
fees. Bondholders may not collect from the municipality's general taxes
or revenues. For example, a municipality may issue bonds to build a
toll road, and pledge the tolls to repay the bonds. Therefore, a
shortfall in the tolls normally would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The
municipality would lend the proceeds from its bonds to the company
using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable
solely from the company's loan payments, not from any other
revenues of the municipality. Therefore, any default on the loan
normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to
the federal alternative minimum tax (AMT). The Fund may invest in
bonds subject to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end
a lease, without penalty, by not providing for the lease payments in
its annual budget. After the lease ends, the lessor can resell the
equipment or facility but may lose money on the sale. The Fund may
invest in securities supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities
at a price below the amount payable at maturity. The difference between
the purchase price and the amount paid at maturity represents interest
on the zero coupon security. Investors must wait until maturity to
receive interest and principal, which increases the interest rate risks
and credit risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of
credit, bond insurance and surety bonds. Credit enhancement also
includes arrangements where securities or other liquid assets secure
payment of a fixed income security. If a default occurs, these assets
may be sold and the proceeds paid to the security's holders. Either
form of credit enhancement reduces credit risks by providing another
source of payment for a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
"Inter-fund Borrowing and Lending Arrangements"
The Security Exchange Commission (SEC) has granted an exemption that permits the
Fund and all other funds advised by subsidiaries of Federated Investors, Inc.
(Federated funds) to lend and borrow money for certain temporary purposes
directly to and from other Federated funds. Participation in this inter-fund
lending program is voluntary for both borrowing and lending funds, and an
inter-fund loan is only made if it benefits each participating fund. Federated
administers the program according to procedures approved by the Fund's Board of
Trustees (Board), and the Board monitors the operation of the program. Any
inter-fund loan must comply with certain conditions set out in the exemption,
which are designed to assure fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may be
made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the Bank Loan Rate), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the underlying
assets or set aside readily marketable securities with a value that equals or
exceeds the Fund's obligations. Unless the Fund has other readily marketable
assets to set aside, it cannot trade assets used to secure such obligations
without terminating the special transaction. This may cause the Fund to miss
favorable trading opportunities or to realize losses on special
transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government
of the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types
of corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If
the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
Investment Ratings
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's (S&P), MIG-1 or MIG-2
by Moody's Investors Service (Moody's), or F-1+, F-1 or F-2 by Fitch IBCA, 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 rating service can be treated as being in one of
the two highest short-term rating categories; currently, such securities must be
rated by two nationally recognized statistical rating organizations in one of
their two highest rating categories. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
<PAGE>
Fundamental INVESTMENT Objective and PolicY
The Fund's investment objective is to provide current income exempt from federal
regular income tax and the income tax imposed by the State of Alabama consistent
with stability of principal.
The Fund will invest so that at least 80% of its annual interest income is
exempt from federal regular and Alabama state income tax or so that at least 80%
of its net assets is invested in obligations, the interest income from which is
exempt from federal regular and Alabama state income tax.
This investment objective and policy may not be changed by the Board without
shareholder approval.
INVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
Pledging Assets
The Fund will not mortgage, pledge or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
federal securities laws.
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.
For purposes of the concentration limitation: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities. To conform to the current view of the SEC staff that only domestic
bank instruments may be excluded from industry concentration limitations, the
Fund will not exceed foreign bank instruments from industry concentration
limitation tests so long as the policy of the SEC remains in effect. In
addition, investments in certain industrial development bonds funded by
activities in a single industry will be deemed to constitute investment in an
industry, except when held for temporary defensive purposes. The investment of
more than 25% of the value of the Fund's total assets in any one industry will
constitute "concentration."
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 SAI , in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7 (the
Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 (NAV) 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 NAV 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 the Rule. Under the Rule,
the Board must establish procedures reasonably designed to stabilize the NAV 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 NAV per Share based upon available
indications of market value. The Board will decide what, if any, steps should be
taken if there is a difference of more than 0.5 of 1% between the two values.
The Board will take any steps it considers 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 NAV.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All Shares of the Trust have
equal voting rights, except that in matters affecting only a particular Fund or
class, only Shares of that Fund or class are entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 7, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Shares: Hubco, Birmingham, Alabama, owned
approximately 45,409,775.60 (20.09%) shares; Lynspen &Co, Birmingham, Alabama,
owned approximately 48,311,964.34 (21.37%) shares; and Caddell Construction
Inc., Montgomery, Alabama, owned approximately 16,964,651.22 (7.51%) shares.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
STATE TAXES
Under existing Alabama law, distributions made by the Fund will not be subject
to Alabama personal income taxes to the extent that such distributions are
attributable to interest earned on obligations that would be exempt from Alabama
personal income taxes if held directly by shareholders (such as obligations of
Alabama or its political subdivisions, of the United States or of certain
territories or possessions of the United States). Conversely, to the extent that
distributions made by the Fund are derived from other types of obligations, such
distributions will be subject to Alabama personal income taxes.
Shareholders may exclude from the share value of the Fund, for purposes of the
Alabama personal property tax, that portion of the total share value which is
attributable to the value of the obligations of Alabama or its political
subdivisions, of the United States or of certain territories or possessions of
the United States.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1,2000, the
Trust will be comprised of 40 Funds. The Federated Fund Complex is comprised of
43 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January _7_, 2000, the Fund's Board and Officers as a group owned less
than 1% of the Fund's outstanding Shares.
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<TABLE>
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<S> <C> <C> <C>
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Name
Birth Date Aggregate Total Compensation
Address Principal Occupations Compensation From Trust and Fund
Position With Trust for Past Five Years From Trust Complex
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of the $0 $0 for the Trust and 54
Birth Date: July 28, 1924 Federated Fund Complex;.; Chairman and Trustee, other investment
Federated Investors Tower Federated Investment Management Company; Chairman and companies in the Fund
1001 Liberty Avenue Director, Federated Investors, Inc., Federated Complex
Pittsburgh, PA Investment Counseling and Federated Global Investment
CHAIRMAN AND TRUSTEE Management Corp.; Chairman, Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; 176.77 $113,860.22 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's Trust
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries, and 54 other investment
Pittsburgh, PA Inc. (coated steel conduits/computer storage equipment); companies in the Fund
TRUSTEE formerly: Senior Partner, Ernst & Young LLP; Director, Complex
MED 3000 Group, Inc. (physician practice management);
Director, Member of Executive Committee, University of
Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $194.48 $125,264.48 for the Trust
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior and 54 other investment
Grubb & Ellis/Investment Vice President, John R. Wood and Associates, Inc., companies in the Fund
Properties Corporation Realtors; Partner or Trustee in private real estate Complex
3201 Tamiami Trail North ventures in Southwest Florida; formerly: President,
Naples, FL Naples Property Management, Inc. and Northgate Village
TRUSTEE Development Corporation.
Nicholas P. Constantakis++ Director or Trustee of the Federated Fund Complex; $0 $47,958.02 for the
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering, Trust and
175 Woodshire Drive construction, operations and technical services 29 other investment
Pittsburgh, PA formerly: Partner, Andersen Worldwide SC. companies
TRUSTEE in the Fund Complex
John F. Cunningham Director or Trustee of some of the Federated Fund $134.17 $0 for the Trust and 46
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive other investment
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business companies in the Fund
Palm Beach, FL consulting); Trustee Associate, Boston College; Complex
TRUSTEE Director, Iperia Corp. (communications/software);
formerly: Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of the Federated $0 $0 for the Trust and 16
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds other investment
Federated Investors Tower in the Federated Fund Complex; President, Chief companies in the Fund
1001 Liberty Avenue Executive Officer and Director, Federated Investors, Complex
Pittsburgh, PA Inc.; President and Trustee, Federated Investment
PRESIDENT AND TRUSTEE Management Company and Federated Investment Counseling;
President and Director, Federated Global
Investment Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder
Services Company; Director, Federated Services
Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $176.77 $113,860.22 for the Trust
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical and 54 other investment
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - companies in the Fund
Suite 1111 Downtown; Hematologist, Oncologist and Internist, Complex
Pittsburgh, PA University of Pittsburgh Medical Center; Member,
TRUSTEE National Board of Trustees, Leukemia Society of America.
Peter E. Madden Director or Trustee of the Federated Fund Complex; $161.99 $113,860.22 for the Trust
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts and 54 other investment
One Royal Palm Way General Court; President, State Street Bank and Trust companies in the Fund
100 Royal Palm Way Company and State Street Corporation. Complex
Palm Beach, FL
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation; Director, The Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $138.83 $0 for the Trust and 50
Birth Date: April 10, 1945 Complex; Executive Vice President, Legal and External other investment
80 South Road Affairs, Dugan Valva Contess, Inc. (marketing, companies in the Fund
Westhampton Beach, NY communications, technology and consulting).; formerly Complex
TRUSTEE Management Consultant.
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $20,158.88 $113,860.22 for the
S.J.D.# President, Law Professor, Duquesne University; Trust
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Michael and 54 other investment
President, Duquesne University Baker Corp. (engineering, construction, operations and companies in the Fund
Pittsburgh, PA technical services). Complex
TRUSTEE
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $176.77 $113,860.22 for the
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. Trust
4905 Bayard Street and 54 other investment
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum companies in the Fund
TRUSTEE Company of America; television producer; business owner. Complex
John S. Walsh Director or Trustee of some of the Federated Fund $134.17 $0 for the Trust and 48
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. other investment
2007 Sherwood Drive (manufacturer of construction temporary heaters); companies in the Fund
Valparaiso, IN President and Director, Manufacturers Products, Inc. Complex
TRUSTEE (distributor of portable construction heaters);
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the Trust and 1
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice other investment
Federated Investors Tower President and Treasurer of some of the Funds in the company in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
EXECUTIVE VICE PRESIDENT Management Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company.
John W. McGonigle Executive Vice President and Secretary of the Federated $0 $0 for the Trust and 54
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary and other investment
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated companies in the Fund
1001 Liberty Avenue Investment Management Company and Federated Investment Complex
Pittsburgh, PA Counseling; Director, Federated Global Investment
EXECUTIVE VICE PRESIDENT AND Management Corp., Federated Services Company and
SECRETARY Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President $0 $0 for the Trust and 54
Birth Date: June 17, 1954 - Funds Financial Services Division, Federated other investment
Federated Investors Tower Investors, Inc.; formerly: various management positions companies in the Fund
1001 Liberty Avenue within Funds Financial Services Division of Federated Complex
Pittsburgh, PA Investors, Inc.
TREASURER
Richard B. Fisher President or Vice President of some of the Funds in the $0 $0 for the Trust and 6
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of other investment
Federated Investors Tower the Funds in the Federated Fund Complex; Executive Vice companies in the Fund
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and Complex
Pittsburgh, PA Director, Federated Securities Corp.
VICE PRESIDENT
William D. Dawson, III Chief Investment Officer of this Fund and various other $0 $0 for the Trust and 41
Birth Date: March 3, 1949 Funds in the Federated Fund Complex; Executive Vice other investment
Federated Investors Tower President, Federated Investment Counseling, Federated companies in the Fund
1001 Liberty Avenue Global Investment Management Corp., Federated Investment Complex
Pittsburgh, PA Management Company and Passport Research, Ltd.;
CHIEF INVESTMENT OFFICER Registered Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors,
Inc.; formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company and
Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. $0 $0 for the Trust and 6
Birth Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been a other investment
Federated Investors Tower Senior Portfolio Manager and a Senior Vice President of companies in the Fund
1001 Liberty Avenue the Funds' Adviser since 1997. Ms. Cunningham served as Complex
Pittsburgh, PA a Portfolio Manager and a Vice President of the Adviser
VICE PRESIDENT from 1993 through 1996.
Ms. Cunningham is a Chartered Financial Analyst and
received her M.B.A. in Finance from Robert Morris
College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $0 $0 for the Trust and 7
Birth Date: September 12, 1953 Ochson joined Federated in 1982 and has been a Senior other investment
Federated Investors Tower Portfolio Manager and a Senior Vice President of the companies in the Fund
1001 Liberty Avenue Funds' Adviser since 1996. From 1988 through 1995, Ms. Complex
Pittsburgh, PA Ochson served as a Portfolio Manager and a Vice
VICE PRESIDENT President of the Funds' Adviser. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the 1940 Act.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Mr. Constantakis became a member of the Board on October 1, 1999. He did
not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated
Funds 0.150 of 1% on the first $250 million 0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million 0.075 of 1% on assets in excess of $750
million The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio. Federated Services Company may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT auditors
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FEES PAID BY THE FUND FOR SERVICES
For the Year Ended October 31 1999 1998 1997
Advisory Fee Earned $1,050,119 $944,018 $1,102,550
Advisory Fee Reduction $745,427 $686,739 $774,067
Brokerage Commissions $0 $0 $0
Administrative Fee $158,358 $142,377 $166,497
Shareholder Services Fee $504,058 -- --
</TABLE>
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
<PAGE>
Average Annual Total Returns and Yield
Total returns are given for the one-year, five-year and Start of Performance
periods ended October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the seven-day
period ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Start of Performance on
7-Day Period 1 Year 5 Years December 3, 1993
Total Return NA 2.98% 3.27% 3.16%
Yield 3.12% NA NA NA
Effective Yield 3.17% NA NA NA
Tax-Equivalent Yield 5.63% NA NA NA
- ----------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
Yield, Effective Yield and Tax-Equivalent Yield
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result. The tax-equivalent yield
of Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
<PAGE>
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to AMT and
state and/or local taxes.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TAX EQUIVALENCY TABLE
Taxable Yield Equivalent for 2000 - STATE OF ALABAMA
Combined Federal and State
Income Tax Bracket: 20.00% 33.00% 36.00% 41.00% 44.60%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $161,451-288,350 Over 288,350
Single Return $1-26,250 $26,251-63,550 $63,551-132,600 $132,601-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.25% 1.49% 1.56% 1.69% 1.81%
1.50% 1.88% 2.24% 2.34% 2.54% 2.71%
2.00% 2.50% 2.99% 3.13% 3.39% 3.61%
2.50% 3.13% 3.73% 3.91% 4.24% 4.51%
3.00% 3.75% 4.48% 4.69% 5.08% 5.42%
3.50% 4.38% 5.22% 5.47% 5.93% 6.32%
4.00% 5.00% 5.97% 6.25% 6.78% 7.22%
4.50% 5.63% 6.72% 7.03% 7.63% 8.12%
5.00% 6.25% 7.46% 7.81% 8.47% 9.03%
5.50% 6.88% 8.21% 8.59% 9.32% 9.93%
6.00% 7.50% 8.96% 9.38% 10.17% 10.83%
6.50% 8.13% 9.70% 10.16% 11.02% 11.73%
7.00% 8.75% 10.45% 10.94% 11.86% 12.64%
7.50% 9.38% 11.19% 11.72% 12.71% 13.54%
8.00% 10.00% 11.94% 12.50% 13.56% 14.44%
8.50% 10.63% 12.69% 13.28% 14.41% 15.34%
9.00% 11.25% 13.43% 14.06% 15.25% 16.25%
</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.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
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.
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.
Money
A monthly magazine, regularly ranks money market funds in various categories
based on the latest available seven-day effective yield.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
Federated Funds overview
Municipal Funds
In the municipal sector, as of December 31, 1999Federated managed 12 bond funds
with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed53 equity funds totaling approximately $18.3
billion in assets across growth, value, equity income, international, index and
sector (i.e. utility) styles. Federated's value-oriented management style
combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54money market
funds, including 16 government, 13prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion, $13.1 billion and $115
million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
Federated Clients Overview
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of
Alabama Municipal Cash Trust dated October 31, 1999.
<PAGE>
INVESTMENT RATINGS
Standard & Poor's Short-Term Municipal Obligation Ratings
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
Commercial Paper (CP) Ratings
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
Long-Term Debt Ratings
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
Moody's Investors Service Short-Term Municipal Obligation Ratings
Moody's Investors Service (Moody's) short-term ratings are designated Moody's
Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or VMIG
ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
Commercial Paper (CP) Ratings
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Long-Term Debt Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
Fitch IBCA, 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.
<PAGE>
75
ADDRESSES
Alabama municipal cash trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PROSPECTUS
Arizona Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and Arizona income taxes consistent with stability of
principal and liquidity by investing in a portfolio of high-quality Arizona tax
exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 7
How is the Fund Sold? 7
How to Purchase Shares 8
How to Redeem Shares 9
Account and Share Information 12
Who Manages the Fund? 13
Financial Information 13
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Arizona Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value (NAV) of $1.00 per share. The Fund's
investment objective is to provide current income exempt from federal regular
income tax and Arizona income taxes consistent with stability of principal and
liquidity. While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the strategies and policies
described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Arizona tax exempt securities maturing in 397
days or less. At least 80% of the Fund's annual interest income will be exempt
from federal regular income tax and Arizona income taxes. Interest from the
Fund's investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable NAV, it is possible to lose
money by investing in the Fund. 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. The Shares offered by this prospectus are not deposits or obligations of
any bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Service Shares of Arizona Municipal Cash Trust (the "Former
Fund") prior to its reorganization into the Fund, which is a newly created
portfolio of Money Market Obligations Trust (the "Trust"). On the date of the
reorganization, February 1, 2000, the Former Fund will be dissolved and its net
assets (inclusive of liabilities recorded on the Former Fund's records) will be
transferred into the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Institutional Service Shares of the Former Fund as of
the calendar year-end for one year.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 3%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's Institutional Service Shares start of
business through the calendar year ended 1999. The light gray shaded chart
features one distinct vertical bar, shaded in charcoal, and visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Former
Fund's Institutional Service Shares for the calendar year is stated directly at
the top of the bar, for the calendar year 1999. The percentage noted is: 2.86 %.
Historically, the Former Fund has maintained a constant $1.00 NAV per share. The
bar chart shows the variability of the Former Fund's Institutional Service
Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Service Shares were not sold subject to a sales
charge (load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Service
Shares highest quarterly return was 0.81% (quarter ended December 31, 1999). Its
lowest quarterly return was 0.61% (quarter ended March 31, 1999).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Institutional Service Shares
Average Annual Total Returns for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
CALENDAR PERIOD FUND
<S> <C>
1 Year 2.86%
Start of Performance 1 2.96%
</TABLE>
1 The Former Fund's Institutional Service Shares start of performance date was
June 10, 1998.
The Former Fund's Institutional Service Shares 7-Day Net Yield as of December
31, 1999 was 4.07%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
ARIZONA MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Service Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions)
(as a percentage of
offering price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (Before Waivers and Reimbursements) 1 Expenses
That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 2 0.50%
Distribution (12b-1) Fee None
Shareholder Services Fee 0.25%
Other Expenses 3 0.78%
Total Annual Fund
Operating Expenses 4 1.53%
1 Although not contractually obligated to do so, the adviser expects to waive and
reimburse certain amounts during the fiscal year ending October 31, 2000. These
are shown below along with the net expenses the Fund expects to actually pay for
the fiscal year ending October 31, 2000.
Total Waivers and
Reimbursement of Fund
Expenses 0.94%
Total Actual Annual Fund
Operating Expenses (after
waivers and
reimbursements) 0.59%
2 The adviser expects to voluntarily waive the management fee. The adviser can
terminate this anticipated voluntary waiver at any time. The management fee paid
by the Fund (after the anticipated voluntary waiver) is expected to be 0.00% for
the fiscal year ending October 31, 2000.
3 The adviser expects to voluntarily reimburse certain operating expenses of the
Fund. The adviser can terminate this anticipated voluntary reimbursement at any
time. Other operating expenses paid by the Fund (after the anticipated voluntary
reimbursement) are expected to be 0.34% for the fiscal year ending October 31,
2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of the
Former Fund as a portfolio of the Trust, the Total Annual Fund Operating Expenses
and Total Actual Annual Fund Operating Expenses (after waivers and
reimbursements) for the Former Fund's Shares were 1.53% and 0.58%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses are BEFORE WAIVERS AND REIMBURSEMENTS as estimated in
the table and remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C>
1 Year $156
3 Years $483
5 Years $834
10 Years $1,824
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Arizona tax exempt securities
maturing in 397 days or less. At least 80% of the Fund's annual interest income
will be exempt from federal regular income tax and Arizona income taxes.
Interest from the Fund's investments may be subject to AMT. The dollar-weighted
average maturity of the Fund's portfolio will be 90 days or less. The Adviser
actively manages the Fund's portfolio, seeking to limit the credit risk taken by
the Fund and select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and Arizona income tax. It
may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Arizona issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
ARIZONA RISKS
Since the Fund invests primarily in issuers from Arizona, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Arizona's economy, traditionally focused on agriculture, mining, and real estate
has experienced strong diversification into the services and manufacturing
sectors. The state also continues to benefit from an extensive tourism industry.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge. NAV is determined at 12:00 noon and 1:00 p.m.
(Eastern time) and as of the end of regular trading (normally 4:00 p.m. Eastern
time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $10,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-Arizona
taxpayers because it invests in Arizona municipal securities.
The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or The Federated Funds). Orders by mail are considered received when payment
by check is converted into federal funds (normally the business day after the
check is received) and Shares begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for
same-day payment of redemption proceeds, without that day's dividend, for
redemption requests received before 2:00 p.m. (Eastern time).
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund does not issue share certificates.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the Arizona state taxes discussed above to the extent they
are derived from interest on obligations exempt from such taxes. Capital gains
and non-exempt dividends are taxable whether paid in cash or reinvested in the
Fund. Redemptions are taxable sales. Please consult your tax adviser regarding
your federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR PERIOD
ENDED ENDED
OCTOBER 31, OCTOBER 31,
1999 1998 1
<S> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.03 0.01
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.03) (0.01)
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00
TOTAL RETURN 2 2.76% 1.28%
RATIOS TO AVERAGE NET
ASSETS:
Expenses 3 1.53% 2.53% 4
Net investment income 3 1.78% 1.03% 4
Expenses(after waivers and
reimbursements) 0.58% 0.32% 4
Net investment
income(after waivers and
reimbursements) 2.73% 3.24% 4
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $33,933 $34,728
</TABLE>
1 Reflects operations for the period from June 10, 1998 (date of initial public
investment) to October 31, 1998.
2 Based on NAV, which does not reflect the sales charge or contingent deferred
sales charge, if applicable.
3 During the period, certain fees were voluntarily waived and reimbursed. If
such voluntary waivers and reimbursements had not occurred, the ratios would
have been as indicated.
4 Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
Arizona Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as it becomes available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
Annual Report, Semi-Annual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Arizona Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N450
G02372-01 (1/00)
[Graphic]
Statement of Additional Information
ARIZONA MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
institutional service shares
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Institutional Service Shares of
Arizona Municipal Cash Trust (Fund), dated January 31, 2000. This SAI
incorporates by reference the Fund's Annual Report. Obtain the prospectus or the
Annual Report without charge by calling 1-800-341-7400.
JANUARY 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip 60934N450
022390 (1/00)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on May 30, 1998, will
be reorganized as a portfolio of the Trust on February 1, 2000.
The Fund's investment adviser is Federated Investment Management Company
(Adviser). Effective March 31, 1999, Federated Management, former adviser to the
Fund, became Federated Investment Management Company (formerly, Federated
Advisers).
SECURITIES IN WHICH THE FUND INVESTS
The Fund's principal securities are described in its prospectus. Additional
securities, and further information regarding the principal securities, are
outlined below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its
charter or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues
received by the issuer such as specific taxes, assessments, tolls or
fees. Bondholders may not collect from the municipality's general taxes
or revenues. For example, a municipality may issue bonds to build a
toll road, and pledge the tolls to repay the bonds. Therefore, a
shortfall in the tolls normally would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The
municipality would lend the proceeds from its bonds to the company
using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable
solely from the company's loan payments, not from any other
revenues of the municipality. Therefore, any default on the loan
normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to
the federal alternative minimum tax (AMT). The Fund may invest in
bonds subject to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end
a lease, without penalty, by not providing for the lease payments in
its annual budget. After the lease ends, the lessor can resell the
equipment or facility but may lose money on the sale. The Fund may
invest in securities supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities
at a price below the amount payable at maturity. The difference between
the purchase price and the amount paid at maturity represents interest
on the zero coupon security. Investors must wait until maturity to
receive interest and principal, which increases the interest rate risks
and credit risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of
credit, bond insurance and surety bonds. Credit enhancement also
includes arrangements where securities or other liquid assets secure
payment of a fixed income security. If a default occurs, these assets
may be sold and the proceeds paid to the security's holders. Either
form of credit enhancement reduces credit risks by providing another
source of payment for a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
"Inter-fund Borrowing and Lending Arrangements
The Securities and Exchange Commission (SEC) has granted an exemption that
permits the Fund and all other funds advised by subsidiaries of Federated
Investors, Inc. ("Federated funds") to lend and borrow money for certain
temporary purposes directly to and from other Federated funds. Participation in
this inter-fund lending program is voluntary for both borrowing and lending
funds, and an inter-fund loan is only made if it benefits each participating
fund. Federated administers the program according to procedures approved by the
Fund's Board, and the Board monitors the operation of the program. Any
inter-fund loan must comply with certain conditions set out in the exemption,
which are designed to assure fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may be
made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the "Repo Rate") and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the "Bank Loan Rate"), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate."
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with
payment and delivery of the securities scheduled for a future time. During
the period between purchase and settlement, no payment is made by the Fund
to the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value
in determining the price of its shares. Settlement dates may be a month or
more after entering into these transactions so that the market values of
the securities bought may vary from the purchase prices. Therefore, delayed
delivery transactions create interest rate risks for the Fund. Delayed
delivery transactions also involve credit risks in the event of a
counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will set aside readily
marketable securities with a value that equals or exceeds the Fund's
obligations. Unless the Fund has other readily marketable assets to set
aside, it cannot trade assets used to secure such obligations without
terminating the special transaction. This may cause the Fund to miss
favorable trading opportunities or to realize losses on special
transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government
of the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types
of corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If
the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund
is the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must
repurchase the underlying security at a higher price, regardless of the
market value of the security at the time of repurchase.
Investment Ratings
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's (S&P), MIG-1 or MIG-2
by Moody's Investors Service (Moody's), or F-1+, F-1 or F-2 by Fitch IBCA, 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 rating service can be treated as being in one of
the two highest short-term rating categories; currently, such securities must be
rated by two nationally recognized statistical rating organizations in one of
their two highest rating categories. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
Fundamental INVESTMENT Objective and PolicY
The Fund's investment objective is to provide current income exempt from federal
regular income tax and Arizona income taxes consistent with stability of
principal and liquidity.
At least 80% of the Fund's annual interest income will be exempt from federal
regular income tax and Arizona income taxes.
This investment objective and policy may not be changed by the Fund's Board of
Trustees (Board) without shareholder approval.
INVESTMENT LIMITATIONS
Diversification of Investments
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized by
such U.S. government securities; and securities of other investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
For purposes of the diversification above limitation, 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."
Pledging Assets
The Fund will not mortgage, pledge or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
federal securities laws.
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.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, as a matter
of non-fundamental policy, the Fund will not exclude foreign bank instruments
from industry concentration limitation tests so long as the policy of the SEC
remains in effect. In addition, investments in certain industrial development
bonds funded by activities in a single industry will be deemed to constitute
investment in an industry, except when held for temporary defensive purposes.
The investment of more than 25% of the value of the Fund's total assets in any
one industry will constitute "concentration."
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 1940 Act. In particular, the Fund will comply with the various
requirements of Rule 2a-7 (the Rule), which regulates money market mutual funds.
The Fund will determine the effective maturity of its investments according to
the Rule. The Fund may change these operational policies to reflect changes in
the laws and regulations without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 (NAV) 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 NAV 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 the Rule. Under the Rule,
the Board must establish procedures reasonably designed to stabilize the NAV 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 NAV per Share based upon available
indications of market value. The Board will decide what, if any, steps should be
taken if there is a difference of more than 0.5 of 1% between the two values.
The Board will take any steps it considers 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 NAV.
<PAGE>
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All Shares of the Trust have
equal voting rights, except that in matters affecting only a particular Fund or
class, only Shares of that Fund or class are entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: Zions First National
Bank., Salt Lake City, Utah owned approximately 10,874,251 Shares (26.25%);
Colonial Trust Co. Phoenix, Arizona owned approximately 9,077,278 Shares
(21.91%) Helen R. Smith Phoenix, Arizona owned approximately 2,534,750 Shares
(6.12%); Norwest Investment Services, Inc. Minneapolis, Minnesota owned
approximately 7,937,443 Shares (19.16%); Drain Rauscher Inc. Minneapolis,
Minnesota owned approximately 3,144,615 Shares (7.59%);Drain Rauscher Inc. FBO,
Phoenix, Arizona owned approximately 2,098,933 Shares (5.07%)
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
STATE TAXES
Under existing Arizona law, distributions made by the Fund will not be subject
to Arizona individual or corporate income taxes to the extent that such
distributions qualify as exempt-interest dividends under Internal Revenue Code
and represent (i) interest income received on obligations of the United Sates or
its territories or possessions; and (ii) interest income received on obligations
of Arizona or its political subdivisions. Conversely, to the extent that
distributions made by the Fund are attributable to other types of obligations,
such distributions will be subject to Arizona income taxes.
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WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Trust is comprised of 40
funds and the Federated Fund Complex is comprised of 54 investment companies,
whose investment advisers are affiliated with the Fund's Adviser.
As of January 12, 2000 the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.
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<TABLE>
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<S> <C> <C> <C>
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Name
Birth Date Aggregate Total Compensation
Address Principal Occupations Compensation From Trust and Fund
Position With Trust for Past Five Years From Fund Complex
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of the $0 $0 for the Trust and 43
Birth Date: July 28, 1924 Federated Fund Complex; Chairman and Trustee, Federated other investment
Federated Investors Tower Investment Management Company; Chairman and Director, companies in the Fund
1001 Liberty Avenue Federated Investors, Inc. Federated Investment Complex
Pittsburgh, PA Counseling and Federated Global Investment Management
CHAIRMAN AND TRUSTEE Corp.; Chairman, Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $38.60 $116,760.63 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's Trust
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries, and 43 other investment
Pittsburgh, PA Inc. (coated steel conduits/computer storage equipment); companies in the Fund
TRUSTEE formerly: Senior Partner, Ernst & Young LLP; Director, Complex
MED 3000 Group, Inc. (physician practice management);
Director, Member of Executive Committee, University of
Pittsburgh.
and 54John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $42.47 $128,455.37 for the Trust
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior and 43 other investment
Wood/Commercial Dept. Vice President, John R. Wood and Associates, Inc., companies in the Fund
John R. Wood Associates, Inc. Realtors; Partner or Trustee in private real estate Complex
Realtors ventures in Southwest Florida; formerly: President,
3255 Tamiami Trail North Naples Property Management, Inc. and Northgate Village
Naples, FL Development Corporation.
TRUSTEE
Nicholas Constantakis++
Birth Date: September 3, 1939 Director or Trustee of the Federated Fund Complex; $0 $73,191.21 for the
175 Woodshire Drive formerly: Partner, Andersen Worldwide SC. Trust and
Pittsburgh, PA 37 other investment
TRUSTEE companies
in the Fund Complex
John F. Cunningham Director or Trustee of some of the Federated Fund $38.60 $93,190,48 for the Trust
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive and 37
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business other investment
Palm Beach, FL consulting); Trustee Associate, Boston College; companies in the Fund
TRUSTEE Director, Iperia Corp. (communications/software); Complex
formerly: Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of the Federated $0 $0 for the Trust and 30
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds other investment
Federated Investors Tower in the Federated Fund Complex; President, Chief companies in the Fund
1001 Liberty Avenue Executive Officer and Director, Federated Investors, Complex
Pittsburgh, PA Inc.; President and Trustee, Federated Investment
PRESIDENT AND TRUSTEE Management Company; President and Trustee, Federated
Investment Counseling; President and Director,
Federated Global Investment Management Corp.;
President, Passport Research, Ltd.; Trustee,
Federated Shareholder Services Company;
Director, Federated Services Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $38.60 $116,760.63 for the Trust
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical and 43 other investment
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - companies in the Fund
Suite 1111 Downtown; Hematologist, Oncologist and Internist, Complex
Pittsburgh, PA University of Pittsburgh Medical Center; Member,
TRUSTEE National Board of Trustees, Leukemia Society of America.
and 54Peter E. Madden Director or Trustee of the Federated Fund Complex; $29.74 $109,153.60 for the Trust
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts and 43 other investment
One Royal Palm Way General Court; President, State Street Bank and Trust companies in the Fund
100 Royal Palm Way Company and State Street Corporation. Complex
Palm Beach, FL
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation; Director, The Boston Stock Exchange.
and 54Charles F. Mansfield, Director or Trustee of some of the Federated Fund $40.53 $102,573.91 for the
Jr. Complex; Management Consultant. Trust and 40
Birth Date: April 10, 1945 other investment
80 South Road Previous Positions: Chief Executive Officer, PBTC companies in the Fund
Westhampton Beach, NY International Bank; Partner, Arthur Young & Company (now Complex
TRUSTEE Ernst & Young LLP); Chief Financial Officer of Retail
Banking Sector, Chase Manhattan Bank; Senior
Vice President, Marine Midland Bank; Vice
President, Citibank; Assistant Professor of
Banking and Finance, Frank G. Zarb School of
Business, Hofstra University.
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $42.47 $128,455.37 for the
S.J.D.# President, Law Professor, Duquesne University; Trust
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Michael and 43 other investment
President, Duquesne University Baker Corp. (engineering, construction, operations and companies in the Fund
Pittsburgh, PA technical services). Complex
TRUSTEE
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.
and 54Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $38.60 $116,760.63 for the
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. Trust
4905 Bayard Street and 43 other investment
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum companies in the Fund
TRUSTEE Company of America; television producer; business owner. Complex
and 54John S. Walsh++ Director or Trustee of some of the Federated Fund $38.60 $94,536.85 for the Trust
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. and 39
2007 Sherwood Drive (manufacturer of construction temporary heaters); other investment
Valparaiso, IN President and Director, Manufacturers Products, Inc. companies in the Fund
TRUSTEE (distributor of portable construction heaters); Complex
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the Trust and 42
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice other investment
Federated Investors Tower President and Treasurer of some of the Funds in the company in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
EXECUTIVE VICE PRESIDENT Management Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company.
John W. McGonigle Executive Vice President and Secretary of the Federated $0 $0 for the Trust and 43
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary and other investment
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated companies in the Fund
1001 Liberty Avenue Investment Management Company and Federated Investment Complex
Pittsburgh, PA Counseling; Director, Federated Global Investment
EXECUTIVE VICE PRESIDENT AND Management Corp., Federated Services Company and
SECRETARY Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President $0 $0 for the Trust and 43
Birth Date: June 17, 1954 - Funds Financial Services Division, Federated other investment
Federated Investors Tower Investors, Inc.; formerly: various management positions companies in the Fund
1001 Liberty Avenue within Funds Financial Services Division of Federated Complex
Pittsburgh, PA Investors, Inc.
TREASURER
Richard B. Fisher President or Vice President of some of the Funds in the $0 $0 for the Trust and 41
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of other investment
Federated Investors Tower the Funds in the Federated Fund Complex; Executive Vice companies in the Fund
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and Complex
Pittsburgh, PA Director, Federated Securities Corp.
VICE PRESIDENT
William D. Dawson, III Chief Investment Officer of this Fund and various other $0 $0 for the Trust and 42
Birth Date: March 3, 1949 Funds in the Federated Fund Complex; Executive Vice other investment
Federated Investors Tower President, Federated Investment Counseling, Federated companies in the Fund
1001 Liberty Avenue Global Investment Management Corp., Federated Investment Complex
Pittsburgh, PA Management Company and Passport Research, Ltd.;
CHIEF INVESTMENT OFFICER Registered Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors,
Inc.; formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company and
Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. $0 $0 for the Trust and 6
Birth Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been a other investment
Federated Investors Tower Senior Portfolio Manager and a Senior Vice President of companies in the Fund
1001 Liberty Avenue the Funds' Adviser since 1997. Ms. Cunningham served as Complex
Pittsburgh, PA a Portfolio Manager and a Vice President of the Adviser
VICE PRESIDENT from 1993 until 1996.
Ms. Cunningham is a Chartered Financial Analyst and
received her M.B.A. in Finance from Robert Morris
College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $0 $0 for the Trust and 7
Birth Date: September 12, 1953 Ochson joined Federated in 1982 and has been a Senior other investment
Federated Investors Tower Portfolio Manager and a Senior Vice President of the companies in the Fund
1001 Liberty Avenue Funds' Adviser since 1996. From 1988 through 1995, Ms. Complex
Pittsburgh, PA Ochson served as a Portfolio Manager and a Vice
VICE PRESIDENT President of the Funds' Adviser. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the 1940 Act.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Mr. Constantakis became a member of the Board of Trustees, on October 1,1999.
He did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated
Funds 0.150 of 1% on the first $250 million 0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million 0.075 of 1% on assets in excess of $750
million The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio. Federated Services Company may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT auditors
The independent Auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
For the Year Ended October 31 1999 1998*
Advisory Fee Earned $157,652 $24,043
Advisory Fee Reduction $157,652 $24,043
Brokerage Commissions $0 $0
Administrative Fee $125.000 $48,973
Shareholder Services Fee
Institutional Service Shares $78.826 --
* From the Fund's inception (June 10, 1998) to October 31, 1998.
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
Average Annual Total Returns and Yield
Total returns are given for the one-year, Start of Performance periods ended
October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the seven-day
period ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Start of Performance on
7-Day Period 1 Year June 10, 1998
Institutional Service Shares
Total Return NA 2.76 % 2.91 %
Yield 3.02 % NA NA
Effective Yield 3.06 % NA NA
Tax-Equivalent Yield 5.00 % NA NA
- --------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
Yield, Effective Yield and Tax-Equivalent Yield
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result. The tax-equivalent yield
of Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming a specific tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to AMT and
state and/or local taxes.
TAX EQUIVALENCY TABLE
Taxable Yield Equivalent for 2000 - STATE OF ARIZONA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Combined Federal and State
Income Tax Bracket: 18.74% 32.72% 35.72% 41.04% 44.64%
- ----------------------------------------------------------------------------------------------------------------------
Single Return $1-26,250 $26,251-63,550 $63,551-132,600 $132,601-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.23% 1.49% 1.56% 1.70% 1.81%
1.50% 1.85% 2.23% 2.33% 2.54% 2.71%
2.00% 2.46% 2.97% 3.11% 3.39% 3.61%
2.50% 3.08% 3.72% 3.89% 4.24% 4.52%
3.00% 3.69% 4.46% 4.67% 5.09% 5.42%
3.50% 4.31% 5.20% 5.44% 5.94% 6.32%
4.00% 4.92% 5.95% 6.22% 6.78% 7.23%
4.50% 5.54% 6.69% 7.00% 7.63% 8.13%
5.00% 6.15% 7.43% 7.78% 8.48% 9.03%
5.50% 6.77% 8.17% 8.56% 9.33% 9.93%
6.00% 7.38% 8.92% 9.33% 10.18% 10.84%
6.50% 8.00% 9.66% 10.11% 11.02% 11.74%
7.00% 8.61% 10.40% 10.89% 11.87% 12.64%
7.50% 9.23% 11.15% 11.67% 12.72% 13.55%
8.00% 9.84% 11.89% 12.45% 13.57% 14.45%
8.50% 10.46% 12.63% 13.22% 14.42% 15.35%
9.00% 11.08% 13.38% 14.00% 15.26% 16.26%
</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
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable
sources regarding individual countries
and regions, world stock exchanges, and
economic and demographic statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
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.
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.
Money
A monthly magazine, regularly ranks money market funds in various categories
based on the latest available seven-day effective yield.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial
institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle
trillions of dollars in annual trading volume.
Federated Funds overview
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of
Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset
backed securities market, a market totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1998, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 eurodenominated
with assets approximating $34.1 billion, $35.7 billion, $13.1 billion and $115
million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment
Company Institute.
Federated Clients Overview
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B.
Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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
Timothy C. Pillion, Senior Vice President, Bank Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of
Arizona Municipal Cash Trust dated October 31, 1999.
<PAGE>
INVESTMENT RATINGS
Standard & Poor's Short-Term Municipal Obligation Ratings
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
Commercial Paper (CP) Ratings
An S&P commercial paper rating
is a current assessment of
the likelihood of timely
payment of debt having an
original maturity of no more
than 365 days.
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
Long-Term Debt Ratings
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
Moody's Investors Service, Inc., Short-Term Municipal Obligation Ratings Moody's
Investor Service, Inc. (Moody's) short-term ratings are designated Moody's
Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or VMIG
ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the
demand feature. The VMIG
rating can be assigned a 1 or 2 designation using the same definitions described
above for the MIG rating.
Commercial Paper (CP) Ratings
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Long-Term Debt Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
Fitch IBCA, 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.
<PAGE>
189
ADDRESSES
Arizona municipal cash trust
Institutional Service Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PROSPECTUS
California Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income taxes imposed by the state of
California consistent with stability of principal by investing in a portfolio of
high-quality California tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Contents
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 7
How to Redeem Shares 8
Account and Share Information 10
Who Manages the Fund? 10
Financial Information 11
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
California Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value of $1.00 per share. The Fund's investment
objective is to provide current income exempt from federal regular income tax
and the personal income taxes imposed by the state of California consistent with
stability of principal. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.
WHAT ARE THE FUND'S MAIN
INVESTMENT STRATEGIES?
The Fund invests in high-quality California tax exempt securities maturing in
397 days or less. The Fund will invest its assets so that at least 80% of its
annual interest income is exempt from federal regular income tax and California
state income tax or so that at least 80% of its net assets is invested in
obligations, the interest income from which is exempt from federal regular
income tax and California state income tax. Interest from the Fund's investments
may be subject to the federal alternative minimum tax for individuals and
corporations (AMT). The dollar-weighted average maturity of the Fund's portfolio
will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
Risk/Return Bar Chart and Table
The Bar Chart and Performance table below reflect historical performance data
for Institutional Service Shares of California Municipal Cash Trust (the "Former
Fund") prior to its reorganization into the Fund, which is a newly created
portfolio of Money Market Obligations Trust (the "Trust"). On the date of the
reorganization, February 1, 2000, the Former Fund will be dissolved and its net
assets (inclusive of liabilities recorded on the Former Fund's records) will be
transferred to the Fund.
[GRAPH APPEARS HERE]
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Service Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Service Shares were not sold subject to a sales
charge (load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Service
Shares highest quarterly return was 1.35% (quarter ended June 30, 1990). Its
lowest quarterly return was 0.44% (quarters ended March 31, 1993 and March 31,
1994).
Average Annual Total Return Table
The following table represents the Former Fund's Institutional Service Shares
Average Annual Total Returns for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year 2.77%
5 Years 3.11%
Start of Performance/1/ 3.34%
</TABLE>
1 The Former Fund's Institutional Service Shares start of performance date was
April 3, 1989.
The Former Fund's Institutional Service Shares 7-Day Net Yield as of December
31, 1999 was 3.83%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
CALIFORNIA MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Service Shares of the Fund.
<TABLE>
<CAPTION>
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None Maximum Deferred Sales Charge (Load) (as a percentage of original
purchase price or redemption proceeds, as applicable) None Maximum Sales Charge
(Load) Imposed on Reinvested Dividends (and other Distributions) (as a
percentage of offering None
price)
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
Annual Fund Operating Expenses (Before Waivers)/1/
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
<S> <C>
Management Fee2 0.50%
Distribution (12b-1) Fee None
Shareholder Services Fee 0.25%
Other Expenses 0.16%
Total Annual Fund Operating Expenses/3/ 0.91%
</TABLE>
1 Although not contractually obligated to do so, the adviser expects to waive
certain amounts during the fiscal year ending October 31, 2000. These are
shown below along with the net expenses the Fund expects to actually pay for
the fiscal year ending October 31, 2000.
Total Waivers of Fund Expenses 0.41%
Total Actual Annual Fund Operating Expenses (after waivers) 0.50%
2 The adviser expects to voluntarily waive a portion of the management fee. The
adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.09% for the fiscal year ending October 31, 2000.
3 For the fiscal year ended October 31, 1999, prior to the reorganization of the
Former Fund as a portfolio of the Trust, the Total Annual Fund Operating
Expenses and Total Actual Annual Fund Operating Expenses (after waivers) for
the Former Fund's Institutional Service Shares were 0.91% and 0.50%,
respectively.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional
Service Shares for the time periods indicated and then redeem all of your Shares
at the end of those periods. The Example also assumes that your investment has a
5% return each year and that the Fund's Institutional Service Shares operating
expenses are before waivers as estimated in the table above and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year $ 93
3 Years $ 290
5 Years $ 504
10 Years $ 1,120
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests its assets in a portfolio of high- quality California tax
exempt securities maturing in 397 days or less. The Fund will invest its assets
so that at least 80% of its annual interest income is exempt from federal
regular income tax and California state income tax or so that at least 80% of
its net assets is invested in obligations, the interest income from which is
exempt from federal regular income tax and California state income tax. Interest
from the Fund's investments may be subject to AMT. The dollar-weighted average
maturity of the Fund's portfolio will be 90 days or less. The Adviser actively
manages the Fund's portfolio, seeking to limit the credit risk taken by the Fund
and select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and California income tax.
It may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
Variable Rate Demand Instruments
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
Municipal Notes
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSRO or be of comparable quality to
securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as
Standard & Poor's and Moody's Investors Service. These services assign ratings
to securities by assessing the likelihood of issuer default. Lower credit
ratings correspond to higher credit risk. If a security has not received a
rating, the Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by California issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
CALIFORNIA SECTOR RISKS
Since the Fund invests primarily in issuers from California, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
California's deep economic base continues to experience increased diversity and
strong growth as its economy has recovered from a deep recession in the early
1990's (sparked by downsizing in the aerospace industry in relation to military
cutbacks). The major components of California's economy continue to be high
technology (particularly Internet-related firms), trade, entertainment,
manufacturing, tourism, construction and services. California's location is a
benefit to its trade component; however, these factors lead to above-average
exposure to international economic conditions.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum
is reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Service Shares and
Institutional Shares, each representing interests in a single portfolio of
securities. This prospectus relates only to Institutional Service Shares. Each
share class has different expenses, which affect their performance. Contact your
investment professional or call 1-800-341-7400 for more information concerning
the other class.
The Fund's Distributor, Federated Securities Corp., markets the Shares
described in this prospectus to retail customers of financial institutions
acting in an agency or fiduciary capacity or to individuals directly or through
investment professionals. The Fund may not be a suitable investment for
retirement plans or for non-California taxpayers because it invests in
California municipal securities.
The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 1:00
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New
Account Form; and
. Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or
Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at
1-800-341-7400 once you have completed the appropriate authorization form for
telephone transactions.
If you call before 12:00 noon (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time) your redemption will be wired to
you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for same-
day payment of redemption proceeds, without that day's dividend, for redemption
requests received before 2:00 p.m. (Eastern time).
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of
record;
. your redemption will be sent to an address of record that was changed
within the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened: . an electronic transfer to your account at a financial
institution that
is an ACH member; or
. wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the
Fund's ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the California taxes discussed above to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate you would have earned (or
lost) on an investment in the Fund, assuming reinvestment of any dividends and
capital gains.
This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights-Institutional Service Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended October 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income From Investment Operations:
Net investment income 0.03 0.03 0.03 0.03 0.03
Net realized loss on investment (0.01)
TOTAL FROM INVESTMENTOPERATIONS 0.03 0.03 0.03 0.03 0.02
Capital Contributions 0.01
Less Distributions:
Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return/1/ 2.71% 3.05% 3.19% 3.22% 3.37%
Ratios to Average Net Assets:
Expenses/2/ 0.91% 0.93% 0.95% 1.11% 1.09%
Net investment income/2/ 2.27% 2.56% 2.64% 2.55% 2.83%
Expenses (after waivers) 0.50% 0.50% 0.46% 0.49% 0.59%
Net investment income (after waivers) 2.68% 2.99% 3.13% 3.17% 3.33%
Supplemental Data:
Net assets, end of period (000 omitted) $482,813 $363,202 $234,764 $132,159 $96,534
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[FEDERATED LOGO]
WORLD-CLASS INVESTMENT MANAGER
California Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, Annual Report and
SemiAnnual Report to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report and the Semi-Annual Report and other information without
charge, and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
[FEDERATED LOGO]
California Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N351
G00329-01-SS (1/00)
Federated is a registered mark of Federated Investors, Inc.
2000 (C) Federated Investors, Inc. [RECYCLED LOGO]
PROSPECTUS
PROSPECTUS
California Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income taxes imposed by the state of
California consistent with stability of principal by investing in a portfolio of
high-quality California tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 7
How to Redeem Shares 8
Account and Share Information 9
Who Manages the Fund? 10
Financial Information 10
</TABLE>
- -------------------
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
- -------------------
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
California Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value of $1.00 per share. The Fund's investment
objective is to provide current income exempt from federal regular income tax
and the personal income taxes imposed by the state of California consistent with
stability of principal. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality California tax exempt securities maturing in
397 days or less. The Fund will invest its assets so that at least 80% of its
annual interest income is exempt from federal regular income tax and California
state income tax or so that at least 80% of its net assets is invested in
obligations, the interest income from which is exempt from federal regular
income tax and California state income tax. Interest from the Fund's investments
may be subject to the federal alternative minimum tax for individuals and
corporations (AMT). The dollar-weighted average maturity of the Fund's portfolio
will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
Risk/Return Bar Chart and Table
The Bar Chart and Performance table below reflect historical performance data
for Institutional Shares of California Municipal Cash Trust (the "Former Fund")
prior to its reorganization into the Fund, which is a newly created portfolio of
Money Market Obligations Trust (the "Trust"). On the date of the reorganization,
February 1, 2000, the Former Fund will be dissolved and its net assets
(inclusive of liabilities recorded on the Former Fund's records) will be
transferred to the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Institutional Shares of the Former Fund as of the
calendar year-end for each of three years.
The `y' axis reflects the "% Total Return" beginning with "0%" and increasing in
increments of 1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's start of business through the calendar
year ended December 31, 1999. The light gray shaded chart features three
distinct vertical bars, each shaded in charcoal, and each visually representing
by height the total
return percentages for the calendar year stated directly at its base. The
calculated total return percentage for Institutional Shares for each calendar
year is stated directly at the top of each respective bar, for the calendar
years 1997 through 1999. The percentages noted are: 3.47%, 3.23% and 3.03%
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Shares were not sold subject to a sales charge
(load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Shares
highest quarterly return was 0.90% (quarter ended June 30, 1997). Its lowest
quarterly return was 0.68% (quarter ended March 31, 1999).
Average Annual Total Return Table
The following table represents the Former Fund's Institutional Shares Average
Annual Total Returns for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
Calendar Period Fund
- ----------------------------------------------------
<S> <C>
1 Year 3.03%
- ----------------------------------------------------
Start of Performance/1/ 3.28%
- ----------------------------------------------------
</TABLE>
1 The Former Fund's Institutional Shares start of performance date was March 4,
1996.
The Former Fund's Institutional Shares 7-Day Net Yield as of December 31, 1999
was 4.08%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
CALIFORNIA MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the Fund.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None Maximum Deferred Sales Charge (Load) (as a percentage of original
purchase price or redemption proceeds,
as applicable) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of
offering price) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
Annual Fund Operating Expenses (Before Waivers)/1/
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee/2/ 0.50%
Distribution (12b-1) Fee None
Shareholder Services Fee3 0.25%
Other Expenses 0.16%
Total Annual Fund Operating Expenses4 0.91%
</TABLE>
1 Although not contractually obligated to do so, the adviser and shareholder
service provider expect to waive certain amounts during the fiscal year
ending October 31, 2000. These are shown below along with the net expenses
the Fund expects to actually pay for the fiscal year ending October 31, 2000.
<TABLE>
<S> <C>
Total Waivers of Fund Expenses 0.66%
Total Actual Annual Fund Operating Expenses (after waivers) 0.25%
</TABLE>
2 The adviser expects to voluntarily waive a portion of the management fee. The
adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.09% for the fiscal year ending October 31, 2000.
3 The shareholder services provider expects to voluntarily waive the
shareholder services fee. The shareholder services provider can terminate
this anticipated voluntary waiver at any time. The shareholder services fee
paid by the Fund's Institutional Shares (after the anticipated voluntary
waiver) is expected to be 0.00% for the fiscal year ending October 31, 2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of
the Former Fund as a portfolio of the Trust, the Total Annual Fund Operating
Expenses and Total Actual Annual Fund Operating Expenses (after waivers) for
the Former Fund's Institutional Shares were 0.91% and 0.25%, respectively.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Institutional Shares operating expenses are before
waivers as estimated in the table above and remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
Calendar Period Fund
- ------------------------------------------------------
<S> <C>
1 Year $ 93
- ------------------------------------------------------
3 Years $ 290
- ------------------------------------------------------
5 Years $ 504
- ------------------------------------------------------
10 Years $1,120
- ------------------------------------------------------
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests its assets in a portfolio of high- quality California tax
exempt securities maturing in 397 days or less. The Fund will invest its assets
so that at least 80% of its annual interest income is exempt from federal
regular income tax and California state income tax or so that at least 80% of
its net assets is invested in obligations, the interest income from which is
exempt from federal regular income tax and California state income tax. Interest
from the Fund's investments may be subject to AMT. The dollar-weighted average
maturity of the Fund's portfolio will be 90 days or less. The Adviser actively
manages the Fund's portfolio, seeking to limit the credit risk taken by the Fund
and select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and California income tax.
It may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal
Securities in Which the
Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
Variable Rate Demand Instruments
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
Municipal Notes
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSRO or be of comparable quality to
securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as
Standard & Poor's and Moody's Investors Service. These services assign ratings
to securities by assessing the likelihood of issuer default. Lower credit
ratings correspond to higher credit risk. If a security has not received a
rating, the Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the prices of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by California issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
CALIFORNIA SECTOR RISKS
Since the Fund invests primarily in issuers from California, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
California's deep economic base continues to experience increased diversity and
strong growth as its economy has recovered from a deep recession in the early
1990's (sparked by downsizing in the aerospace industry in relation to military
cutbacks). The major components of California's economy continue to be high
technology (particularly Internet-related firms), trade, entertainment,
manufacturing, tourism, construction and services. California's location is a
benefit to its trade component; however, these factors lead to above-average
exposure to international economic conditions.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum
is reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Shares and Institutional
Service Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Shares. Each share class has
different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.
The Fund's Distributor, Federated Securities Corp., markets the Shares
described in this prospectus to financial institutions acting in an agency or
fiduciary capacity or to individuals directly or through investment
professionals. The Fund may not be a suitable investment for retirement plans or
for non-California taxpayers because it invests in California municipal
securities.
The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 1:00
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time) your redemption will be wired to
you the following business day. You will receive that day's dividend.
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is an
ACH member; or
. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the California taxes discussed above to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance since inception. Some of the information is presented on a per share
basis. Total returns represent the rate you would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights-Institutional Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended October 31 1999 1998 1997 1996/1/
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income From Investment Operations:
Net investment income 0.03 0.03 0.03 0.02
Less Distributions:
Distributions from net investment income (0.03) (0.03) (0.03) (0.02)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return2 2.97% 3.31% 3.44% 2.24%
Ratios to Average Net Assets:
Expenses3 0.91% 0.92% 0.95% 1.10%/4/
Net investment income3 2.27% 2.58% 2.71% 2.43%/4/
Expenses (after waivers) 0.25% 0.25% 0.21% 0.20%/4/
Net investment income (after waivers) 2.93% 3.25% 3.45% 3.33%/4/
Supplemental Data:
Net assets, end of period (000 omitted) $74,370 $41,574 $41,956 $20,089
</TABLE>
1 Reflects operations for the period from March 4, 1996 (date of initial public
investment) to October 31, 1996.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
4 Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
Notes
Notes
Notes
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, Annual Report and
SemiAnnual Report to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report and the Semi-Annual Report and other information without
charge, and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected]. or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
[LOGO OF FEDERATED INVESTORS]
California Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N369
G00300-01-IS (1/00)
Federated is a registered mark
of Federated Investors, Inc.
2000 (C)Federated Investors, Inc.
[RECYCLED PAPER LOGO]
[LOGO OF FEDERATED INVESTORS]
World-Class Investment Manager(R)
California
Municipal Cash
Trust
A Portfolio of Money Market
Obligations Trust
INSTITUTIONAL SHARES
JANUARY 31, 2000
P R O S P E C T U S
STATEMENT OF ADDITIONAL INFORMATION
California Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for California Municipal Cash Trust
(Fund), dated January 31, 2000. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectuses or the Annual Report without charge by
calling 1-800-341-7400.
JANUARY 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip 60934N351
Cusip 60934N369
G00329-02(1/00)
How is the Fund Organized?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1998. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on May 30, 1994, will
be reorganized as a portfolio of the Trust on February 1, 2000.
The Board of Trustees (Board) has established two classes of shares of the Fund,
known as Institutional Shares and Institutional Service Shares. This SAI relates
to both classes of Shares. The Fund's investment adviser is Federated Investment
Management Company (Adviser). Effective March 31, 1999, Federated Management,
former adviser to the Fund, became Federated Investment Management Company
(formerly, Federated Advisers).
Securities in Which the Fund Invests
The Fund's principal securities are described in its prospectus. Additional
securities, and further details regarding the principal securities, are outlined
below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its charter
or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues received by
the issuer such as specific taxes, assessments, tolls or fees. Bondholders
may not collect from the municipality's general taxes or revenues. For
example, a municipality may issue bonds to build a toll road, and pledge
the tolls to repay the bonds. Therefore, a shortfall in the tolls normally
would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new
factory to improve its local economy. The municipality would lend the
proceeds from its bonds to the company using the factory, and the company
would agree to make loan payments sufficient to repay the bonds. The
bonds would be payable solely from the company's loan payments, not from
any other revenues of the municipality. Therefore, any default on the
loan normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to the
federal alternative minimum tax (AMT). The Fund may invest in bonds
subject to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order
to comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end a
lease, without penalty, by not providing for the lease payments in its
annual budget. After the lease ends, the lessor can resell the equipment or
facility but may lose money on the sale. The Fund may invest in securities
supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final
maturity unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities at
a price below the amount payable at maturity. The difference between the
purchase price and the amount paid at maturity represents interest on the
zero coupon security. Investors must wait until maturity to receive
interest and principal, which increases the interest rate risks and credit
risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of credit,
bond insurance and surety bonds. Credit enhancement also includes
arrangements where securities or other liquid assets secure payment of a
fixed income security. If a default occurs, these assets may be sold and
the proceeds paid to the security's holders. Either form of credit
enhancement reduces credit risks by providing another source of payment for
a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
Inter-fund Borrowing and Lending Arrangements
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. (Federated funds) to lend
and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary
for both borrowing and lending funds, and an inter-fund loan is only made if
it benefits each participating fund. Federated administers the program
according to procedures approved by the Fund's Board of Trustees (Board), and
the Board monitors the operation of the program. Any inter-fund loan must
comply with certain conditions set out in the exemption, which are designed to
assure fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may
be made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term
borrowings (the Bank Loan Rate), as determined by the Board. The interest rate
imposed on inter-fund loans is the average of the Repo Rate and the Bank Loan
Rate.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment
and delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into
these transactions so that the market values of the securities bought may vary
from the purchase prices. Therefore, delayed delivery transactions create
interest rate risks for the Fund. Delayed delivery transactions also involve
credit risks in the event of a counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the
underlying assets or set aside readily marketable securities with a value that
equals or exceeds the Fund's obligations. Unless the Fund has other readily
marketable assets to set aside, it cannot trade assets used to secure such
obligations without terminating the special transaction. This may cause the
Fund to miss favorable trading opportunities or to realize losses on special
transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government of
the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and
use the proceeds (or bank loans) to repay maturing paper. If the issuer
cannot continue to obtain liquidity in this fashion, its commercial paper
may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from
a dealer or bank and agrees to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price, reflecting
the Fund's return on the transaction. This return is unrelated to the interest
rate on the underlying security. The Fund will enter into repurchase
agreements only with banks and other recognized financial institutions, such
as securities dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is
the seller (rather than the buyer) of the securities, and agrees to repurchase
them at an agreed upon time and price. A reverse repurchase agreement may be
viewed as a type of borrowing by the Fund. Reverse repurchase agreements are
subject to credit risks. In addition, reverse repurchase agreements create
leverage risks because the Fund must repurchase the underlying security at a
higher price, regardless of the market value of the security at the time of
repurchase.
INVESTMENT RATINGS
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's ("S&P"), MIG-1 or MIG-
2 by Moody's Investors Service ("Moody's"), or F-1+, F-1 or F-2 by Fitch IBCA,
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 rating service can be treated as being
in one of the two highest short-term rating categories; currently, such
securities must be rated by two nationally recognized statistical rating
organizations in one of their two highest rating categories. See "Regulatory
Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICY
The Fund's investment objective is to provide current income exempt from federal
regular income tax and the personal income taxes imposed by the state of
California consistent with stability of principal.
The Fund invests in tax-exempt securities so that at least 80% of its annual
interest income is exempt from federal regular income tax and California state
income tax or so that at least 80% of its net assets is invested in obligations,
the interest income from which is exempt from federal regular income tax and
California state income tax.
This investment objective and policy may not be changed by the Board without
shareholder approval.
INVESTMENT LIMITATIONS
Diversification
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized by
such U.S. government securities; and securities of other investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commmodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
Securities Act of 1933.
For purposes of the diversification limitation, 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.
For purposes of the concentration limitation: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities. To conform to the current view of the SEC staff that only domestic
bank instruments may be excluded from industry concentration limitations, as a
matter of non-fundamental policy, the Fund will not exceed foreign bank
instruments from industry concentration limitation tests so long as the policy
of the SEC remains in effect. In addition, investments in certain industrial
development bonds funded by activities in a single industry will be deemed to
constitute investment in an industry, except when held for temporary defensive
purposes. The investment of more than 25% of the value of the Fund's total
assets in any one industry will constitute "concentration."
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 SAI, in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7 (the
Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board 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.
What Do Shares Cost?
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
Account and Share Information
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Institutional Shares: Union
Bank of California Omnibus Sweep Acct., San Diego, CA, owned approximately
17,566,881 shares (18.51%); Cupertino National Bank & Trust Co., Palo Alto, CA,
owned approximately 13,569,473 shares (14.30%); Santa Monica Bank, Santa Monica,
CA, owned approximately 11,553.901 shares (12.17%); Fiduciary Trust Co.
International, New York, NY, owned approximately 11,371,250 shares (11.98%);
Borel Bank & Trust, San Mateo, CA, owned approximately 10,323,346 shares
(10.88%); Bank of Stockton, Stockton, CA, owned approximately 6,350,677 shares
(6.69%); and Bank of Marin, Novato, CA owned approximately 5,121,859 shares
(5.40%).
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Institutional Service Shares:
Capital Network Services Inc., San Francisco, CA, owned approximately 78,622,625
shares (14.81%); Piper Jaffray Inc., Minneapolis, MN, owned approximately
77,702,202 shares (14.64%); UBS AG, New York, NY, owned approximately 51,716,534
shares (9.74%); Naidot & Co., Woodbridge, NJ, owned approximately 35,723,100
shares (6.73%).
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
STATE TAXES
Under existing California laws, distributions made by the Fund will not be
subject to California individual income taxes to the extent that such
distributions qualify as exempt-interest dividends under the California Revenue
and Taxation Code, and provided further that at the close of each quarter, at
least 50 percent of the value of the total assets of the Fund consists of
obligations the interest on which is exempt from California taxation under
either the Constitution or laws of California or the Constitution or laws of the
United States. The Fund will furnish its shareholders with a written note
designating exempt-interest dividends within 60 days after the close of its
taxable year. Conversely, to the extent that distributions made by the Fund are
derived from other types of obligations, such distributions will be subject to
California individual income taxes.
Dividends of the Fund are not exempt from the California taxes payable by
corporations.
Who Manages and Provides Services to the Fund?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
54 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January 12, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.
<TABLE>
<CAPTION>
Name
Birth Date Aggregate Total Compensation
Address Principal Occupations Compensation From Trust and
Position With Trust for Past Five Years From Fund Fund Complex
<S> <C> <C> <C>
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of the $0 $0 for the Trust and 43
Birth Date: July 28, 1924 Federated Fund Complex; Chairman and Trustee, Federated other investment
Federated Investors Tower Investment Management Company; Chairman and Director, companies in the Fund
1001 Liberty Avenue Federated Investors, Inc., Federated Investment Complex
Pittsburgh, PA Counseling and Federated Global Investment Management
CHAIRMAN AND TRUSTEE Corp.; Chairman, Passport Research, Ltd.
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Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $315.29 $116,760.63 for the Trust
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's and 43 other investment
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries, companies in the Fund
Pittsburgh, PA Inc. (coated steel conduits/computer storage equipment); Complex
TRUSTEE formerly: Senior Partner, Ernst & Young LLP; Director,
MED 3000 Group, Inc. (physician practice management);
Director, Member of Executive Committee, University of
Pittsburgh.
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John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $346.85 $128,455.37 for the Trust
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior and 43 other investment
Grubb & Ellis/Investment Vice President, John R. Wood and Associates, Inc., companies in the Fund
Properties Corporation Realtors; Partner or Trustee in private real estate Complex
3201 Tamiami Trail North ventures in Southwest Florida; formerly: President,
Naples, FL Naples Property Management, Inc. and Northgate Village
TRUSTEE Development Corporation.
- ---------------------------------------------------------------------------------------------------------------------------------
Nicholas P. Constantakis++ Director or Trustee of the Federated Fund Complex; $0 $73,191.21 for the
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering, Trust and
175 Woodshire Drive construction, operations and technical services); 37 other investment
Pittsburgh, PA formerly: Partner, Andersen Worldwide SC. companies
TRUSTEE in the Fund Complex
- ---------------------------------------------------------------------------------------------------------------------------------
John F. Cunningham Director or Trustee of some of the Federated Fund $241.87 $93,190.48 for the Trust
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive and 37 other investment
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business companies in the Fund
Palm Beach, FL consulting); Trustee Associate, Boston College; Complex
TRUSTEE Director, Iperia Corp (communications/software);
formerly: Director, Redgate Communications and
EMC Corporation (computer storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue+ President or Executive Vice President of the Federated $0 $0 for the Trust and 30
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds other investment
Federated Investors Tower in the Federated Fund Complex; President, Chief companies in the Fund
1001 Liberty Avenue Executive Officer and Director, Federated Investors, Complex
Pittsburgh, PA Inc.; President and Trustee, Federated Investment
PRESIDENT AND TRUSTEE Management Company and Federated Investment Counseling;
President and Director, Federated Global
Investment Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder
Services Company; Director, Federated Services
Company.
- ---------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $315.29 $116,760.63 for the Trust
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical and 43 other investment
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - companies in the Fund
Suite 1111 Downtown; Hematologist, Oncologist and Internist, Complex
Pittsburgh, PA University of Pittsburgh Medical Center; Member,
TRUSTEE National Board of Trustees, Leukemia Society of America.
- ---------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Director or Trustee of the Federated Fund Complex; $289.85 $109,153.60 for the Trust
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts and 43 other investment
One Royal Palm Way General Court; President, State Street Bank and Trust companies in the Fund
100 Royal Palm Way Company and State Street Corporation. Complex
Palm Beach, FL
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation; Director, The Boston Stock Exchange.
- ---------------------------------------------------------------------------------------------------------------------------------
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $250.84 $102,573.91 for the Trust
Birth Date: April 10, 1945 Complex; Executive Vice President, Legal and External and 40 other investment
80 South Road Affairs, Dugan Valva Contess, Inc. (marketing, companies in the Fund
Westhampton Beach, NY communications, technology and consulting); formerly Complex
TRUSTEE Management Consultant.
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
- ---------------------------------------------------------------------------------------------------------------------------------
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $339.50 $128,455.37 for the Trust
S.J.D.# President, Law Professor, Duquesne University; and 43 other investment
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Michael companies in the Fund
President, Duquesne University Baker Corp. (engineering, construction, operations and Complex
Pittsburgh, PA technical services).
TRUSTEE
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.
- ---------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $315.29 $116,760.63 for the Trust
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. and 43 other investment
4905 Bayard Street companies in the Fund
Pittsburgh, PA Complex
TRUSTEE Previous Positions: National Spokesperson, Aluminum
Company of America; television producer;
business owner.
- ---------------------------------------------------------------------------------------------------------------------------------
John S. Walsh Director or Trustee of some of the Federated Fund $241.87 $94,536.85 for the Trust
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. and 39 other investment
2007 Sherwood Drive (manufacturer of construction temporary heaters); companies in the Fund
Valparaiso, IN President and Director, Manufacturers Products, Inc. Complex
TRUSTEE (distributor of portable construction heaters);
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the Trust and 42
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice other investment
Federated Investors Tower President and Treasurer of some of the Funds in the company in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
EXECUTIVE VICE PRESIDENT Management Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company.
- ---------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Executive Vice President and Secretary of the Federated $0 $0 for the Trust and 43
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary, and other investment
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated companies in the Fund
1001 Liberty Avenue Investment Management Company and Federated Investment Complex
Pittsburgh, PA Counseling; Director, Federated Global Investment
EXECUTIVE VICE PRESIDENT AND Management Corp., Federated Services Company and
SECRETARY Federated Securities Corp.
- ---------------------------------------------------------------------------------------------------------------------------------
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President $0 $0 for the Trust and 43
Birth Date: June 17, 1954 - Funds Financial Services Division, Federated other investment
Federated Investors Tower Investors, Inc.; formerly: various management positions companies in the Fund
1001 Liberty Avenue within Funds Financial Services Division of Federated Complex
Pittsburgh, PA Investors, Inc.
TREASURER
- ---------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher President or Vice President of some of the Funds in the $0 $0 for the Trust and 41
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of other investment
Federated Investors Tower the Funds in the Federated Fund Complex; Executive Vice companies in the Fund
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and Complex
Pittsburgh, PA Director, Federated Securities Corp.
VICE PRESIDENT
- ---------------------------------------------------------------------------------------------------------------------------------
William D. Dawson, III Chief Investment Officer of this Fund and various other $0 $0 for the Trust and 42
Birth Date: March 3, 1949 Funds in the Federated Fund Complex; Executive Vice other investment
Federated Investors Tower President, Federated Investment Counseling, Federated companies in the Fund
1001 Liberty Avenue Global Investment Management Corp., Federated Investment Complex
Pittsburgh, PA Management Company and Passport Research, Ltd.;
CHIEF INVESTMENT OFFICER Registered Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors,
Inc.; formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company and
Passport Research, Ltd.
- ---------------------------------------------------------------------------------------------------------------------------------
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. $0 $0 for the Trust and 6
Birth Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been a other investment
Federated Investors Tower Senior Portfolio Manager and a Senior Vice President of companies in the Fund
1001 Liberty Avenue the Funds' Adviser since 1997. Ms. Cunningham served as Complex
Pittsburgh, PA a Portfolio Manager and a Vice President of the Adviser
VICE PRESIDENT from 1993 through 1996. Ms. Cunningham is a Chartered
Financial Analyst and received her M.B.A. in Finance
from Robert Morris College.
- ---------------------------------------------------------------------------------------------------------------------------------
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $0 $0 for the Trust and 7
Birth Date: September 12, 1953 Ochson joined Federated in 1982 and has been a Senior other investment
Federated Investors Tower Portfolio Manager and a Senior Vice President of the companies in the Fund
1001 Liberty Avenue Funds' Adviser since 1996. From 1988 through 1995, Ms. Complex
Pittsburgh, PA Ochson served as a Portfolio Manager and a Vice
VICE PRESIDENT President of the Funds' Adviser. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
</TABLE>
* An asterisk denotes Trustee who is deemed to be an interested person as
defined in the 1940 Act.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Nicholas P. Constantakis became a member of the Board on October 1, 1999. He
did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
<TABLE>
<CAPTION>
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated Funds
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
For the Year Ended October 31 1999 1998 1997
<S> <C> <C> <C>
Advisory Fee Earned $2,488,373 $1,757,809 $1,047,530
Advisory Fee Reduction $2,053,851 1,496,779 1,026,075
Brokerage Commissions $ 0 0 0
Administrative Fee $ 375,247 265,101 167,256
Shareholder Services Fee
Institutional Shares $ 0 --- --
Institutional Service Shares $1,086,577 --- --
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for shareholder services fees, which are borne only by the applicable
class of Shares.
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the SEC standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year and Start of Performance periods ended
October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the seven-day
period ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
Start of Performance
7-Day Period 1 Year 5 Years on March 4, 1996
Institutional Shares
<S> <C> <C> <C> <C>
Total Return 2.97% NA 3.27%
Yield 3.09%
Effective Yield 3.14%
Tax-Equivalent Yield 6.05%
</TABLE>
<TABLE>
<CAPTION>
7-Day Period 1 Year 5 Years Start of Performance
on April 3, 1989
Institutional Service Shares
<S> <C> <C> <C> <C>
Total Return 2.71% 3.11% 3.34%
Yield 2.84%
Effective Yield 2.88%
Tax-Equivalent Yield 5.56%
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD, EFFECTIVE YIELD AND TAX-EQUIVALENT YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized base-
period return by: adding one to the base-period return, raising the sum to the
365/7th power; and subtracting one from the result. The tax-equivalent yield of
Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLES
Set forth below are samples of tax-equivalency tables that may be used in
advertising and sales literature. These tables are for illustrative purposes
only and are not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to the federal
alternative minimum tax and state and/or local taxes.
TAX EQUIVALENCY TABLE
<TABLE>
<CAPTION>
Taxable Yield Equivalent for 2000 - STATE OF CALIFORNIA
<S> <C> <C> <C> <C> <C>
Combined Federal and State
Income Tax Bracket: 23.00% 37.30% 40.30% 45.30% 48.90%
- -----------------------------------------------------------------------------------------------------------------------------
Single Return $1-26,250 $26,251-63,550 $63,551-132,600 $132,601-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.30% 1.59% 1.68% 1.83% 1.96%
1.50% 1.95% 2.39% 2.51% 2.74% 2.94%
2.00% 2.60% 3.19% 3.35% 3.66% 3.91%
2.50% 3.25% 3.99% 4.19% 4.57% 4.89%
3.00% 3.90% 4.78% 5.03% 5.48% 5.87%
3.50% 4.55% 5.58% 5.86% 6.40% 6.85%
4.00% 5.19% 6.38% 6.70% 7.31% 7.83%
4.50% 5.84% 7.18% 7.54% 8.23% 8.81%
5.00% 6.49% 7.97% 8.38% 9.14% 9.78%
5.50% 7.14% 8.77% 9.21% 10.05% 10.76%
6.00% 7.79% 9.57% 10.05% 10.97% 11.74%
6.50% 8.44% 10.37% 10.89% 11.88% 12.72%
7.00% 9.09% 11.16% 11.73% 12.80% 13.70%
7.50% 9.74% 11.96% 12.56% 13.71% 14.68%
8.00% 10.39% 12.76% 13.40% 14.63% 15.66%
8.50% 11.04% 13.56% 14.24% 15.54% 16.63%
9.00% 11.69% 14.35% 15.08% 16.45% 17.61%
</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.
<TABLE>
<CAPTION>
Taxable Yield Equivalent for 2000 - STATE OF CALIFORNIA
<S> <C> <C> <C> <C> <C>
Combined Federal and State
Income Tax Bracket: 21.00% 37.30% 40.30% 45.30% 48.90%
- ------------------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $161,451-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.27% 1.59% 1.68% 1.83% 1.96%
1.50% 1.90% 2.39% 2.51% 2.74% 2.94%
2.00% 2.53% 3.19% 3.35% 3.66% 3.91%
2.50% 3.16% 3.99% 4.19% 4.57% 4.89%
3.00% 3.80% 4.78% 5.03% 5.48% 5.87%
3.50% 4.43% 5.58% 5.86% 6.40% 6.85%
4.00% 5.06% 6.38% 6.70% 7.31% 7.83%
4.50% 5.70% 7.18% 7.54% 8.23% 8.81%
5.00% 6.33% 7.97% 8.38% 9.14% 9.78%
5.50% 6.96% 8.77% 9.21% 10.05% 10.76%
6.00% 7.59% 9.57% 10.05% 10.97% 11.74%
6.50% 8.23% 10.37% 10.89% 11.88% 12.72%
7.00% 8.86% 11.16% 11.73% 12.80% 13.70%
7.50% 9.49% 11.96% 12.56% 13.71% 14.68%
8.00% 10.13% 12.76% 13.40% 14.63% 15.66%
8.50% 10.765 13.56% 14.24% 15.54% 16.63%
9.00% 11.39% 14.35% 15.08% 16.45% 17.61%
</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.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
. references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
. charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
. discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
. information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
. 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.
. 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.
. Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999 Federated managed 53 equity funds totaling approximately $18.3
billion in assets across growth, value, equity income, international, index and
sector (i.e. utility) styles. Federated's value-oriented management style
combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion. Government Funds In the government
sector, as of December 31, 1999, Federated managed 9 mortgage backed, 11
government/agency and 16 government money market mutual funds, with assets
approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges. Money Market Funds In the money market sector,
Federated 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, 1999, Federated
managed more than $83.0 billion in assets across 54 money market funds,
including 16 government, 13 prime and 24 municipal and 1 euro-denominated with
assets approximating $34.1 billion, $35.7 billion and $13.1 billion and $115
million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
Financial Information
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
Investment Ratings
STANDARD & POOR'S SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
LONG-TERM DEBT RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
MOODY'S INVESTORS SERVICE, SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investors Service (Moody's) short-term ratings are designated Moody's
Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or VMIG
ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
LONG-TERM DEBT RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
FITCH IBCA, 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.
Addresses
CALIFORNIA MUNICIPAL CASH TRUST
Institutional Shares
Institutional Service Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PROSPECTUS
Connecticut Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the Connecticut dividend and interest income tax
consistent with stability of principal by investing in a portfolio of
high-quality Connecticut tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 7
How to Redeem Shares 9
Account and Share Information 11
Who Manages the Fund? 12
Financial Information 12
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is to provide current income
exempt from federal regular income tax and the Connecticut dividend and interest
income tax consistent with stability of principal. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Connecticut tax exempt securities maturing in
397 days or less. The Fund will invest its assets so that at least 80% of its
annual interest income is exempt from federal regular income tax and Connecticut
dividend and interest income tax. Interest from the Fund's investments may be
subject to the federal alternative minimum tax for individuals and corporations
(AMT). The dollar-weighted average maturity of the Fund's portfolio will be 90
days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Institutional Service Shares
of the Former Fund as of the calendar year-end for each of ten years.
The `y' axis reflects the "% Total Return" beginning with "0%" and increasing in
increments of 1% up to 6%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's start of business through the calendar
year ended December 31, 1999. The light gray shaded chart features ten distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for Institutional Service Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1990 through 1999. The percentages noted are: 5.41%, 3.73%,
2.45%, 1.91%,
2.33%, 3.34%, 2.94%, 3.05%, 2.90%. and 2.70%.
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Service Shares of Connecticut Municipal Cash Trust (the
"Former Fund") prior to its reorganization into the Fund, which is a newly
created portfolio of Money Market Obligations Trust (the "Trust"). On the date
of the reorganization, February 1, 2000, the Former Fund will be dissolved and
its net assets (inclusive of liabilities recorded on the Former Fund's records)
will be transferred to the Fund.
[Graphic]
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Service Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Service Shares were sold without a sales charge
(load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Service
Shares highest quarterly return was 1.34% (quarter ended June 30, 1990). Its
lowest quarterly return was 0.44% (quarter ended March 31, 1994).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Institutional Service
Shares Average Annual Total Returns for the calendar periods ended
December 31, 1999.
<TABLE>
<CAPTION>
CALENDAR PERIOD FUND
<S> <C>
1 Year 2.70%
5 Years 2.99%
10 Years 3.07%
</TABLE>
The Former Fund's Institutional Service Shares 7-Day Net Yield as of December
31, 1999 was 3.64%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
CONNECTICUT MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Service Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original
purchase price or redemption proceeds, as applicable) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
(and other Distributions) (as a percentage of offering price) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1 Expenses That are Deducted
From Fund Assets (as a percentage of average net assets)
Management Fee 2 0.50%
Distribution (12b-1) Fee None
Shareholder Services Fee 3 0.25%
Other Expenses 0.15%
Total Annual Fund Operating Expenses 4 0.90%
1 Although not contractually obligated to do so, the adviser and shareholder
services provider expect to waive certain amounts during the fiscal year ending
October 31, 2000. These are shown below along with the net expenses the Fund
expects to actually pay for the fiscal year ending October 31, 2000.
Total Waivers of Fund Expenses 0.30%
Total Actual Annual Fund Operating Expenses (after waivers) 0.60%
2 The adviser expects to voluntarily waive a portion of the management fee. The
adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.30% for the fiscal year ending October 31, 2000. 3 The
shareholder services provider expects to voluntarily waive a portion of the
shareholder services fee. The shareholder services provider can terminate this
anticipated voluntary waiver at any time. The shareholder services fee paid by
the Fund (after the anticipated voluntary waiver) is expected to be 0.15% for
the fiscal year ending October 31, 2000. 4 For the fiscal year ended October 31,
1999, prior to the reorganization of the Former Fund as a portfolio of the
Trust, the Total Annual Fund Operating Expenses and Total Actual Annual Fund
Operating Expenses (after waivers) for the Former Fund's Institutional Service
Shares were 0.90% and 0.60%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Service
Shares for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's Institutional Service Shares operating
expenses are BEFORE WAIVERS as estimated in the table and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 92
3 Years $ 287
5 Years $ 498
10 Years $ 1,108
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Connecticut tax exempt
securities maturing in 397 days or less. The Fund will invest its assets so that
at least 80% of its annual interest income is exempt from federal regular income
tax and Connecticut dividend and interest income tax. Interest from the Fund's
investments may be subject to AMT. The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less. The Adviser actively manages the
Fund's portfolio, seeking to limit the credit risk taken by the Fund and select
investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal income tax and Connecticut
dividend and interest income tax. It may do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to receive and distribute taxable income to
investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These NRSROs assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Connecticut issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
CONNECTICUT SECTOR RISKS
Since the Fund invests primarily in issuers from Connecticut, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Connecticut's economy is relatively diversified across services industries (such
as insurance and finance), retail and wholesale trade, and manufacturing
(concentrated in defense and transportation). These sectors were adversely
impacted by the recession of the early 1990s; however, Connecticut's rate of
economic growth has improved and is almost on track with the national average.
In addition, the state's extraordinary wealth and resources continue to be a
source of credit strength.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share. The
Fund does not charge a front-end sales charge. NAV is determined at 12:00 noon
and 1:00 p.m. (Eastern time) and as of the end of regular trading (normally 4:00
p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for
non-Connecticut taxpayers because it invests in Connecticut municipal
securities.
The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for
same-day payment of redemption proceeds, without that day's dividend, for
redemption requests received before 2:00 p.m. (Eastern time).
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the Connecticut taxes discussed above to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03 0.03 0.03 0.03 0.03
LESS DISTRIBUTIONS:
Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 1 2.64% 2.98% 3.01% 3.02% 3.31%
RATIOS TO AVERAGE NET ASSETS:
Expenses 2 0.90% 0.89% 0.91% 0.92% 0.90%
Net investment income 2 2.30% 2.64% 2.66% 2.65% 2.96%
Expenses (after waivers) 0.60% 0.60% 0.60% 0.60% 0.60%
Net investment income (after waivers) 2.60% 2.93% 2.97% 2.97% 3.26%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $279,135 $339,567 $271,316 $227,089 $184,718
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
Connecticut Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, Annual Report and
Semi-Annual Report to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report and the Semi-Annual Report and other information without
charge, and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Connecticut Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N559
9101004A-SS (1/00)
[Graphic]
Statement of Additional Information
CONNECTICUT MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
institutional Service Shares
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Connecticut Municipal Cash Trust
(Fund), dated January 31, 2000. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectus or the Annual Report without charge by
calling 1-800-341-7400.
january 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip 60934N559
9101004B-SS (1/00)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1998. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on November 1, 1989,
will be reorganized as a portfolio of the Trust on February 1, 2000.
The Fund's investment adviser is Federated Investment Management Company
(Adviser). Effective March 31, 1999, Federated Management, former adviser to the
Fund, became Federated Investment Management Company (formerly, Federated
Advisers).
SECURITIES IN WHICH THE FUND INVESTS
The Fund's principal securities are described in its prospectus. Additional
securities, and further details regarding the principal securities, are outlined
below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is
consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its
charter or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues
received by the issuer such as specific taxes, assessments, tolls or
fees. Bondholders may not collect from the municipality's general taxes
or revenues. For example, a municipality may issue bonds to build a
toll road, and pledge the tolls to repay the bonds. Therefore, a
shortfall in the tolls normally would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The
municipality would lend the proceeds from its bonds to the company
using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable
solely from the company's loan payments, not from any other
revenues of the municipality. Therefore, any default on the loan
normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to
the federal alternative minimum tax (AMT). The Fund may invest in
bonds subject to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end
a lease, without penalty, by not providing for the lease payments in
its annual budget. After the lease ends, the lessor can resell the
equipment or facility but may lose money on the sale. The Fund may
invest in securities supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities
at a price below the amount payable at maturity. The difference between
the purchase price and the amount paid at maturity represents interest
on the zero coupon security. Investors must wait until maturity to
receive interest and principal, which increases the interest rate risks
and credit risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of
credit, bond insurance and surety bonds. Credit enhancement also
includes arrangements where securities or other liquid assets secure
payment of a fixed income security. If a default occurs, these assets
may be sold and the proceeds paid to the security's holders. Either
form of credit enhancement reduces credit risks by providing another
source of payment for a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
Inter-fund Borrowing and Lending Arrangements
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. (Federated funds) to
lend and borrow money for certain temporary purposes directly to and from
other Federated funds. Participation in this inter-fund lending program is
voluntary for both borrowing and lending funds, and an inter-fund loan is
only made if it benefits each participating fund. Federated administers the
program according to procedures approved by the Fund's Board of Trustees
(Board), and the Board monitors the operation of the program. Any
inter-fund loan must comply with certain conditions set out in the
exemption, which are designed to assure fairness and protect all
participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed"
trades. All inter-fund loans must be repaid in seven days or less. The
Fund's participation in this program must be consistent with its investment
policies and limitations, and must meet certain percentage tests.
Inter-fund loans may be made only when the rate of interest to be charged
is more attractive to the lending fund than market-competitive rates on
overnight repurchase agreements (the Repo Rate) and more attractive to the
borrowing fund than the rate of interest that would be charged by an
unaffiliated bank for short-term borrowings (the Bank Loan Rate), as
determined by the Board. The interest rate imposed on inter-fund loans is
the average of the Repo Rate and the Bank Loan Rate.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with
payment and delivery of the securities scheduled for a future time. During
the period between purchase and settlement, no payment is made by the Fund
to the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value
in determining the price of its shares. Settlement dates may be a month or
more after entering into these transactions so that the market values of
the securities bought may vary from the purchase prices. Therefore, delayed
delivery transactions create interest rate risks for the Fund. Delayed
delivery transactions also involve credit risks in the event of a
counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the
underlying assets or set aside readily marketable securities with a value
that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to
secure such obligations without terminating the special transaction. This
may cause the Fund to miss favorable trading opportunities or to realize
losses on special transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government
of the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types
of corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If
the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund
is the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must
repurchase the underlying security at a higher price, regardless of the
market value of the security at the time of repurchase.
Investment Ratings
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's ("S&P"), MIG-1 or
MIG-2 by Moody's Investors Service ("Moody's"), or F-1+, F-1 or F-2 by Fitch
IBCA, 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 rating service can be
treated as being in one of the two highest short-term rating categories;
currently, such securities must be rated by two nationally recognized
statistical rating organizations in one of their two highest rating categories.
See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the
Fund. The Fund's principal risks are described in its
prospectus. Additional risk factors are outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its
investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
Fundamental INVESTMENT Objective and Policy
The Fund's investment objective is to provide current income exempt from
federal regular income tax and the Connecticut dividend and interest
income tax consistent with stability of principal.
The Fund invests in tax-exempt securities so that at least 80% of its
annual interest income is exempt from federal regular income tax
and Connecticut dividend and interest income tax.
This investment objective and policy may not be changed by the Board without
shareholder approval.
INVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
federal securities laws.
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.
For purposes of the concentration limitation: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities. To conform to the current view of the SEC staff that only domestic
bank instruments may be excluded from industry concentration limitations, the
Fund will not exceed foreign bank instruments from industry concentration
limitation tests so long as the policy of the SEC remains in effect. In
addition, investments in certain industrial development bonds funded by
activities in a single industry will be deemed to constitute investment in an
industry, except when held for temporary defensive purposes. The investment of
more than 25% of the value of the Fund's total assets in any one industry will
constitute
"concentration."
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 SAI, in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7 (the
Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board 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.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its
affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share
class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur
certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of
its shareholders for acts or obligations of the Trust.
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.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights except
that in matters affecting only a particular Fund or
class, only Shares of that Fund or class are entitled
to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to
vote.
As of January 7, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Institutional Service Shares: First Union
National Bank, Charlotte, North Carolina, owned approximately 54,310,788 shares
(18.96%); Fleet Securities Corp., Rochester, New York, owned approximately
17,247,105 shares (6.02%); and The Chase Manhattan Bank NA, Rochester, New York,
owned approximately 15,060,601 shares (5.26%).
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
state TAXes
Under existing Connecticut laws, distributions made by the Fund will not be
subject to Connecticut individual income taxes to the extent that such
distributions qualify as exempt interest dividends under the Internal Revenue
Code, and represent (i) interest on obligations issued by the district, or
similar public entity created under the laws of the State of Connecticut, and
(ii) interest on obligations the income of which may not, by federal law, be
taxed by a state, such as bonds issued by the government of Puerto Rico.
Conversely, to the extent that the distributions made by the Fund are derived
from other types of obligations, such dividends will be subject to Connecticut
individual income taxes.
Distributions from the Fund to a shareholder subject to the Connecticut
corporation business tax are not eligible for the dividends received deduction
under the Connecticut corporation business tax and therefore are included in the
taxable income of a taxpayer to the extent such distributions are treated as
either exempt-interest dividends or capital gains dividends for federal income
tax purposes. All other distributions from the Fund are eligible for the
Connecticut corporation business tax dividends received deduction.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
43 investment companies, whose investment advisers are affiliated with the
Fund's
Adviser.
As of January 7, 2000, the
Fund's Board and Officers as a group owned less than 1% of the Fund's
outstanding Shares.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Name
Birth Date Aggregate Total Compensation
Address Principal Occupations Compensation From Trust and Fund
Position With Trust for Past Five Years From Fund Complex
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of the $0 $0 for the Trust and 43
Birth Date: July 28, 1924 Federated Fund Complex; Chairman and Trustee, Federated other investment
Federated Investors Tower Investment Management Company; Chairman and Director, companies in the Fund
1001 Liberty Avenue Federated Investors, Inc., Federated Investment Complex
Pittsburgh, PA Counseling and Federated Global Investment Management
CHAIRMAN AND TRUSTEE Corp.; Chairman, Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $266.42 $116,760.63 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's Trust
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries, and 43 other investment
Pittsburgh, PA Inc. (coated steel conduits/computer storage equipment); companies in the Fund
TRUSTEE formerly: Senior Partner, Ernst & Young LLP; Director, Complex
MED 3000 Group, Inc. (physician practice management);
Director, Member of Executive Committee, University of
Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $293.10 $128,455.37 for the Trust
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior and 43 other investment
Grubb & Ellis/Investment Vice President, John R. Wood and Associates, Inc., companies in the Fund
Properties Corporation Realtors; Partner or Trustee in private real estate Complex
3201 Tamiami Trail North ventures in Southwest Florida; formerly: President,
Naples, FL Naples Property Management, Inc. and Northgate Village
TRUSTEE Development Corporation.
Nicholas P. Constantakis++ Director or Trustee of the Federated Fund Complex; $0 $73,191.21 for the
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering, Trust and
175 Woodshire Drive construction, operations and technical services); 37 other investment
Pittsburgh, PA formerly: Partner, Andersen Worldwide SC. companies
TRUSTEE in the Fund Complex
John F. Cunningham Director or Trustee of some of the Federated Fund $197.90 $93,190.48 for the Trust
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive and 37 other investment
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business companies in the Fund
Palm Beach, FL consulting); Trustee Associate, Boston College; Complex
TRUSTEE Director, Iperia Corp (communications/software);
formerly: Director, Redgate Communications and
EMC Corporation (computer storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of the Federated $0 $0 for the Trust and 30
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds other investment
Federated Investors Tower in the Federated Fund Complex; President, Chief companies in the Fund
1001 Liberty Avenue Executive Officer and Director, Federated Investors, Complex
Pittsburgh, PA Inc.; President and Trustee, Federated Investment
PRESIDENT AND TRUSTEE Management Company and Federated Investment Counseling;
President and Director, Federated Global
Investment Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder
Services Company; Director, Federated Services
Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $266.42 $116,760.63 for the Trust
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical and 43 other investment
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - companies in the Fund
Suite 1111 Downtown; Hematologist, Oncologist and Internist, Complex
Pittsburgh, PA University of Pittsburgh Medical Center; Member,
TRUSTEE National Board of Trustees, Leukemia Society of America.
Peter E. Madden Director or Trustee of the Federated Fund Complex; $242.85 $109,153.60 for the Trust
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts and 43 other investment
One Royal Palm Way General Court; President, State Street Bank and Trust companies in the Fund
100 Royal Palm Way Company and State Street Corporation. Complex
Palm Beach, FL
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation; Director, The Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $204.29 $102,573.91 for the
Birth Date: April 10, 1945 Complex; Executive Vice President, Legal and External Trust and 40
80 South Road Affairs, Dugan Valva Contess, Inc. (marketing, other investment
Westhampton Beach, NY communications, technology and consulting); formerly companies in the Fund
TRUSTEE Management Consultant. Complex
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $286.24 $128,455.37 for the
S.J.D.# President, Law Professor, Duquesne University; Trust
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Michael and 43 other investment
President, Duquesne University Baker Corp. (engineering, construction, operations and companies in the Fund
Pittsburgh, PA technical services). Complex
TRUSTEE
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $266.42 $116,760.63 for the
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. Trust
4905 Bayard Street and 43 other investment
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum companies in the Fund
TRUSTEE Company of America; television producer; business owner. Complex
John S. Walsh Director or Trustee of some of the Federated Fund $197.90 $94,536.85 for the Trust
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. and 39 other investment
2007 Sherwood Drive (manufacturer of construction temporary heaters); companies in the Fund
Valparaiso, IN President and Director, Manufacturers Products, Inc. Complex
TRUSTEE (distributor of portable construction heaters);
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the Trust and 42
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice other investment
Federated Investors Tower President and Treasurer of some of the Funds in the company in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
EXECUTIVE VICE PRESIDENT Management Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company.
John W. McGonigle Executive Vice President and Secretary of the Federated $0 $0 for the Trust and 43
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary, and other investment
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated companies in the Fund
1001 Liberty Avenue Investment Management Company and Federated Investment Complex
Pittsburgh, PA Counseling; Director, Federated Global Investment
EXECUTIVE VICE PRESIDENT AND Management Corp., Federated Services Company and
SECRETARY Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President $0 $0 for the Trust and 43
Birth Date: June 17, 1954 - Funds Financial Services Division, Federated other investment
Federated Investors Tower Investors, Inc.; formerly: various management positions companies in the Fund
1001 Liberty Avenue within Funds Financial Services Division of Federated Complex
Pittsburgh, PA Investors, Inc.
TREASURER
Richard B. Fisher President or Vice President of some of the Funds in the $0 $0 for the Trust and 41
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of other investment
Federated Investors Tower the Funds in the Federated Fund Complex; Executive Vice companies in the Fund
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and Complex
Pittsburgh, PA Director, Federated Securities Corp.
VICE PRESIDENT
William D. Dawson, III Chief Investment Officer of this Fund and various other $0 $0 for the Trust and 42
Birth Date: March 3, 1949 Funds in the Federated Fund Complex; Executive Vice other investment
Federated Investors Tower President, Federated Investment Counseling, Federated companies in the Fund
1001 Liberty Avenue Global Investment Management Corp., Federated Investment Complex
Pittsburgh, PA Management Company and Passport Research, Ltd.;
CHIEF INVESTMENT OFFICER Registered Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors,
Inc.; formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company and
Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. $0 $0 for the Trust and 6
Birth Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been a other investment
Federated Investors Tower Senior Portfolio Manager and a Senior Vice President of companies in the Fund
1001 Liberty Avenue the Funds' Adviser since 1997. Ms. Cunningham served as Complex
Pittsburgh, PA a Portfolio Manager and a Vice President of the Adviser
VICE PRESIDENT from 1993 through 1996. Ms. Cunnin gham is a Chartered
Financial Analyst and received her M.B.A. in Finance
from Robert Morris College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $0 $0 for the Trust and 7
Birth Date: September 12, 1953 Ochson joined Federated in 1982 and has been a Senior other investment
Federated Investors Tower Portfolio Manager and a Senior Vice President of the companies in the Fund
1001 Liberty Avenue Funds' Adviser since 1996. From 1988 through 1995, Ms. Complex
Pittsburgh, PA Ochson served as a Portfolio Manager and a Vice
VICE PRESIDENT President of the Funds' Adviser. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
</TABLE>
* An asterisk denotes Trustee who is deemed to be an interested person as
defined in the 1940 Act.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Nicholas P. Constantakis became a member of the Board on October 1, 1999.
He did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated
Funds 0.150 of 1% on the first $250 million 0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million 0.075 of 1% on assets in excess of $750
million The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio. Federated Services Company may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT auditors
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
For the Year Ended October 31 1999 1998 1997
Advisory Fee Earned $1,600,781$1,625,027 $1,319,478
Advisory Fee Reduction 610,335 595,412 518,584
Brokerage Commissions 0 0 0
Administrative Fee 241,398 245,077 199,252
Shareholder Services Fee 448,219 455,008
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
<PAGE>
Average Annual Total Returns and Yield
Total returns are given for the one-year, five-year and Start of Performance
periods ended October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the seven-day
period ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
7-Day Period 1 Year 5 Years Start of Performance on
November 1, 1989
Institutional Service
Shares
Total Return NA 2.64% 2.99% 3.13%
Yield 2.79% NA NA NA
Effective Yield 2.83% NA NA NA
Tax-Equivalent Yield 4.99% NA NA NA
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
Yield, Effective Yield and Tax-Equivalent Yield
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result. The tax-equivalent yield
of Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
<PAGE>
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to the federal
alternative minimum tax and state and/or local taxes.
Taxable Yield Equivalent for 2000 - STATE OF CONNECTICUT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%
Combined Federal and State: 19.50% 32.50% 35.50% 40.50% 44.10%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $161,451-288,350 Over 288,350
Single Return $1-26,250 $26,251-63,550 $63,551-132,600 $132,601-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.24% 1.48% 1.55% 1.68% 1.79%
1.50% 1.86% 2.22% 2.33% 2.52% 2.68%
2.00% 2.48% 2.96% 3.10% 3.36% 3.58%
2.50% 3.11% 3.70% 3.88% 4.20% 4.47%
3.00% 3.73% 4.44% 4.65% 5.04% 5.37%
3.50% 4.35% 5.19% 5.43% 5.88% 6.26%
4.00% 4.97% 5.93% 6.20% 6.72% 7.16%
4.50% 5.59% 6.67% 6.98% 7.56% 8.05%
5.00% 6.21% 7.41% 7.75% 8.40% 8.94%
5.50% 6.83% 8.15% 8.53% 9.24% 9.84%
6.00% 7.45% 8.89% 9.30% 10.08% 10.73%
6.50% 8.07% 9.63% 10.08% 10.92% 11.63%
7.00% 8.70% 10.37% 10.85% 11.76% 12.52%
7.50% 9.32% 11.11% 11.64% 12.61% 13.42%
8.00% 9.94% 11.85% 12.40% 13.45% 14.31%
8.50% 10.56% 12.59% 13.18% 14.29% 15.21%
9.00% 11.18% 13.33% 13.95% 15.13% 16.10%
</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.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to
certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
<PAGE>
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
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.
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.
Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
Federated Funds overview
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999 Federated managed 53 equity funds totaling approximately $18.3
billion in assets across growth, value, equity income, international, index and
sector (i.e. utility) styles. Federated's value-oriented management style
combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1
euro-denominated, with assets approximating $34.1 billion, $35.7 billion and
$13.1 billion and $115 million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
Federated Clients Overview
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
<PAGE>
INVESTMENT RATINGS
Standard & Poor's Short-Term Municipal Obligation Ratings
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
Commercial Paper (CP) Ratings
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
Long-Term Debt Ratings
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
Moody's Investors Service Short-Term Municipal Obligation Ratings
Moody's Investors Service (Moody's) short-term ratings are designated Moody's
Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or VMIG
ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
Commercial Paper (CP) Ratings
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Long-Term Debt Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
Fitch IBCA, 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.
<PAGE>
253
ADDRESSES
connecticut Municipal cash trust
Institutional Service Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PROSPECTUS
Florida Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
CASH II SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax consistent with stability of principal and liquidity and to
maintain an investment portfolio that will cause its shares to be exempt from
the Florida state intangibles tax by investing in a portfolio of high-quality
Florida tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 7
How to Redeem Shares 9
Account and Share Information 11
Who Manages the Fund? 12
Financial Information 12
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Florida Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value (NAV) of $1.00 per share. The Fund's
investment objective is to provide current income exempt from federal regular
income tax consistent with stability of principal and liquidity and to maintain
an investment portfolio that will cause its shares to be exempt from the Florida
state intangibles tax. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Florida tax exempt securities maturing in 397
days or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax. Interest from the
Fund's investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable NAV, it is possible to lose
money by investing in the Fund. 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. The Shares offered by this prospectus are not deposits or obligations of
any bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table below reflect historical performance data
for Cash II Shares of Florida Municipal Cash Trust (the "Former Fund") prior to
its reorganization into the Fund, which is a newly created portfolio of Money
Market Obligations Trust (the "Trust"). On the date of the reorganization,
February 1, 2000, the Former Fund will be dissolved and its net assets
(inclusive of liabilities recorded on the Former Fund's records) will be
transferred to the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Cash II Shares of Florida Municipal Cash Trust as of the
calendar year-end for each of four years. The `y' axis reflects the "% Total
Return" beginning with "0" and increasing in increments of 1% up to 3% . The `x'
axis represents calculation periods from the earliest first full calendar
year-end of the Fund's start of business through the calendar year ended October
31, 1999. The light gray shaded chart features four distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Fund for each calendar year is stated directly
at the top of each respective bar, for the calendar years 1996 through 1999. The
percentages noted are: 2.95%, 2.97%, 2.74% and 2.61%.
Historically, the Former Fund has maintained a constant $1.00 NAV per share. The
bar chart shows the variability of the Former Fund's Cash II Shares total
returns on a calendar year-end basis.
The Former Fund's Cash II Shares were sold without a sales charge (load). The
total returns displayed above are based upon NAV.
Within the period shown in the Chart, the Former Fund's Cash II Shares highest
quarterly return was 0.77% (quarter ended June 30, 1997). Its lowest quarterly
return was 0.56% (quarter ended March 31, 1999).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Cash II Shares Average Annual
Total Returns for the calendar periods ended December 31, 1999.
CALENDAR PERIOD FUND
1 Year 2.61%
Start of Performance 1 2.83%
1 The Former Fund's Cash II Shares start of performance date was November 27,
1995.
The Former Fund's Cash II Shares 7-Day Net Yield as of December 31, 1999 was
3.76%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
FLORIDA MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Cash II Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions)
(as a percentage of
offering price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
<CAPTION>
<S> <C>
ANNUAL FUND OPERATING
EXPENSES (Before Waivers) 1 Expenses That are Deducted From Fund Assets (as a
percentage of average net assets)
Management Fee 2 0.40%
Distribution (12b-1) Fee 3 0.25%
Shareholder Services Fee 0.25%
Other Expenses 0.20%
Total Annual Fund
Operating Expenses 4 1.10%
1 Although not contractually obligated to do so, the adviser and distributor
expect to waive certain amounts during the fiscal year ending October 31, 2000.
These are shown below along with the net expenses the Fund expects to actually
pay for the fiscal year ending October 31, 2000.
Total Waiver of Fund
Expenses 0.24%
Total Actual Annual Fund
Operating Expenses (after
waivers) 0.86%
2 The adviser expects to voluntarily waive a portion of the management fee. The
adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.19% for the fiscal year ending October 31, 2000.
3 The distributor expects to voluntarily waive a portion of the distribution (12b-
1) fee. The distributor can terminate this anticipated voluntary waiver at any
time. The distribution (12b-1) fee paid by the Fund's Cash II Shares (after the
anticipated voluntary waiver) is expected to be 0.22% for the fiscal year ending
October 31, 2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of the
Former Fund as a portfolio of the Trust, the Total Annual Fund Operating Expenses
and Total Actual Annual Fund Operating Expenses (after waivers) for the Former
Fund's Cash II Shares were 1.10% and 0.86%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Cash II Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Cash II Shares for the
time periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Cash II Shares operating expenses are BEFORE WAIVERS as
estimated in the table below and remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
1 Year $ 112
2 Years $ 350
5 Years $ 606
10 Years $ 1,340
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Florida tax exempt securities
maturing in 397 days or less. The Fund will invest its assets so that at least
80% of its annual interest income is exempt from federal regular income tax.
Interest from the Fund's investments may be subject to AMT. The dollar-weighted
average maturity of the Fund's portfolio will be 90 days or less. The Adviser
actively manages the Fund's portfolio, seeking to limit the credit risk taken by
the Fund and select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal income tax and the Florida
intangibles tax. It may do this to minimize potential losses and maintain
liquidity to meet shareholder redemptions during adverse market conditions. This
may cause the Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Florida issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
FLORIDA SECTOR RISKS
Since the Fund invests primarily in issuers from Florida, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Florida's economy is centered on the trade and services industry; it is also
influenced by agriculture and tourism, which is the main driver of the state's
economy.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge. NAV is determined at 12:00 noon and 1:00 p.m.
(Eastern time) and as of the end of regular trading (normally 4:00 p.m. Eastern
time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $10,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Shares and Cash II Shares, each
representing interests in a single portfolio of securities. This prospectus
relates only to Cash II Shares. Each share class has different expenses, which
affect their performance. Contact your investment professional or call
1-800-341-7400 for more information concerning the other class.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions or to individuals directly or
through investment professionals. The Fund may not be a suitable investment for
retirement plans or for non-Florida taxpayers because it invests in Florida
municipal securities.
When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Class II Shares. Because these Shares pay
marketing fees on an ongoing basis, your investment cost may be higher over time
than other shares with different sales charges and marketing fees.
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time) your redemption will be wired to you
the following business day. You will receive that day's dividend. Under limited
circumstances, arrangements may be made with the Distributor for same-day
payment of redemption proceeds, without that day's dividend, for redemption
requests received before 2:00 p.m. (Eastern time).
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the Florida intangibles tax to the extent they are derived
from interest on obligations exempt from the Florida intangibles tax. Capital
gains and non-exempt dividends are taxable whether paid in cash or reinvested in
the Fund. Redemptions are taxable sales. Please consult your tax adviser
regarding your federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance since inception. Some of the information is presented on a per share
basis. Total returns represent the rate an investor would have earned (or lost)
on an investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.03 0.03 0.03
LESS DISTRIBUTIONS:
Distributions from net investment income (0.02) (0.03) (0.03) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 2 2.53% 2.83% 2.94% 2.80%
RATIOS TO AVERAGE NET ASSETS:
Expenses 3 1.10% 1.04% 1.04% 1.09% 4
Net investment income 3 2.28% 2.64% 2.64% 2.64% 4
Expenses (after waivers) 0.86% 0.85% 0.80% 0.65% 4
Net investment income (after waivers) 2.52% 2.83% 2.88% 3.07% 4
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $216,926 $71,839 $62,756 $31,824
</TABLE>
1 Reflects operations for the period from November 27, 1995 (date of initial
public investment) to October 31, 1996.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
4 Computed on an annualized basis
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
Florida Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
CASH II SHARES
PROSPECTUS
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report, the Semi-Annual Report and other information without charge,
and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Florida Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N344
G00537-02-CII (1/00)
[Graphic]
PROSPECTUS
Florida Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax consistent with stability of principal and liquidity and to
maintain an investment portfolio that will cause its shares to be exempt from
the Florida state intangibles tax by investing in a portfolio of high-quality
Florida tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 7
How to Redeem Shares 9
Account and Share Information 11
Who Manages the Fund? 12
Financial Information 13
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Florida Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value (NAV) of $1.00 per share. The Fund's
investment objective is to provide current income exempt from federal regular
income tax consistent with stability of principal and liquidity and to maintain
an investment portfolio that will cause its shares to be exempt from the Florida
state intangibles tax. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Florida tax exempt securities maturing in 397
days or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax. Interest from the
Fund's investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable NAV, it is possible to lose
money by investing in the Fund. 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. The Shares offered by this prospectus are not deposits or obligations of
any bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Shares of Florida Municipal Cash Trust (the "Former Fund")
prior to its reorganization into the Fund, which is a newly created portfolio of
Money Market Obligations Trust (the "Trust"). On the date of the reorganization,
February 1, 2000, the Former Fund will be dissolved and its net assets
(inclusive of liabilities recorded on the Former Fund's records) will be
transferred to the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Institutional Shares of Florida Municipal Cash Trust as
of the calendar year-end for each of five years. The `y' axis reflects the "%
Total Return" beginning with "0" and increasing in increments of 1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Fund's start of business through the calendar year
ended October 31, 999. The light gray shaded chart features five distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Fund for each calendar year is
stated directly at the top of each respective bar, for the calendar years 1995
through 1999, The percentages noted are: 3.59%, 3.13%, 3.23%, 3.01% and 2.87%.
Historically, the Former Fund has maintained a constant $1.00 NAV per share. The
bar chart shows the variability of the Former Fund's Institutional Shares total
returns on a calendar year-end basis.
The Former Fund's Institutional Shares were sold without a sales charge (load).
The total returns displayed above are based upon NAV.
Within the period shown in the Chart, the Former Fund's Institutional Shares
highest quarterly return was 0.93% (quarter ended June 30, 1995). Its lowest
quarterly return was 0.62% (quarter ended March 31, 1999).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Institutional Shares Average
Annual Total Returns for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
CALENDAR PERIOD FUND
<S> <C>
1 Year 2.87%
5 Years 3.17%
Start of Performance 1 3.18%
</TABLE>
1 The Former Fund's Institutional Shares start of performance date was September
21, 1994.
The Former Fund's Institutional Shares 7-Day Net Yield as of December 31, 1999
was 4.02%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
FLORIDA MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C> Fees Paid Directly From Your Investment Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of offering price) None Maximum Deferred
Sales Charge (Load) (as a percentage of original purchase price or redemption
proceeds, as applicable) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
(and other Distributions) (as a percentage of offering price) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>
<S> <C>
ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 2 0.40%
Distribution (12b-1) Fee 3 0.25%
Shareholder Services Fee 4 0.25%
Other Expenses 0.20%
Total Annual Fund
Operating Expenses 5 1.10%
1 Although not contractually obligated to do so, the adviser, distributor and
shareholder services provider expect to waive certain amounts during the fiscal
year ending October 31, 2000. These are shown below along with the net expenses
the Fund expects to actually pay for the fiscal year ending October 31, 2000.
Total Waiver of Fund Expenses 0.52%
Total Actual Annual Fund Operating Expenses (after waivers) 0.58%
2 The adviser expects to voluntarily waive a portion of the management fee. The
adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.19% for the fiscal year ending October 31, 2000. 3 The
distributor does not expect to accrue or charge its distribution (12b-1) fee of
0.25% during the fiscal year ending October 31, 2000. The distributor can accrue
its fee, and thereby terminate this anticipated voluntary waiver of the
distribution (12b-1) fee, at any time. The distribution (12b-1) fee paid by the
Fund's Institutional Shares (after the anticipated voluntary waiver) is expected
to be 0.00% for the fiscal year ending October 31, 2000. 4 The shareholder
services provider expects to voluntarily waive a portion of the shareholder
services fee. The shareholder services provider can terminate this anticipated
voluntary waiver at any time. The shareholder services fee paid by the Fund's
Institutional Shares (after the anticipated voluntary waiver) is expected to be
0.19% for the fiscal year ending October 31, 2000. 5 For the fiscal year ended
October 31, 1999, prior to the reorganization of the Former Fund as a portfolio
of the Trust, the Total Annual Fund Operating Expenses and Total Actual Annual
Fund Operating Expenses (after waivers) for the Former Fund's Institutional
Shares were 1.10% and 0.58%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Institutional Shares operating expenses are BEFORE
WAIVERS as estimated in the table below and remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 112
3 Years $ 350
5 Years $ 606
10 Years $ 1,340
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Florida tax exempt securities
maturing in 397 days or less. The Fund will invest its assets so that at least
80% of its annual interest income is exempt from federal regular income tax.
Interest from the Fund's investments may be subject to AMT. The dollar-weighted
average maturity of the Fund's portfolio will be 90 days or less. The Adviser
actively manages the Fund's portfolio, seeking to limit the credit risk taken by
the Fund and to select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors, such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal income tax and the Florida
intangibles tax. It may do this to minimize potential losses and maintain
liquidity to meet shareholder redemptions during adverse market conditions. This
may cause the Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Florida issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
FLORIDA SECTOR RISKS
Since the Fund invests primarily in issuers from Florida, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Florida's economy is centered on the trade and services industry; it is also
influenced by agriculture and tourism, which is the main driver of the state's
economy.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge. NAV is determined at 12:00 noon and 1:00 p.m.
(Eastern time) and as of the end of regular trading (normally 4:00 p.m. Eastern
time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $10,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Shares and Cash II Shares, each
representing interests in a single portfolio of securities. This prospectus
relates only to Institutional Shares. Each share class has different expenses,
which affect their performance. Contact your investment professional or call
1-800-341-7400 for more information concerning the other class.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-Florida
taxpayers because it invests in Florida municipal securities.
When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Institutional Shares. Because these Shares pay
marketing fees on an ongoing basis, your investment cost may be higher over time
than other shares with different sales charges and marketing fees.
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend.
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the Florida intangibles tax to the extent they are derived
from interest on obligations exempt from the Florida intangibles tax. Capital
gains and non-exempt dividends are taxable whether paid in cash or reinvested in
the Fund. Redemptions are taxable sales. Please consult your tax adviser
regarding your federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights
will help you understand the Fund's financial performance since inception. Some
of the information is presented on a per share basis. Total returns represent
the rate an investor would have earned (or lost) on an investment in the Fund,
assuming reinvestment of any dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03 0.03 0.03 0.03 0.04
LESS DISTRIBUTIONS:
Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.04)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 1 2.79% 3.09% 3.20% 3.20% 3.60%
RATIOS TO AVERAGE NET ASSETS:
Expenses 2 0.85% 0.77% 0.79% 0.83% 0.87%
Net investment income 2 2.49% 2.77% 2.90% 2.83% 3.16%
Expenses (after waivers) 0.58% 0.58% 0.54% 0.49% 0.45%
Net investment income (after waivers) 2.76% 2.96% 3.15% 3.17% 3.58%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $136,841 $157,194 $479,860 $500,993 $153,347
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
Florida Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report, the Semi-Annual Report and other information without charge,
and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Florida Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N336
005392 (1/00)
[Graphic]
Statement of Additional Information
FLORIDA MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
institutional shares
cash ii shares
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Florida Municipal Cash Trust
(Fund), dated January 31, 2000. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectuses or the Annual Report without charge by
calling 1-800-341-7400.
january 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
What Do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip 60934N336
Cusip 60934N344
G00537-01 (1/00)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on September 19, 1994,
will be reorganized as a portfolio of the Trust on February 1, 2000.
The Board of Trustees (the Board) has established two classes of shares of the
Fund, known as Institutional Shares and Cash II Shares (Shares). This SAI
relates to both classes of Shares. The Fund's investment adviser is Federated
Investment Management Company (Adviser). Effective March 31, 1999, Federated
Management, former adviser to the Fund, became Federated Investment Management
Company (formerly, Federated Advisers).
SECURITIES IN WHICH THE FUND INVESTS
The Fund's principal securities are described in its prospectus. Additional
securities, and further details regarding the principal securities, are outlined
below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its
charter or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues
received by the issuer such as specific taxes, assessments, tolls or
fees. Bondholders may not collect from the municipality's general taxes
or revenues. For example, a municipality may issue bonds to build a
toll road, and pledge the tolls to repay the bonds. Therefore, a
shortfall in the tolls normally would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The
municipality would lend the proceeds from its bonds to the company
using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable
solely from the company's loan payments, not from any other
revenues of the municipality. Therefore, any default on the loan
normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to
the federal alternative minimum tax (AMT). The Fund may invest in
bonds subject to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end
a lease, without penalty, by not providing for the lease payments in
its annual budget. After the lease ends, the lessor can resell the
equipment or facility but may lose money on the sale. The Fund may
invest in securities supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities
at a price below the amount payable at maturity. The difference between
the purchase price and the amount paid at maturity represents interest
on the zero coupon security. Investors must wait until maturity to
receive interest and principal, which increases the interest rate risks
and credit risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of
credit, bond insurance and surety bonds. Credit enhancement also
includes arrangements where securities or other liquid assets secure
payment of a fixed income security. If a default occurs, these assets
may be sold and the proceeds paid to the security's holders. Either
form of credit enhancement reduces credit risks by providing another
source of payment for a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
Inter-fund Borrowing and Lending Arrangements
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. (Federated funds) to lend
and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary
for both borrowing and lending funds, and an inter-fund loan is only made if it
benefits each participating fund. Federated administers the program according to
procedures approved by the Board, and the Board monitors the operation of the
program. Any inter-fund loan must comply with certain conditions set out in the
exemption, which are designed to assure fairness and protect all participating
funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may be
made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the Bank Loan Rate), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate."
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the underlying
assets or set aside readily marketable securities with a value that equals or
exceeds the Fund's obligations. Unless the Fund has other readily marketable
assets to set aside, it cannot trade assets used to secure such obligations
without terminating the special transaction. This may cause the Fund to miss
favorable trading opportunities or to realize losses on special transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government
of the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types
of corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If
the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
Investment Ratings
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's (S&P), MIG-1 or MIG-2
by Moody's Investors Service (Moody's), or F-1+, F-1 or F-2 by Fitch IBCA, 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 rating service can be treated as being in one of
the two highest short-term rating categories; currently, such securities must be
rated by two nationally recognized statistical rating organizations in one of
their two highest rating categories. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
Fundamental INVESTMENT Objective and Policy
The investment objective of the Fund is to provide current income exempt from
federal regular income tax consistent with stability of principal and liquidity
and to maintain an investment portfolio that will cause its shares to be exempt
from the Florida state intangibles tax.
The Fund invests in tax-exempt securities so that at least 80% its annual
interest income is exempt from federal regular income tax.
This investment objective and policy may not be changed by the Board without
shareholder approval.
I
<PAGE>
NVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
IInvesting in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
Securities Act of 1933.
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.
For purposes of the concentration limitation: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, the Fund
will not exclude foreign bank instruments from industry concentration limitation
tests so long as the policy of the SEC remains in effect. In addition,
investments in certain industrial development bonds funded by activities in a
single industry will be deemed to constitute investment in an industry, except
when held for temporary defensive purposes. The investment of more than 25% of
the value of the Fund's total assets in any one industry will constitute
"concentration."
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 SAI , in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7
(Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board will take any steps it considers 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.
WHAT DO SHARES COST?
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
<PAGE>
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
RULE 12B-1 PLAN
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.
The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.
For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing-related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 20 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of the outstanding Institutional Shares: Vito J. Spitaleri,
Miami Beach ,Florida, owned approximately 25,300,072.78 (11.78%) shares,
Wackenhut Correction Corp., Palm Beach Gardens, Florida owned approximately,
21,529,694.67 (9.68%) shares, Calhoun & Co., Detroit, Michigan, owned
approximately 17,861,575.08 (8.03%) shares, and Wachovia Securities Inc.,
Charlotte, North Carolina, owned approximately 16,217,826.53 (7.29%) shares.
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of the outstanding Cash II Shares: Trustman,
Atlanta, Georgia, owned approximately 458,557,799.19 (97.39%) shares.
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
<PAGE>
STATE TAXES
Florida Intangibles Tax
Shareholders of the Fund that are subject to the Florida intangibles tax will
not be required to include the value of their Fund shares in their taxable
intangible property if 90% of the Fund's investments on the annual assessment
date are obligations that would be exempt from such tax if held directly by such
shareholders, such as Florida and U.S. government obligations. As described
earlier, the Fund will normally attempt to invest substantially all of its
assets in securities which are exempt from the Florida intangibles tax.
Accordingly, the value of the Fund shares held by a shareholder should under
normal circumstances be exempt from the Florida intangibles tax.
However, if less than 90% of the portfolio consists of assets which are exempt
on the annual assessment date, only the portion of the shares of the Fund which
relate to securities issued by the United States and its possessions and
territories will be exempt from the Florida intangibles tax, even if they partly
relate to Florida tax-exempt securities.
Florida State Municipal Taxation
In a majority of states that have an income tax, dividends paid by a mutual fund
attributable to investments in a particular state's municipal obligations are
exempt from both federal and such state's income tax. If Florida were to adopt
an income tax in the future, and assuming that its income tax policy with
respect to mutual funds investing in Florida state and local municipal
obligations would be similar to the general tax policy of other states,
dividends paid by the Fund would be exempt from Florida state income tax. A
constitutional amendment approved by referendum would be required before an
individual tax could be imposed.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1,2000, the
Trust will be comprised of 40 Funds. The Federated Fund Complex is comprised of
43 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January 12, 1999, , the Fund's Board and Officers as a group owned less
than 1% of the Fund's outstanding Shares.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
<PAGE>
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Name
Birth Date Aggregate Total Compensation
Address Principal Occupations Compensation From Trust and Fund
Position With Fund for Past Five Years From Fund Complex
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of the $0 $0 for the Trust and 54
Birth Date: July 28, 1924 Federated Fund Complex;.; Chairman and Trustee, other investment
Federated Investors Tower Federated Investment Management Company; Chairman and companies in the Fund
1001 Liberty Avenue Director, Federated Investors, Inc., Federated Complex
Pittsburgh, PA Investment Counseling, and Federated Global Investment
CHAIRMAN AND TRUSTEE Management Corp.; Chairman, Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $255.59 $113,860.22 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's Trust
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries, and 54 other investment
Pittsburgh, PA Inc. (coated steel conduits/computer storage equipment); companies in the Fund
TRUSTEE formerly: Senior Partner, Ernst & Young LLP; Director, Complex
MED 3000 Group, Inc. (physician practice management);
Director, Member of Executive Committee, University of
Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $281.19 $125,264.48 for the Trust
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior and 54 other investment
Grubb & Ellis/Investment Vice President, John R. Wood and Associates, Inc., companies in the Fund
Properties Corporation Realtors; Partner or Trustee in private real estate Complex
3201 Tamiami Trail North ventures in Southwest Florida; formerly: President,
Naples, FL Naples Property Management, Inc. and Northgate Village
TRUSTEE Development Corporation.
Nicholas P. Constantakis++ Director or Trustee of the Federated Fund Complex; $0 $47,958.02 for the
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering, Trust and
175 Woodshire Drive construction, operations and technical services); 29 other investment
Pittsburgh, PA formerly: Partner, Andersen Worldwide SC. companies
TRUSTEE in the Fund Complex
John F. Cunningham Director or Trustee of some of the Federated Fund $1193.16 $0 for the Trust and 46
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive other investment
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business companies in the Fund
Palm Beach, FL consulting); Trustee Associate, Boston College; Complex
TRUSTEE Director, Iperia Corp. (communications/software);
formerly: Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of the Federated $0 $0 for the Trust and 16
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds other investment
Federated Investors Tower in the Federated Fund Complex; President, Chief companies in the Fund
1001 Liberty Avenue Executive Officer and Director, Federated Investors, Complex
Pittsburgh, PA Inc.; President and Trustee, Federated Investment
PRESIDENT AND TRUSTEE Management Company and Federated Investment Counseling,
President and Director, Federated Global
Investment Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder
Services Company; Director, Federated Services
Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $255.59 $113,860.22 for the Trust
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical and 54 other investment
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - companies in the Fund
Suite 1111 Downtown; Hematologist, Oncologist and Internist, Complex
Pittsburgh, PA University of Pittsburgh Medical Center; Member,
TRUSTEE National Board of Trustees, Leukemia Society of America.
Peter E. Madden Director or Trustee of the Federated Fund Complex; $214.16 $113,860.22 for the Trust
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts and 54 other investment
One Royal Palm Way General Court; President, State Street Bank and Trust companies in the Fund
100 Royal Palm Way Company and State Street Corporation. Complex
Palm Beach, FL
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation; Director, The Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $197.82 $0 for the Trust and 50
Birth Date: April 10, 1945 Complex; Executive Vice President, Legal and External other investment
80 South Road Affairs, Dugan Valva Contess, Inc. (marketing, companies in the Fund
Westhampton Beach, NY communications, technology and consulting).; formerly Complex
TRUSTEE Management Consultant.
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $274.94 $113,860.22 for the
S.J.D.# President, Law Professor, Duquesne University; Trust
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Michael and 54 other investment
President, Duquesne University Baker Corp. (engineering, construction, operations and companies in the Fund
Pittsburgh, PA technical services). Complex
TRUSTEE
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $255.59 $113,860.22 for the
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. Trust
4905 Bayard Street and 54 other investment
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum companies in the Fund
TRUSTEE Company of America; television producer; business owner. Complex
John S. Walsh Director or Trustee of some of the Federated Fund $193.16 $0 for the Trust and 48
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. other investment
2007 Sherwood Drive (manufacturer of construction temporary heaters); companies in the Fund
Valparaiso, IN President and Director, Manufacturers Products, Inc. Complex
TRUSTEE (distributor of portable construction heaters);
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
<PAGE>
Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the Trust and 1
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice other investment
Federated Investors Tower President and Treasurer of some of the Funds in the company in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
EXECUTIVE VICE PRESIDENT Management Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company.
John W. McGonigle Executive Vice President and Secretary of the Federated $0 $0 for the Trust and 54
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary and other investment
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated companies in the Fund
1001 Liberty Avenue Investment Management Company, Federated Investment Complex
Pittsburgh, PA Counseling; Director, Federated Global Investment
EXECUTIVE VICE PRESIDENT AND Management Corp., Federated Services Company and
SECRETARY Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President $0 $0 for the Trust and 54
Birth Date: June 17, 1954 - Funds Financial Services Division, Federated other investment
Federated Investors Tower Investors, Inc.; formerly: various management positions companies in the Fund
1001 Liberty Avenue within Funds Financial Services Division of Federated Complex
Pittsburgh, PA Investors, Inc.
TREASURER
Richard B. Fisher President or Vice President of some of the Funds in the $0 $0 for the Trust and 6
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of other investment
Federated Investors Tower the Funds in the Federated Fund Complex; Executive Vice companies in the Fund
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and Complex
Pittsburgh, PA Director, Federated Securities Corp.
VICE PRESIDENT
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
William D. Dawson, III Chief Investment Officer of this Fund and various other $0 $0 for the Trust and 41
Birth Date: March 3, 1949 Funds in the Federated Fund Complex; Executive Vice other investment
Federated Investors Tower President, Federated Investment Counseling, Federated companies in the Fund
1001 Liberty Avenue Global Investment Management Corp., Federated Investment Complex
Pittsburgh, PA Management Company and Passport Research, Ltd.;
CHIEF INVESTMENT OFFICER Registered Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors,
Inc.; formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company and
Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. $0 $0 for the Trust and 6
Birth Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been a other investment
Federated Investors Tower Senior Portfolio Manager and a Senior Vice President of companies in the Fund
1001 Liberty Avenue the Funds' Adviser since 1997. Ms. Cunningham served as Complex
Pittsburgh, PA a Portfolio Manager and a Vice President of the Adviser
VICE PRESIDENT from 1993 through 1996. Ms. Cunnin gham is a Chartered
Financial Analyst and received her M.B.A. in Finance
from Robert Morris College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $0 $0 for the Trust and 7
Birth Date: September 12, 1953 Ochson joined Federated in 1982 and has been a Senior other investment
Federated Investors Tower Portfolio Manager and a Senior Vice President of the companies in the Fund
1001 Liberty Avenue Funds' Adviser since 1996. From 1988 through 1995, Ms. Complex
Pittsburgh, PA Ochson served as a Portfolio Manager and a Vice
VICE PRESIDENT President of the Funds' Adviser. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the 1940 Act.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Mr. Constantakis became a member of the Board on October 1, 1999. He did
not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
Maximum Administrative Fee Average Aggregate Daily Net Assets of the
Federated Funds
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
<PAGE>
INDEPENDENT auditors
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
<TABLE>
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FEES PAID BY THE FUND FOR SERVICES
For the Year Ended October 31 1999 1998 1997
Advisory Fee Earned $ 1,118,018 $2,032,071 $2,318,654
Advisory Fee Reduction $ 566,594 $686,562 $1,092,531
Brokerage Commissions $ 0 $0 $0
Administrative Fee $ 210,746 $383,094 $437,669
12b-1 Fee
Institutional Shares $ -- --
Cash II Shares $ 307,114
Shareholder Services Fee
Institutional Shares $ 391,648 -- --
Cash II Shares $ 307,114 -- --
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
<PAGE>
Average Annual Total Returns and Yield
Total returns are given for the one-year, five-year and Start of Performance
periods ended October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the 7-day period
ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
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Start of Performance on
7-Day Period 1 Year 5 Years September 21, 1994
Institutional Shares
Total Return -- 2.79% 3.18% 3.18%
Yield 3.03% -- -- --
Effective Yield 3.08% -- -- --
Tax-Equivalent Yield 5.02% -- -- --
- -----------------------------------------------------------------------------------------------------------------
Start of Performance on
7-Day Period 1 Year November 27, 1995
Cash II Shares
Total Return -- 2.53% 2.82%
Yield 2.77% -- --
Effective Yield 2.81% -- --
Tax-Equivalent Yield 4.59% -- --
- --------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
Yield, Effective Yield and Tax-Equivalent Yield
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result. The tax-equivalent yield
of Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
<PAGE>
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to AMT and
state and/or local taxes.
<TABLE>
<CAPTION>
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TAX EQUIVALENCY TABLE
Taxable Yield Equivalent for 2000 - STATE OF FLORIDA
Federal Income Tax Bracket: 15.00% 28.00% 31.00% 36.00% 39.60%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $161,451-288,350 Over 288,350
Single Return $1-26,250 $26,251-63,550 $63,551-132,600 $132,601-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.33% 1.54% 1.60% 1.71% 1.81%
1.50% 1.91% 2.23% 2.32% 2.49% 2.63%
2.00% 2.50% 2.93% 3.05% 3.28% 3.46%
2.50% 3.09% 3.62% 3.77% 4.06% 4.29%
3.00% 3.68% 4.32% 4.50% 4.84% 5.12%
3.50% 4.27% 5.01% 5.22% 5.62% 5.94%
4.00% 4.86% 5.71% 5.95% 6.40% 6.77%
4.50% 5.44% 6.40% 6.67% 7.18% 7.60%
5.00% 6.03% 7.09% 7.40% 7.96% 8.43%
5.50% 6.62% 7.79% 8.12% 8.74% 9.26%
6.00% 7.21% 8.48% 8.85% 9.53% 10.08%
6.50% 7.80% 9.18% 9.57% 10.31% 10.91%
7.00% 8.39% 9.87% 10.29% 11.09% 11.74%
7.50% 8.97% 10.57% 11.02% 11.87% 12.57%
8.00% 9.56% 11.26% 11.74% 12.65% 13.40%
8.50% 10.15% 11.96% 12.47% 13.43% 14.22%
9.00% 10.74% 12.65% 13.19% 14.21% 15.05%
<PAGE>
TAX EQUIVALENCY TABLE
Taxable Yield Equivalent for 2000 MultiState Municipal Fund
Federal Income Tax Bracket: 15.00% 28.00% 31.00% 36.00% 39.60%
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $161,451-288,350 Over 288,350
Single Return $1-26,250 $26,251-63,550 $63,551-132,600 $132,601-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
8.50% 10.00% 11.81% 12.32% 13.28% 14.07%
9.00% 10.59% 12.50% 13.04% 14.06% 14.90%
</TABLE>
Note:The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent.
<PAGE>
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
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.
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.
Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day effective
yield.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
Federated Funds overview
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24and 1 euro-denominated with
assets approximating $34.1 billion, $35.7 billion, $13.1 billion and $115
million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
Federated Clients Overview
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
<PAGE>
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
INVESTMENT RATINGS
Standard & Poor's Short-Term Municipal Obligation Ratings
An 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 And Tender Option Bonds Ratings
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
Commercial Paper 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 rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
Moody's Investors Service 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 And Tender Option Bonds Ratings
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
Commercial Paper (CP) Ratings
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Long-Term Debt Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
Fitch ibca, 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.
<PAGE>
ADDRESSES
florida municipal cash trust
Institutional Shares
Cash II Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PROSPECTUS
Georgia Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income tax imposed by the State of Georgia
consistent with stability of principal and liquidity by investing in a portfolio
of high-quality Georgia tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Contents
<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 4
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 6
How to Redeem Shares 8
Account and Share Information 10
Who Manages the Fund? 10
Financial Information 11
</TABLE>
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Georgia Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value of $1.00 per share. The Fund's investment
objective is current income exempt from federal regular income tax and the
personal income tax imposed by the State of Georgia consistent with stability of
principal and liquidity. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Georgia tax exempt securities maturing in 397
days or less. The Fund will invest so that at least 80% of its annual interest
income is exempt from federal regular income tax and Georgia state income tax.
Interest from the Fund's investments may be subject to the federal alternative
minimum tax for individuals and corporations (AMT). The dollar-weighted average
maturity of the Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other government
agency.
Risk/Return Bar Chart and Table
The Bar Chart and Performance Table below reflect historical performance data
for Georgia Municipal Cash Trust (Former Fund) prior to its reorganization into
the Fund, which is a newly created portfolio of Money Market Obligations Trust
(Trust). On the date of the reorganization, February 1, 2000, the Former Fund
was dissolved and it net assets (inclusive of liabilities recorded on the Former
Fund's records) were transferred into the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Former Fund as of the calendar year-end for each of
four years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's start of business through the calendar
year ended 1999. The light gray shaded chart features four distinct vertical
bars, each shaded in charcoal, and each visually representing by height the
total return percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Former Fund for each calendar year is
stated directly at the top of each respective bar, for the calendar years 1996
through 1999, The percentages noted are: 3.27%, 3.42%, 3.25%, and 3.00%,
respectively.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's total
returns on a calendar year-end basis.
The Former Fund's Shares were not sold subject to a sales charge (load). The
total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's highest quarterly return
was 0.89% (quarter ended June 30, 1997). Its lowest quarterly return was 0.66%
(quarter ended March 31, 1999).
Average Annual Total Return Table
The following table represents the Former Fund's Average Annual Total Returns
for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year 3.00%
Start of Performance/1/ 3.29%
</TABLE>
/1/ The Former Fund's start of performance date was August 22, 1995.
The Former Fund's 7-Day Net Yield as of December 31, 1999 was 4.21%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
GEORGIA MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
<TABLE>
<CAPTION>
Shareholder Fees
Fees Paid Directly From Your Investment
<S>
<C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, as applicable) None Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and other Distributions) (as a percentage of offering
price) None
Redemption Fee (as a percentage of amount redeemed, if
applicable) None
Exchange
Fee
None
Annual Fund Operating Expenses (Before Waivers)/1/
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management
Fee/2/
0.50%
Distribution (12b-1)
Fee None
Shareholder Services
Fee/3/ 0.25%
Other
Expenses
0.16%
Total Annual Fund Operating
Expenses/4/ 0.91%
</TABLE>
/1/ Although not contractually obligated to do so, the Adviser expects to waive
certain amounts during the fiscal year ending October 31, 2000. These are
shown below along with the net expenses the Fund expects to actually pay for
the fiscal year ending October 31, 2000.
Total Waiver of Fund Expenses 0.42%
Total Actual Annual Fund Operating Expenses (after waivers) 0.49%
/2/ The Adviser expects to voluntarily waive a portion of the management fee.
The Adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.14% for the fiscal year ending October 31, 2000.
/3/ The shareholder services provider expects to voluntarily waive a portion of
the shareholder services fee. The shareholder services provider can
terminate this anticipated voluntary waiver at any time. The shareholder
services fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.19% for the fiscal year ending October 31, 2000.
/4/ For the fiscal year ended October 31, 1999, prior to the reorganization of
the Former Fund as a Portfolio of the Trust, the Total Annual Fund Operating
Expenses and Total Actual Annual Fund Operating Expenses (after waivers) for
the Former Fund were 0.91% and 0.49%, respectively.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Shares for the time
periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Shares operating expenses are before waivers as estimated in
the table and remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year $ 93
3 Years $ 290
5 Years $ 504
10 Years $1,120
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Georgia tax exempt securities
maturing in 397 days or less. The Fund will invest so that at least 80% of its
annual interest income is exempt from federal regular income tax and Georgia
state income tax. Interest from the Fund's investments may be subject to AMT.
The dollar-weighted average maturity of the Fund's portfolio will be 90 days or
less. The Adviser actively manages the Fund's portfolio, seeking to limit the
credit risk taken by the Fund and select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and Georgia income tax. It
may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as
Standard & Poor's and Moody's Investors Service. These services assign ratings
to securities by assessing the likelihood of issuer default. Lower credit
ratings correspond to higher credit risk. If a security has not received a
rating, the Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Georgia issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
GEORGIA RISKS
Since the Fund invests primarily in issuers from Georgia, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Georgia's stable and broad-based manufacturing (textiles, food products, paper
products, electronic equipment and aircraft), trade, service and transportation
oriented economy has produced steady economic growth. The diversity of the
state's economy has also produced strong employment growth fueled by the fast-
growing service sector, which more than offsets certain manufacturing sector
losses. These trends, supported by strong in-migration, are expected to
continue.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $10,000 minimum
is reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non- Georgia
taxpayers because it invests in Georgia municipal securities.
The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 1:00
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption
amount you will receive is based upon the next calculated NAV after the Fund
receives the order from your investment professional. Investment professionals
are responsible for promptly submitting redemption requests and providing proper
written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon p.m. (Eastern time) your redemption will be
wired to you the same day. You will not receive that day's dividend.
If you call after 12:00 noon p.m. (Eastern time) your redemption will be wired
to you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for same-
day payment of redemption proceeds, without that day's dividend, for redemption
requests received before 2:00 p.m. (Eastern time).
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317 All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is an
ACH member; or
. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from Georgia state personal income tax to the extent they are
derived from interest on obligations exempt from Georgia personal income taxes.
Capital gains and non-exempt dividends are taxable whether paid in cash or
reinvested in the Fund. Redemptions are taxable sales. Please consult your tax
adviser regarding your federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in this prospectus.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
Year Ended October 31 1999 1998 1997
1996 1995/1/
<S> <C> <C> <C>
<C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Income From Investment
Operations:
Net investment income 0.03 0.03 0.03
0.03 0.01
Less
Distributions:
Distributions from net investment income (0.03) (0.03) (0.03)
(0.03) (0.01)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Total Return/2/ 2.94% 3.33% 3.38%
3.37% 0.73%
Ratios to Average Net
Assets:
Expenses/3/ 0.91% 0.93% 0.92%
0.98% 1.00%/4/
Net investment income/3/ 2.48% 2.84% 2.90%
2.79% 3.06%/4/
Expenses (after waivers) 0.49% 0.49% 0.49%
0.46% 0.25%/4/
Net investment income (after waivers) 2.90% 3.28% 3.33%
3.31% 3.81%/4/
Supplemental
Data:
Net assets, end of period (000 omitted) $ 267,132 $ 168,098 $ 121,858 $ 122,940
$ 111,278
</TABLE>
/1/ Reflects operations for the period from August 22, 1995 (date of initial
public investment) to October 31, 1995.
/2/ Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
/3/ During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
/4/ Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[FEDERATED LOGO APPEARS HERE]
Georgia Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
SemiAnnual Report to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
Annual Report, Semi-Annual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
[FEDERATED LOGO APPEARS HERE]
Georgia Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N328
G01204-01 (01/00)
Federated is a registered mark
of Federated Investors, Inc.
2000 (c)Federated Investors, Inc.
[RECYCLED LOGO APPEARS HERE]
STATEMENT OF ADDITIONAL INFORMATION
Georgia Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Georgia Municipal Cash Trust (Fund),
dated January 31, 2000. Obtain the prospectus without charge by calling
1-800-341-7400.
JANUARY 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Investment Ratings
Addresses
Cusip 314229691
G01204-02 (1/00)
How is the Fund Organized?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established September 1, 1989,
will be reorganized as a portfolio of the Trust on February 1, 2000.
The Fund's investment adviser is Federated Investment Management Company.
Effective March 31, 1999, Federated Management, former Adviser to the Fund,
became Federated Investment Management Company (formerly, Federated Advisers).
Securities in Which the Fund Invests
The Fund's principal securities are described in its prospectus. Additional
securities, and further information regarding the principal securities, are
outlined below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to regular federal income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its charter
or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues received by
the issuer such as specific taxes, assessments, tolls or fees. Bondholders
may not collect from the municipality's general taxes or revenues. For
example, a municipality may issue bonds to build a toll road, and pledge
the tolls to repay the bonds. Therefore, a shortfall in the tolls normally
would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new
factory to improve its local economy. The municipality would lend the
proceeds from its bonds to the company using the factory, and the company
would agree to make loan payments sufficient to repay the bonds. The bonds
would be payable solely from the company's loan payments, not from any
other revenues of the municipality. Therefore, any default on the loan
normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to the
federal alternative minimum tax (AMT). The Fund may invest in bonds subject
to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order
to comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end a
lease, without penalty, by not providing for the lease payments in its
annual budget. After the lease ends, the lessor can resell the equipment or
facility but may lose money on the sale. The Fund may invest in securities
supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final
maturity unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities at
a price below the amount payable at maturity. The difference between the
purchase price and the amount paid at maturity represents interest on the
zero coupon security. Investors must wait until maturity to receive
interest and principal, which increases the interest rate risks and credit
risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of credit,
bond insurance and surety bonds. Credit enhancement also includes
arrangements where securities or other liquid assets secure payment of a
fixed income security. If a default occurs, these assets may be sold and
the proceeds paid to the security's holders. Either form of credit
enhancement reduces credit risks by providing another source of payment for
a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
Inter-fund Borrowing and Lending Arrangements
The Securities and Exchange Commission (SEC) has granted an exemption that
permits the Fund and all other funds advised by subsidiaries of Federated
Investors, Inc. (Federated funds) to lend and borrow money for certain
temporary purposes directly to and from other Federated funds. Participation
in this inter-fund lending program is voluntary for both borrowing and lending
funds, and an inter-fund loan is only made if it benefits each participating
fund. Federated administers the program according to procedures approved by
the Fund's Board, and the Board monitors the operation of the program. Any
inter-fund loan must comply with certain conditions set out in the exemption,
which are designed to assure fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may
be made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term
borrowings (the Bank Loan Rate), as determined by the Board. The interest rate
imposed on inter-fund loans is the average of the Repo Rate and the Bank Loan
Rate.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment
and delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into
these transactions so that the market values of the securities bought may vary
from the purchase prices. Therefore, delayed delivery transactions create
interest rate risks for the Fund. Delayed delivery transactions also involve
credit risks in the event of a counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the
underlying assets or set aside readily marketable securities with a value that
equals or exceeds the Fund's obligations. Unless the Fund has other readily
marketable assets to set aside, it cannot trade assets used to secure such
obligations without terminating the special transaction. This may cause the
Fund to miss favorable trading opportunities or to realize losses on special
transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government of
the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and
use the proceeds (or bank loans) to repay maturing paper. If the issuer
cannot continue to obtain liquidity in this fashion, its commercial paper
may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from
a dealer or bank and agrees to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price, reflecting
the Fund's return on the transaction. This return is unrelated to the interest
rate on the underlying security. The Fund will enter into repurchase
agreements only with banks and other recognized financial institutions, such
as securities dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is
the seller (rather than the buyer) of the securities, and agrees to repurchase
them at an agreed upon time and price. A reverse repurchase agreement may be
viewed as a type of borrowing by the Fund. Reverse repurchase agreements are
subject to credit risks. In addition, reverse repurchase agreements create
leverage risks because the Fund must repurchase the underlying security at a
higher price, regardless of the market value of the security at the time of
repurchase.
INVESTMENT RATINGS
Securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's (S&P), MIG-1 or MIG-2
by Moody's Investors Service (Moody's), or F-1+, F-1 or F-2 by Fitch IBCA, 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 rating service can be treated as being in one of
the two highest short-term rating categories; currently, such securities must be
rated by two nationally recognized statistical rating organizations in one of
their two highest rating categories. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide current income exempt from federal
regular income tax and the income tax imposed by the State of Georgia consistent
with stability of principal and liquidity.
The Fund will invest so that at least 80% of its annual interest income will be
exempt from federal regular income tax and Georgia state income tax.
This investment objective and policy may not be changed by the Fund's Board of
Trustees (Board) without shareholder approval.
INVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting Securities
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940, as
amended (1940 Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
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 limitations 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.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Permissible Investments
The Fund invests in a portfolio of high-quality tax-exempt securities maturing
in 397 days or less.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
federal securities laws.
Investing In Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash
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.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, as a matter
of non-fundamental policy, the Fund will not exclude foreign bank instruments
from industry concentration limitation tests so long as the policy of the SEC
remains in effect. In addition, investments in certain industrial development
bonds funded by activities in a single industry will be deemed to constitute
investment in an industry, except when held for temporary defensive purposes.
The investment of more than 25% of the value of the Fund's total assets in any
one industry will constitute "concentration."
In applying the concentration restriction: (1) utility companies will be divided
according to their services, for example, gas, gas transmission, electric and
telephone will each be considered a separate industry; (2) financial service
companies will be classified according to the end users of their services, for
example, automobile finance, bank finance and diversified finance will each be
considered a separate industry; and (3) asset-backed securities will be
classified according to the underlying assets securing such securities.
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 SAI, in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7
(Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board 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.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
Account and Share Information
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 7, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Shares: Cobatco Synovus Trust Company,
Columbus, Georgia, owned approximately 32,947,927 Shares (10.53%); Wachovia Bank
of North Carolina, Winston-Salem, North Carolina, owned approximately 12,488,635
Shares (35.94%); and Harold and Nancy Shumate, Duluth, Georgia, owned
approximately 22,372,573 Shares (7.15%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
STATE TAXES
Under existing Georgia law, shareholders of the Fund will not be subject to
individual or corporate Georgia income taxes on distributions from the Fund to
the extent that such distributions represent exempt-interest dividends for
federal income tax purposes that are attributable to (1) interest-bearing
obligations issued by or on behalf of the State of Georgia or its political
subdivisions, or (2) interest on obligations of the United States or of any
other issuer whose obligations are exempt from state income taxes under federal
law. Distributions, if any, derived from capital gains or other sources
generally will be taxable for Georgia income tax purposes to shareholders of the
Fund who are subject to the Georgia income tax.
Who Manages and Provides Services to the Fund?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
43 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January 7, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.
<TABLE>
<CAPTION>
Name
Birth Date Aggregate
Total Compensation
Address Principal Occupations Compensation From
Trust and Fund
Position With Trust for Past Five Years From Fund
Complex
<S> <C> <C> <C>
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of $ 0 $0
for the Trust and 43
Birth Date: July 28, 1924 the Federated Fund Complex; Chairman and Trustee, other
investment
Federated Investors Tower Federated Investment Management Company; Chairman
companies in the Fund
1001 Liberty Avenue and Director, Federated Investors, Inc., Federated
Complex
Pittsburgh, PA Investment Counseling, and Federated Global
CHAIRMAN AND TRUSTEE Investment Management Corp.; Chairman, Passport
Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $184.18
$116,760.63 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's Trust
and 43 other
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries,
companies in the Fund
Pittsburgh, PA Inc. (coated steel conduits/computer storage
Complex
TRUSTEE equipment); formerly: Senior Partner, Ernst & Young
LLP; Director, MED 3000 Group, Inc. (physician
practice management); Director, Member of Executive
Committee, University of Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $202.62
$128,455.37 for the
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior Trust
and 43 other
Grubb & Ellis/Investment Vice President, John R. Wood and Associates, Inc.,
investment companies
Properties Corporation Realtors; Partner or Trustee in private real estate in
the Fund Complex
3201 Tamiami Trail North ventures in Southwest Florida; formerly: President,
Naples, FL Naples Property Management, Inc. and Northgate
TRUSTEE Village Development Corporation.
Nicholas P. Constantakis++ Director or Trustee of the Federated Fund Complex; $ 0
$73,191.21 for the
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering, Trust
and 37 other
175 Woodshire Drive construction, operations and technical services);
investment companies
Pittsburgh, PA formerly: Partner, Andersen Worldwide SC. in
the Fund Complex
TRUSTEE
John F. Cunningham Director or Trustee of some of the Federated Fund $138.96
$93,190.48 for the
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive Trust
and 37 other
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business
investment
Palm Beach, FL consulting); Trustee Associate, Boston College;
companies in the
TRUSTEE Director, Iperia Corp. (communications/software); Fund
Complex
formerly: Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.;
President and Chief Operating Officer, Wang
Laboratories; Director, First National Bank of
Boston; Director, Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of the $ 0 $0
for the Trust and 30
Birth Date: April 11, 1949 Federated Fund Complex; Director or Trustee of some other
investment
Federated Investors Tower of the Funds in the Federated Fund Complex;
companies in the
1001 Liberty Avenue President, Chief Executive Officer and Director, Fund
Complex
Pittsburgh, PA Federated Investors, Inc.; President and Trustee,
PRESIDENT AND TRUSTEE Federated Investment Management Company; President
and Trustee, Federated Investment
Counseling, President and Director,
Federated Global Investment Management
Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services
Company; Director, Federated Services
Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $184.18
$116,760.63 for the
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Trust
and 43 other
3471 Fifth Avenue Medical Director, University of Pittsburgh Medical
investment companies
Suite 1111 Center - Downtown; Hematologist, Oncologist, and in
the Fund Complex
Pittsburgh, PA Internist, University of Pittsburgh Medical Center;
TRUSTEE Member, National Board of Trustees, Leukemia Society
of America.
Peter E. Madden Director or Trustee of the Federated Fund Complex; $166.10
$109,153.60 for the
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Trust
and 43 other
One Royal Palm Way Massachusetts General Court; President, State Street
investment companies
100 Royal Palm Way Bank and Trust Company and State Street Corporation. in
the Fund Complex
Palm Beach, FL Previous Positions: Director, VISA USA and VISA
TRUSTEE International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation; Director, The Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $143.70
$102,573.91 for the
Birth Date: April 10, 1945 Complex; Executive Vice President, Legal and Trust
and 40 other
80 South Road External Affairs, Dugan Valva Contess, Inc.
investment companies
Westhampton Beach, NY (marketing, communications, technology and in
the Fund Complex
TRUSTEE consulting).; formerly Management Consultant
Previous Positions: Chief Executive
Officer, PBTC International Bank; Partner,
Arthur Young & Company (now Ernst & Young
LLP); Chief Financial Officer of Retail
Banking Sector, Chase Manhattan Bank;
Senior Vice President, Marine Midland Bank;
Vice President, Citibank; Assistant
Professor of Banking and Finance, Frank G.
Zarb School of Business, Hofstra
University.
John E. Murray, Jr., J.D., S.J.D.# Director or Trustee of the Federated Fund Complex; $198.10
$128,455.37 for the
Birth Date: December 20, 1932 President, Law Professor, Duquesne University; Trust
and 43 other
President, Duquesne University Consulting Partner, Mollica & Murray; Director,
investment companies
Pittsburgh, PA Michael Baker Corp. (engineering, construction, in
the Fund Complex
TRUSTEE operations and technical services).
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $184.18
$116,760.63 for the
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. Trust
and 43 other
4905 Bayard Street Previous Positions: National Spokesperson, Aluminum
investment companies
Pittsburgh, PA Company of America; television producer; business in
the Fund Complex
TRUSTEE owner.
John S. Walsh Director or Trustee of some of the Federated Fund $138.96
$94,536.85for the Trust
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. and
39 other investment
2007 Sherwood Drive (manufacturer of construction temporary heaters);
companies in the
Valparaiso, IN President and Director, Manufacturers Products, Inc. Fund
Complex
TRUSTEE (distributor of portable construction heaters);
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh &
Kelly, Inc. (heavy highway contractor); formerly:
Vice President, Walsh & Kelly, Inc.
Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0
for the Trust and 42
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice other
investment
Federated Investors Tower President and Treasurer of some of the Funds in the
companies in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated Fund
Complex
Pittsburgh, PA Investors, Inc.; Vice President, Federated
EXECUTIVE VICE PRESIDENT Investment Management Company and Federated
Investment Counseling, Federated Global Investment
Management Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated
Securities Corp.; Trustee, Federated Shareholder
Services Company.
John W. McGonigle Executive Vice President and Secretary of the $0 $0
for the Trust and 43
Birth Date: October 26, 1938 Federated Fund Complex; Executive Vice President, other
investment
Federated Investors Tower Secretary and Director, Federated Investors, Inc.;
companies in the
1001 Liberty Avenue Trustee, Federated Investment Management Company and Fund
Complex
Pittsburgh, PA Federated Investment Counseling; Director, Federated
EXECUTIVE VICE PRESIDENT AND Global Investment Management Corp., Federated
SECRETARY Services Company and Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice $0 $0
for the Trust and 43
Birth Date: June 17, 1954 President - Funds Financial Services Division,
other investment
Federated Investors Tower Federated Investors, Inc.; formerly: various
companies in the
1001 Liberty Avenue management positions within Funds Financial Services Fund
Complex
Pittsburgh, PA Division of Federated Investors, Inc.
TREASURER
Richard B. Fisher President or Vice President of some of the Funds in $0 $0
for the Trust and 41
Birth Date: May 17, 1923 the Federated Fund Complex; Director or Trustee of
other investment
Federated Investors Tower some of the Funds in the Federated Fund Complex;
companies in the
1001 Liberty Avenue Executive Vice President, Federated Investors, Inc.; Fund
Complex
Pittsburgh, PA Chairman and Director, Federated Securities Corp.
VICE PRESIDENT
William D. Dawson, III Chief Investment Officer of this Fund and various $0 $0
for the Trust and 42
Birth Date: March 3, 1949 other Funds in the Federated Fund Complex; Executive other
investment
Federated Investors Tower Vice President, Federated Investment Counseling,
companies in the
1001 Liberty Avenue Federated Global Investment Management Corp., Fund
Complex
Pittsburgh, PA Federated Investment Management Company and Passport
CHIEF INVESTMENT OFFICER Research, Ltd.; Registered Representative, Federated
Securities Corp.; Portfolio Manager,
Federated Administrative Services; Vice
President, Federated Investors, Inc.;
formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio
Management Services Division; Senior Vice
President, Federated Investment Management
Company and Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the $0 $0
for the Trust and 6
Birth Date: September 15, 1959 Trust. Ms. Cunningham joined Federated in 1981 and other
investment
Federated Investors Tower has been a Senior Portfolio Manager and a Senior
companies in the
1001 Liberty Avenue Vice President of the Funds' Adviser since 1997. Ms. Fund
Complex
Pittsburgh, PA Cunningham served as a Portfolio Manager and a Vice
VICE PRESIDENT President of the Adviser from 1993 through 1996. Ms.
Cunningham is a Chartered Financial Analyst and
received her M.B.A. in Finance from Robert Morris
College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $0 $0
for the Trust and 7
Birth Date: September 12, 1953 Ochson joined Federated in 1982 and has been a other
investment
Federated Investors Tower Senior Portfolio Manager and a Senior Vice President
companies in the
1001 Liberty Avenue of the Funds' Adviser since 1996. From 1988 through Fund
Complex
Pittsburgh, PA 1995, Ms. Ochson served as a Portfolio Manager and a
VICE PRESIDENT Vice President of the Funds' Adviser. Ms. Ochson is
a Chartered Financial Analyst and received her
M.B.A. in Finance from the University of Pittsburgh.
</TABLE>
*An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the 1940 Act.
#A pound sign denotes a Member of the Board's Executive Committee, which handles
the Board's responsibilities between its meetings.
+Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++Mr. Constantakis became a member of the Board of Trustees on October 1, 1999.
He did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
<TABLE>
<CAPTION>
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated Funds
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio. Federated Services Company may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountant for the Fund, Arthur Andersen LLP, plans and
performs its audit so that it may provide an opinion as to whether the Fund's
financial statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
For the Year Ended October 31 1999
1998 1997
<S> <C>
<C> <C>
Advisory Fee Earned $1,149,248
$856,835 $767,263
Advisory Fee Reduction $ 828,457
649,041 569,196
Brokerage Commissions $ 0
0 0
Administrative Fee $ 173,307
133,509 125,351
Shareholder Services Fee $ 436,714
- -- --
</TABLE>
If the Fund's expenses are capped at a particular level, the cap does not
include reimbursement to the Fund of any expenses incurred by shareholders who
use the transfer agent's subaccounting facilities. For the fiscal years ended
October 31, 1999, 1998 and 1997, fees paid by the Fund for services are prior to
the Fund's reorganization as a portfolio of the Trust on February 1, 2000.
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the SEC standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year and Start of Performance periods ended
October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the 7-day period
ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
7 -Day 1 Year Start of
Performance
Period on August 22,
1995
<S> <C> <C> <C>
Total Return 2.94% 3.28%
Yield 3.04%
Effective Yield 3.08%
Tax-Equivalent Yield 5.89%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD, EFFECTIVE YIELD AND TAX-EQUIVALENT YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized base-
period return by: adding one to the base-period return, raising the sum to the
365/7th power; and subtracting one from the result. The tax-equivalent yield of
Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to AMT and
state and/or local taxes.
TAX EQUIVALENCY TABLE
<TABLE>
<CAPTION>
Taxable Yield Equivalent for 2000 - STATE OF GEORGIA
<S> <C> <C> <C> <C>
<C>
Tax Bracket:
Federal 15.00% 28.00% 31.00%
36.00% 39.60%
Combined Federal and State: 21.000% 34.000% 37.000%
42.000% 45.600%
- -----------------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $161,451-288,350
Over 288,350
Single Return $1-26,250 $ 26,251-63,550 $ 63,551-132,600 $132,601-288,350
Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.27% 1.52% 1.59%
1.72% 1.84%
1.50% 1.90% 2.27% 2.38%
2.59% 2.76%
2.00% 2.53% 3.03% 3.17%
3.45% 3.68%
2.50% 3.16% 3.79% 3.97%
4.31% 4.60%
3.00% 3.80% 4.55% 4.76%
5.17% 5.51%
3.50% 4.43% 5.30% 5.56%
6.03% 6.43%
4.00% 5.06% 6.06% 6.35%
6.90% 7.35%
4.50% 5.70% 6.82% 7.14%
7.76% 8.27%
5.00% 6.33% 7.58% 7.94%
8.62% 9.19%
5.50% 6.96% 8.33% 8.73%
9.48% 10.11%
6.00% 7.59% 9.09% 9.52%
10.34% 11.03%
6.50% 8.23% 9.85% 10.32%
11.21% 11.95%
7.00% 8.86% 10.61% 11.11%
12.07% 12.87%
7.50% 9.49% 11.36% 11.90%
12.93% 13.79%
8.00% 10.13% 12.12% 12.70%
13.79% 14.71%
8.50% 10.76% 12.88% 13.49%
14.66% 15.63%
9.00% 11.39% 13.64% 14.29%
15.52% 16.54%
</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.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Fund; and
information about the mutual fund industry from sources such as the Investment
Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
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.
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.
Money
A monthly magazine, regularly ranks money market funds in various categories
based on the latest available seven-day effective yield.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion $13.1 billion and $115
million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
Financial Information
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
Investment Ratings
Standard & Poor's Short-Term Municipal Obligation Ratings
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNs) AND TENDER OPTION BONDS (TOBs) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
LONG-TERM DEBT RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
MOODY'S INVESTORS SERVICE SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investors Service (Moody's) short-term ratings are designated Moody's
Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or VMIG
ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNs) AND TENDER OPTION BONDS (TOBs) RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Long-Term Debt Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
Fitch ibca, 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.
Addresses
GEORGIA MUNICIPAL CASH TRUST
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Accountants
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PROSPECTUS
Maryland Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income tax imposed by the State of Maryland
and Maryland municipalities consistent with stability of principal and liquidity
by investing in a portfolio of high-quality Maryland tax exempt securities
maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 7
How to Redeem Shares 8
Account and Share Information 10
Who Manages the Fund? 11
Financial Information 11
</TABLE>
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Maryland Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value of $1.00 per share. The Fund's investment
objective is current income exempt from federal regular income tax and the
personal income tax imposed by the State of Maryland and Maryland municipalities
consistent with stability of principal and liquidity. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Maryland tax exempt securities maturing in 397
days or less. The Fund will invest so that at least 80% of its annual interest
income is exempt from federal regular income tax and Maryland state and local
income tax. Interest from the Fund's investments may be subject to the federal
alternative minimum tax for individuals and corporations (AMT). The
dollar-weighted average maturity of the Fund's portfolio will be 90 days or
less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other government
agency.
Risk/Return Bar Chart and Table
The Bar Chart and Performance Table below reflect historical performance data
for Maryland Municipal Cash Trust (Former Fund) prior to its reorganization into
the Fund, which is a newly created portfolio of Money Market Obligations Trust
(Trust). On the date of the reorganization, February 1, 2000, the Former Fund
was dissolved and its net assets (inclusive of liabilities recorded on the
Former Fund's records) were transferred into the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Former Fund's Cash Series Shares as of the calendar
year-end for each of five years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's Shares start of business through the
calendar year ended 1999. The light gray shaded chart features five distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Former Fund's Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1995 through 1999, The percentages noted are: 3.38%, 3.05%,
3.13%, 2.96%, and 2.76%, respectively.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's total
returns on a calendar year-end basis.
The Former Fund's Shares were not sold subject to a sales charge (load). The
total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's highest quarterly return
was 0.89% (quarter ended June 30, 1995). Its lowest quarterly return was 0.60%
(quarter ended March 31, 1999).
Average Annual Total Return Table
The following table represents the Former Fund's Average Annual Total Returns
for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year 2.76%
5 Years 3.06%
Start of Performance/1/ 3.04%
</TABLE>
/1/ The Former Fund's start of performance date was May 9, 1994.
The Former Fund's 7-Day Net Yield as of December 31, 1999 was 3.78%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
MARYLAND MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
<TABLE>
<S>
<C>
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, as applicable) None Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and other Distributions) (as a percentage of offering
price) None
Redemption Fee (as a percentage of amount redeemed, if
applicable) None
Exchange
Fee
None
Annual Fund Operating Expenses (Before Waivers)/1/
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management
Fee/2/
0.50%
Distribution (12b-1)
Fee None
Shareholder Services
Fee/3/ 0.25%
Other
Expenses
0.45%
Total Annual Fund Operating
Expenses/4/ 1.20%
</TABLE>
/1/ Although not contractually obligated to do so, the Adviser and shareholder
services provider expect to waive certain amounts during the fiscal year
ending October 31, 2000. These are shown below along with the net expenses
the Fund expects to actually pay for the fiscal year ending October 31,
2000.
<TABLE>
<S> <C>
Total Waiver of Fund Expenses 0.50%
Total Actual Annual Fund Operating Expenses (after waivers) 0.70%
</TABLE>
/2/ The Adviser expects to voluntarily waive a portion of the management fee.
The Adviser can terminate this anticipated voluntary waiver at any time.
The management fee paid by the Fund (after the anticipated voluntary
waiver) is expected to be 0.01% for the fiscal year ending October 31,
2000.
/3/ The shareholder services provider expects to voluntarily waive a portion of
the shareholder services fee. The shareholder services provider can
terminate this anticipated voluntary waiver at any time. The shareholder
services fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.24% for the fiscal year ending October 31, 2000.
/4/ For the fiscal year ended October 31, 1999, prior to the reorganization of
the Former Fund as a Portfolio of the Trust, the Total Annual Fund
Operating Expenses and Total Actual Annual Fund Operating Expenses (after
waivers) for the Former Fund were 1.20% and 0.70%, respectively.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Shares for the time
periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Shares operating expenses are before waivers as estimated in
the table and remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year $ 122
3 Years $ 381
5 Years $ 660
10 Years $1,455
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Maryland tax exempt securities
maturing in 397 days or less. The Fund will invest so that at least 80% of its
annual interest income is exempt from federal regular income tax and Maryland
state and local income tax. Interest from the Fund's investments may be subject
to AMT. The dollar-weighted average maturity of the Fund's portfolio will be 90
days or less. The Adviser actively manages the Fund's portfolio, seeking to
limit the credit risk taken by the Fund and select investments with enhanced
yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and Maryland income tax.
It may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as
Standard & Poor's and Moody's Investors Service. These services assign ratings
to securities by assessing the likelihood of issuer default. Lower credit
ratings correspond to higher credit risk. If a security has not received a
rating, the Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Maryland issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
MARYLAND RISKS
Since the Fund invests primarily in issuers from Maryland, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Maryland's economy is relatively diversified across the services, trade and
government sectors. The high proportion of federal government jobs, which
contributes to high wealth levels, made the state vulnerable to the recession
and concurrent federal downsizing in the early 1990's; however, Maryland's
economic growth rate has improved and is nearing the national average.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge. NAV is determined at 12:00 noon and 1:00 p.m.
(Eastern time) and as of the end of regular trading (normally 4:00 p.m. Eastern
time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $10,000 minimum
is reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-Maryland
taxpayers because it invests in Maryland municipal securities.
The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 1:00
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption
amount you will receive is based upon the next calculated NAV after the Fund
receives the order from your investment professional. Investment professionals
are responsible for promptly submitting redemption requests and providing proper
written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon p.m. (Eastern time) your redemption will be
wired to you the same day. You will not receive that day's dividend.
If you call after 12:00 noon p.m. (Eastern time) your redemption will be wired
to you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for same-
day payment of redemption proceeds, without that day's dividend, for redemption
requests received before 2:00 p.m. (Eastern time).
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is an
ACH member; or
. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from Maryland state personal income tax to the extent they are
derived from interest on obligations exempt from Maryland personal income taxes.
Capital gains and non-exempt dividends are taxable whether paid in cash or
reinvested in the Fund. Redemptions are taxable sales. Please consult your tax
adviser regarding your federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended October 31 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Income From Investment
Operations:
Net investment income 0.03 0.03 0.03
0.03 0.03
Less
Distributions:
Distributions from net investment income (0.03) (0.03) (0.03)
(0.03) (0.03)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Total Return/1/ 2.69% 3.05% 3.10%
3.11% 3.36%
Ratios to Average Net
Assets:
Expenses/2/ 1.20% 1.21% 1.32%
1.30% 1.15%
Net investment income/2/ 2.16% 2.49% 2.42%
2.44% 2.80%
Expenses (after waivers and reimbursements) 0.70% 0.70% 0.69%
0.65% 0.65%
Net investment income (after waivers and reimbursements) 2.66% 3.00% 3.05%
3.09% 3.30%
Supplemental
Data:
Net assets, end of period (000 omitted) $46,707 $66,136 $45,575
$54,286 $51,400
</TABLE>
/1/ Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
/2/ During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
Notes
Notes
[FEDERATED logo]
Maryland Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, Annual Report and
SemiAnnual Report to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report and Semi-Annual Report and other information without charge,
and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Rooms's operation and copy fees.
[FEDERATED logo]
Maryland Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N286
G00105-01-A (01/00)
Federated is a registered mark of Federated Investors, Inc.
2000 /c/Federated Investors, Inc.
[recycled paper logo]
MARYLAND MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Maryland Municipal Cash Trust (Fund),
dated January 31, 2000. Obtain the prospectus without charge by calling 1-800-
341-7400.
JANUARY 31, 2000
G00105-02-B (1/00)
Contents
How is the Fund Organized? 0
Securities in Which the Fund Invests 1
How is the Fund Sold? 2
Subaccounting Services 2
Redemption in Kind 2
Massachusetts Partnership Law 1
Account and Share Information 1
Tax Information 1
Who Manages and Provides Services to the Fund? 1
How Does the Fund Measure Performance? 2
Who is Federated Investors, Inc.? 1
Financial Information 2
Investment Ratings 2
Addresses 0
How is the Fund Organized?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established September 1, 1989,
will be reorganized as a portfolio of the Trust on February 1, 2000.
The Fund's investment adviser is Federated Investment Management Company.
Effective March 31, 1999, Federated Management, former Adviser to the Fund,
became Federated Investment Management Company (formerly, Federated Advisers).
Securities in Which the Fund Invests
The Fund's principal securities are described in its prospectus. Additional
securities, and further information regarding the principal securities, are
outlined below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to regular federal income taxes. Typically, states, counties, cities and
other political subdivisions and authorities issue tax exempt securities. The
market categorizes tax exempt securities by their source of repayment.
GENERAL OBLIGATION BONDS
General obligation bonds are supported by the issuer's power to exact property
or other taxes. The issuer must impose and collect taxes sufficient to pay
principal and interest on the bonds. However, the issuer's authority to impose
additional taxes may be limited by its charter or state law.
SPECIAL REVENUE BONDS
Special revenue bonds are payable solely from specific revenues received by the
issuer such as specific taxes, assessments, tolls or fees. Bondholders may not
collect from the municipality's general taxes or revenues. For example, a
municipality may issue bonds to build a toll road, and pledge the tolls to repay
the bonds. Therefore, a shortfall in the tolls normally would result in a
default on the bonds.
PRIVATE ACTIVITY BONDS
Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new factory
to improve its local economy. The municipality would lend the proceeds from its
bonds to the company using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable solely from
the company's loan payments, not from any other revenues of the municipality.
Therefore, any default on the loan normally would result in a default on the
bonds.
The interest on many types of private activity bonds is subject to the federal
alternative minimum tax (AMT). The Fund may invest in bonds subject to AMT.
MUNICIPAL LEASES
Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically subject to
annual appropriation. In other words, a municipality may end a lease, without
penalty, by not providing for the lease payments in its annual budget. After the
lease ends, the lessor can resell the equipment or facility but may lose money
on the sale. The Fund may invest in securities supported by individual leases or
pools of leases.
ZERO COUPON SECURITIES
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate risks and credit risks of a zero coupon security.
CREDIT ENHANCEMENT
Common types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement also includes arrangements where
securities or other liquid assets secure payment of a fixed income security. If
a default occurs, these assets may be sold and the proceeds paid to the
security's holders. Either form of credit enhancement reduces credit risks by
providing another source of payment for a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
SPECIAL TRANSACTIONS
Inter-fund Borrowing and Lending Arrangements
The Securities and Exchange Commission (SEC) has granted an exemption that
permits the Fund and all other funds advised by subsidiaries of Federated
Investors, Inc. (Federated funds) to lend and borrow money for certain temporary
purposes directly to and from other Federated funds. Participation in this
inter-fund lending program is voluntary for both borrowing and lending funds,
and an inter-fund loan is only made if it benefits each participating fund.
Federated administers the program according to procedures approved by the Fund's
Board, and the Board monitors the operation of the program. Any inter-fund loan
must comply with certain conditions set out in the exemption, which are designed
to assure fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may be
made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the Bank Loan Rate), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the underlying
assets or set aside readily marketable securities with a value that equals or
exceeds the Fund's obligations. Unless the Fund has other readily marketable
assets to set aside, it cannot trade assets used to secure such obligations
without terminating the special transaction. This may cause the Fund to miss
favorable trading opportunities or to realize losses on special transactions.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government of the
United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
INVESTMENT RATINGS
Securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's (S&P), MIG-1 or MIG-2
by Moody's Investors Service (Moody's), or F-1+, F-1 or F-2 by Fitch IBCA, 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 rating service can be treated as being in one of
the two highest short-term rating categories; currently, such securities must be
rated by two nationally recognized rating organizations in one of their two
highest rating categories. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide current income exempt from federal
regular income tax and the personal income taxes imposed by the State of
Maryland and Maryland municipalities consistent with stability of principal and
liquidity.
The Fund will invest so that at least 80% of its annual interest income is
exempt from federal regular income tax and Maryland state and local income tax.
This investment objective and policy may not be changed by the Fund's Board of
Trustees (Board) without shareholder approval.
INVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting Securities
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940, as
amended (1940 Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
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 limitations 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.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Permissible Investments
The Fund invests in a portfolio of high-quality tax-exempt securities maturing
in 397 days or less.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
federal securities laws.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, as a matter
of non-fundamental policy, the Fund will not exclude foreign bank instruments
from industry concentration limitation tests so long as the policy of the SEC
remains in effect. In addition, investments in certain industrial development
bonds funded by activities in a single industry will be deemed to constitute
investment in an industry, except when held for temporary defensive purposes.
The investment of more than 25% of the value of the Fund's total assets in any
one industry will constitute "concentration".
In applying the concentration restriction: (1) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (2)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (3) asset-backed
securities will be classified according to the underlying assets securing such
securities.
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 SAI, in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7
(Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board 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.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best- efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related
or shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving the portfolio securities and selling them
before their maturity could receive less than the redemption value of the
securities and could incur certain transaction costs.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
Account and Share Information
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting.
A special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 7, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: EAMCO Riggs Bank NA,
Washington, D.C., owned approximately 3,254,704 Shares (7.40%); First Union
Securities, Inc., Charlotte, North Carolina owned approximately 8,886,600 Shares
(20.21%); CB Heyman and SF Scholder, Trustees, Baltimore, Maryland, owned
approximately 2,490,773 Shares (5.67%).
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
STATE TAXES
Under existing Maryland law, distributions made by the Fund will not be subject
to Maryland state or local income taxes to the extent that such distributions
qualify as exempt-interest dividends under the Internal Revenue Code, and
represent (i) interest on tax-exempt obligations of Maryland or its political
subdivisions or authorities; (ii) interest on obligations of the United States
or an authority, commission, instrumentality, possession or territory of the
United States; or (iii) gain realized by the Fund from the sale or exchange of
bonds issued by Maryland, a political subdivision of Maryland, or the United
States government (excluding obligations issued by the District of Columbia, a
territory or possession of the United States, or a department, agency,
instrumentality, or political subdivision of the District, territory or
possession). Conversely, to the extent that distributions made by the Fund are
derived from other types of obligations, such distributions will be subject to
Maryland income taxes.
Who Manages and Provides Services to the Fund?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
43 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January 7, 2000, the Fund's Board and Officers as a group owned less
than 1% of the Fund's outstanding Shares.
<TABLE>
<CAPTION>
Name
Total
Birth Date Aggregate
Compensation
Address Principal Occupations Compensation
From Trust and
Position for Past Five Years Fund From
Fund Complex
<S> <C> <C>
<C>
John F. Donahue*# Birth Date: Chief Executive Officer and Director or Trustee of the $0
$0 for the Trust
July 28, 1924 Federated Federated Fund Complex; Chairman and Director, Federated
and 43 other
Investors Tower 1001 Liberty Investors, Inc.; Chairman and Trustee, Federated Investment
investment
Avenue Pittsburgh, PA Management Company; Chairman and Director, Federated
companies in the
CHAIRMAN AND TRUSTEE Investment Counseling, and Federated Global Investment
Fund Complex
Management Corp.; Chairman, Passport Research, Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas G. Bigley Birth Date: Director or Trustee of the Federated Fund Complex; Director, $99.30
$116,760.63 for
February 3, 1934 15 Old Member of Executive Committee, Children's Hospital of
the Trust and 43
Timber Trail Pittsburgh, PA Pittsburgh; Director, Robroy Industries, Inc. (coated steel
other investment
TRUSTEE conduits/computer storage equipment); formerly: Senior
companies in the
Partner, Ernst & Young LLP; Director, MED 3000
Group, Inc.
Fund Complex
(physician practice management); Director, Member of
Executive Committee, University of Pittsburgh.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Birth Director or Trustee of the Federated Fund Complex; $109.25
$128,455.37 for
Date: June 23, 1937 Grubb & President, Investment Properties Corporation; Senior Vice
the Trust and 43
Ellis/Investment Properties President, John R. Wood and Associates, Inc., Realtors;
other investment
Corporation 3201 Tamiami Partner or Trustee in private real estate ventures in
companies in the
Trail North Naples, FL TRUSTEE Southwest Florida; formerly: President, Naples Property
Fund Complex
Management, Inc. and Northgate Village Development
Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Nicholas P. Constantakis Director or Trustee of the Federated Fund Complex; Director, $0
$73,191.21 for
Birth Date: September 3, 1939 Michael Baker Corporation (engineering, construction,
the Trust and 37
175 Woodshire Drive operations and technical services); formerly: Partner,
other investment
Pittsburgh, PA TRUSTEE Andersen Worldwide SC.
companies in the
Fund Complex
- ------------------------------------------------------------------------------------------------------------------------------------
John F. Cunningham Birth Director or Trustee of some of the Federated Fund Complex; $74.41
$93,190.48 for
Date: March 5, 1943 353 El Chairman, President and Chief Executive Officer, Cunningham
the Trust and 37
Brillo Way Palm Beach, FL & Co., Inc. (strategic business consulting); Trustee
other investment
TRUSTEE Associate, Boston College; Director, Iperia Corp.
companies in the
(communications/software); formerly: Director, Redgate
Fund Complex
Communications and EMC Corporation (computer
storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.;
President and Chief Operating Officer, Wang
Laboratories; Director, First National Bank of
Boston; Director, Apollo Computer, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue Birth President or Executive Vice President of the Federated Fund $0
$0 for the Trust
Date: April 11, 1949 Complex; Director or Trustee of some of the Funds in the
and 30 other
Federated Investors Tower Federated Fund Complex; President, Chief Executive Officer
investment
1001 Liberty Avenue and Director, Federated Investors, Inc.; President and
companies in the
Pittsburgh, PA PRESIDENT AND Trustee, Federated Investment Management Company; President
Fund Complex
TRUSTEE and Trustee, Federated Investment Counseling, President and
Director, Federated Global Investment Management Corp.;
President, Passport Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director, Federated Services
Company.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; Professor $99.30
$116,760.63 for
Birth Date: October 11, 1932 of Medicine, University of Pittsburgh; Medical Director,
the Trust and 43
3471 Fifth Avenue Suite 1111 University of Pittsburgh Medical Center Downtown;
other investment
Pittsburgh, PA TRUSTEE Hematologist, Oncologist, and Internist, University of
companies in the
Pittsburgh Medical Center; Member, National Board of
Fund Complex
Trustees, Leukemia Society of America.
- ------------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Birth Date: Director or Trustee of the Federated Fund Complex; formerly: $90.77
$109,153.60 for
March 16, 1942 One Royal Palm Representative, Commonwealth of Massachusetts General Court;
the Trust and 43
Way 100 Royal Palm Way Palm President, State Street Bank and Trust Company and State
other investment
Beach, FL TRUSTEE Street Corporation.
companies in the
Previous Positions: Director, VISA USA and VISA
Fund Complex
International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund Complex; $76.88
$102,573.91 for
Birth Date: April 10, 1945 80 Executive Vice President, Legal and External Affairs, Dugan
the Trust and 40
South Road Westhampton Beach, Valva Contess, Inc. (marketing, communications, technology
other investment
NY TRUSTEE and consulting).; formerly Management Consultant
companies in the
Fund Complex
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; President, $106.75
$128,455.37 for
S.J.D.# Birth Date: December Law Professor, Duquesne University; Consulting Partner,
the Trust and 43
20, 1932 President, Duquesne Mollica & Murray; Director, Michael Baker Corp.
other investment
University Pittsburgh, PA (engineering, construction, operations and technical
companies in the
TRUSTEE services).
Fund Complex
Previous Positions: Dean and Professor of Law, University
of Pittsburgh School of Law; Dean and Professor of Law,
Villanova University School of Law.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Birth Date: Director or Trustee of the Federated Fund Complex; Public $99.30
$116,760.63 for
June 21, 1935 4905 Bayard Relations/ Marketing/Conference Planning.
the Trust and 43
Street Pittsburgh, PA TRUSTEE Previous Positions: National Spokesperson, Aluminum Company
other investment
of America; television producer; business owner.
companies in the
Fund Complex
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
John S. Walsh Birth Date: Director or Trustee of some of the Federated Fund Complex; $74.41
$94,536.85 for
November 28, 1957 2007 President and Director, Heat Wagon, Inc. (manufacturer of
the Trust and 39
Sherwood Drive Valparaiso, IN construction temporary heaters); President and Director,
other investment
TRUSTEE Manufacturers Products, Inc. (distributor of portable
companies in the
construction heaters); President, Portable Heater Parts, a
Fund Complex
division of Manufacturers Products, Inc.; Director, Walsh &
Kelly, Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Trustee or Director of some of the Funds in the Federated $0
$0 for the Trust
Edward C. Gonzales Birth Fund Complex; President, Executive Vice President and
and 42 other
Date: October 22, 1930 Treasurer of some of the Funds in the Federated Fund
investment
Federated Investors Tower Complex; Vice Chairman, Federated Investors, Inc.; Vice
companies in the
1001 Liberty Avenue President, Federated Investment Management Company and
Fund Complex
Pittsburgh, PA EXECUTIVE VICE Federated Investment Counseling, Federated Global Investment
PRESIDENT Management Corp. and Passport Research, Ltd.; Executive Vice
President and Director, Federated Securities Corp.; Trustee,
Federated Shareholder Services Company.
- ------------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Birth Date: Executive Vice President and Secretary of the Federated Fund $0
$0 for the Trust
October 26, 1938 Federated Complex; Executive Vice President, Secretary and Director,
and 43 other
Investors Tower 1001 Liberty Federated Investors, Inc.; Trustee, Federated Investment
investment
Avenue Pittsburgh, PA Management Company and Federated Investment Counseling;
companies in the
EXECUTIVE VICE PRESIDENT AND Director, Federated Global Investment Management Corp,
Fund Complex
SECRETARY Federated Services Company and Federated Securities Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Richard J. Thomas Birth Date: Treasurer of the Federated Fund Complex; Vice $0
$0 for the Trust
June 17, 1954 Federated President-Funds Financial Services Division, Federated
and 43 other
Investors Tower 1001 Liberty Investors, Inc.; formerly: various management positions
investment
Avenue Pittsburgh, PA within Funds Financial Services Division of Federated
companies in the
TREASURER Investors Inc.
Fund Complex
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher Birth Date: President or Vice President of some of the Funds in the $0
$0 for the Trust
May 17, 1923 Federated Federated Fund Complex; Director or Trustee of some of the
and 41 other
Investors Tower 1001 Liberty Funds in the Federated Fund Complex; Executive Vice
investment
Avenue Pittsburgh, PA VICE President, Federated Investors, Inc.; Chairman and Director,
companies in the
PRESIDENT Federated Securities Corp.
Fund Complex
- ------------------------------------------------------------------------------------------------------------------------------------
William D. Dawson, III Birth Chief Investment Officer of this Fund and various other $0
$0 for the Trust
Date: March 3, 1949 Federated Funds in the Federated Fund Complex; Executive Vice
and 42 other
Investors Tower 1001 Liberty President, Federated Investment Counseling, Federated Global
investment
Avenue Pittsburgh, PA CHIEF Investment Management Corp., Federated Investment Management
companies in the
INVESTMENT OFFICER Company and Passport Research, Ltd.; Registered
Fund Complex
Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors,
Inc.; formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company and
Passport Research, Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Deborah A. Cunningham Birth Deborah A. Cunningham is Vice President of the Trust. $0
$0 for the Trust
Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been a Senior
and 6 other
Federated Investors Tower Portfolio Manager and a Senior Vice President of the Funds'
investment
1001 Liberty Avenue Adviser since 1997. Ms. Cunningham served as a Portfolio
companies in the
Pittsburgh, PA VICE PRESIDENT Manager and a Vice President of the Adviser from 1993
Fund Complex
through 1996. Ms. Cunningham is a Chartered Financial Analyst
and received her M.B.A. in Finance from Robert Morris
College.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Mary Jo Ochson Birth Date: Mary Jo Ochson is Vice President of the Trust. Ms. Ochson $0
$0 for the Trust
September 12, 1953 Federated joined Federated in 1982 and has been a Senior Portfolio
and 7 other
Investors Tower 1001 Liberty Manager and a Senior Vice President of the Funds' Adviser
investment
Avenue Pittsburgh, PA VICE since 1996. From 1988 through 1995, Ms. Ochson served as a
companies in the
PRESIDENT Portfolio Manager and a Vice President of the Funds'
Fund Complex
Adviser. Ms. Ochson is a Chartered Financial Analyst and
received her M.B.A. in Finance from the University
of Pittsburgh.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the 1940 Act.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Mr. Constantakis became a member of the Board of Trustees on October 1, 1999.
He did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below: <TABLE> <CAPTION> Maximum
Administrative Fee Average Aggregate Daily Net
Assets of the Federated Funds
<S> <C>
0.150 of 1% on the first $250 million 0.125 of 1% on the next $250 million 0.100
of 1% on the next $250 million 0.075 of 1% on assets in excess of $750 million
</TABLE> The administrative fee received during any fiscal year shall be at
least $125,000 per portfolio. Federated Services Company may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of- pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
For the Year Ended October 31 1999 1998 1997
<S> <C> <C> <C>
Advisory Fee Earned $296,658 $287,116 $229.262
Advisory Fee Reduction 287,632 287,116 229.262
Brokerage Commissions 0 0 0
Administrative Fee 125,000 125,001 125,000
Shareholder Services Fee 148,396
</TABLE>
If the Fund's expenses are capped at a particular level, the cap does not
include reimbursement to the Fund of any expenses incurred by shareholders who
use the transfer agent's subaccounting facilities. For the fiscal years ended
October 31, 1999, 1998 and 1997, fees paid by the Fund for services are prior to
the Fund's reorganization as a portfolio of the Trust on February 1, 2000.
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the SEC standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year and Start of Performance
periods ended October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the 7-day period
ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
7 -Day 1 Year 5 Years Start of
Period Performance on
May 9, 1994
<S> <C> <C> <C> <C>
Total Return 2.69% 3.06% 3.03%
Yield 2.87%
Effective Yield 2.91%
Tax-Equivalent Yield 5.40%
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD, EFFECTIVE YIELD AND TAX-EQUIVALENT YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized base-
period return by: adding one to the base- period return, raising the sum to the
365/7th power; and subtracting one from the result. The tax-equivalent yield of
Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to AMT and
state and/or local taxes.
Taxable Yield Equivalent For 2000 - State Of Maryland Including Local Income Tax
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<C>
Combined Federal, State, and
County Income Tax Bracket: 22.28% 35.28% 38.28%
43.28% 46.88%
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450
$161,451-288,35 0VER 288,350
Single Return $1-26,250 $ 26,251-63,550 $ 63,551-132,600
$132,601-288,35 0VER 288,350
Tax Exempt Yield: Taxable Yield
Equivalent:
1.00% 1.29% 1.54% 1.62%
1.76 1.88%
1.50% 1.93% 2.32% 2.43%
2.64 2.82%
2.00% 2.57% 3.09% 3.24%
3.53 3.76%
2.50% 3.22% 3.86% 4.05%
4.41 4.71%
3.00% 3.86% 4.63% 4.86%
5.29 5.65%
3.50% 4.50% 5.41% 5.67%
6.17 6.59%
4.00% 5.15% 6.18% 6.48%
7.05 7.53%
4.50% 5.79% 6.95% 7.29%
7.93 8.47%
5.00% 6.43% 7.72% 8.10%
8.81 9.41%
5.50% 7.08% 8.50% 8.91%
9.70 10.35%
6.00% 7.72% 9.27% 9.72%
10.58 11.29%
6.50% 8.36% 10.04% 10.53%
11.46 12.24%
7.00% 9.01% 10.81% 11.34%
12.34 13.18%
7.50% 9.65% 11.59% 12.15%
13.22 14.12%
8.00% 10.29% 12.36% 12.96%
14.10 15.06%
8.50% 10.94% 13.13% 13.77%
14.98 16.00%
9.00% 11.58% 13.90% 14.58%
15.87 16.94%
</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
local income tax rate is assumed to be 50% of the state rate for all counties
excluding Allegheny, Baltimore, Caroline, Carroll, Montgomery, Prince George's,
Queen Anne's, St. Mary's, Somerset, Talbot, Wicomico, and Worchester.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
. references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
. charts, graphs and illustrations using the Fund's returns, or
returns in general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
. discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
. information about the mutual fund industry from sources such as
the Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete
view of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
Lipper Analytical Services, Inc.
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.
IBC/Donoghue's Money Fund Report
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.
Money
Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion. Government Funds In the government
sector, as of December 31, 1999, Federated managed 9 mortgage backed, 11
government/agency and 16 government money market mutual funds, with assets
approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion and $13.1 billion and
$115 million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield--J. Thomas
Madden; U.S. fixed income--William D. Dawson, III; and global equities and fixed
income--Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,600 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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 advisers. The
marketing effort to these institutional clients is headed by John B. Fisher,
President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
Financial Information
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
Investment Ratings
STANDARD & POOR'S SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short- term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
LONG-TERM DEBT RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong. AA--Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the
highest-rated issues only in small degree. A--Debt rated A has a strong capacity
to pay interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
debt in higher-rated categories.
MOODY'S INVESTORS SERVICE, SHORT-TERM MUNICIPAL OBLIGATION RATINGS Moody's
Investors Service (Moody's) short-term ratings are designated Moody's Investment
Grade (MIG or VMIG). (See below.) The purpose of the MIG or VMIG ratings is to
provide investors with a simple system by which the relative investment
qualities of short-term obligations may be evaluated.
MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
LONG-TERM DEBT RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements maybe 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 IBCA, 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.
Addresses
MARYLAND MUNICIPAL CASH TRUST
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
Prospectus
[LOGO of Boston 1784 Funds]
Massachusetts
Municipal
Cash Trust--
Boston 1784 Funds Shares
As with all mutual funds, the Securities and
Exchange Commission has not approved or
disapproved of these securities or passed
upon the adequacy of this prospectus, and
any representation to the contrary is a
criminal offense.
January 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
Annual Report, Semi-Annual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-BKB-1784.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the SEC's Internet site at http://www.sec.gov. You can purchase
copies of this information by contacting the SEC by email at [email protected].
or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102.
Call 1-202-942-8090 for information on the Public Reference Room's operations
and copying fees.
[LOGO of Boston 1784 Funds]
Boston 1784 Funds\sm\
P.O. Box 8524
Boston, MA 02266-8524
1-800-BKB-1784
www.boston1784funds.com
FEDERATED
World-Class Investment Manager
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federated investors.com
Cusip 60934N237
G00507-01 (1/00)
File No. 811-5950 MF-0136
TABLE OF CONTENTS
Massachusetts Municipal Cash Trust--Boston 1784 Funds Shares....... 1
Shareholder Services............................................... 4
How to reach the Fund....................................... 4
Pricing of Fund shares...................................... 4
How the Fund is sold........................................ 4
How to open an account and purchase shares.................. 4
How to sell and exchange shares............................. 6
Account and share information............................... 7
Tax Information.................................................... 9
More About Massachusetts Municipal Cash Trust--
Boston 1784 Funds Shares....................................... 10
Management......................................................... 12
Financial Highlights............................................... 13
Massachusetts Municipal Cash Trust--
Boston 1784 Funds Shares
This summary briefly describes the principal risks of investing in the Fund. For
further information on the Fund, please read the section entitled More About
Massachusetts Municipal Cash Trust--Boston 1784 Funds Shares.
[LOGO appears here]
What are the Fund's Goals?
Massachusetts Municipal Cash Trust (the "Fund") is a money market fund which
seeks to maintain a stable net asset value (NAV) of $1.00 per share. The Fund's
investment objective is to provide current income which is exempt from federal
regular income tax and Massachusetts state income tax consistent with stability
of principal. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.
[LOGO appears here]
What are the Fund's Main Investment Strategies?
The Fund invests in high-quality Massachusetts tax-exempt securities maturing in
397 days or less. The Fund will invest its assets so that at least 80% of its
annual interest income is exempt from federal regular income tax and
Massachusetts state income tax. Interest from the Fund's investments may be
subject to the federal alternative minimum tax for individuals and corporations
(AMT). The dollar-weighted average maturity of the Fund's portfolio will be 90
days or less.
[LOGO appears here]
What are the Main Risks of Investing in the Fund?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable NAV, it is possible to lose
money by investing in the Fund. 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. An investment in the Fund is not a deposit of BankBoston and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
governmental agency.
[LOGO appears here]
How Has The Fund Performed?
The Bar Chart and Performance Table below reflect historical performance data
for Boston 1784 Funds Shares of Massachusetts Municipal Cash Trust (the "Former
Fund") prior to it's reorganization into the Fund, which is a newly created
porfolio of Money Market Obligations Trust (the "Trust"). On the date of the
reorganization, February 1, 2000, the Former Fund will be dissolved and its net
assets (inclusive of liabilites recorded on Former Fund's records) will be
transferred to the Fund.
When you consider this information, please remember that the Fund's performance
in past years is not necessarily an indication of how the Fund will do in the
future.
Total Return
(per calendar year)
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Boston 1784 Funds Shares of the Former Fund as of the
calendar year-end for each of six years.
The `y' axis reflects the "% Total Return" beginning with "0%" and increasing in
increments of 5% up to 10%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's start of business through the calendar
year ended December 31, 1999. The light gray shaded chart features six distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for Boston 1784 Funds Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1994 through 1999. The percentages noted are:2.26%, 3.36%, 2.98%,
3.11%, 2.95%, and 2.77%.
The Former Fund's Boston 1784 Funds Shares 7-Day Net Yield as of December
31,1999 was 3.88%.
<TABLE>
<CAPTION>
Highest and Lowest Return
(Quarterly 1994-1999)
<S> <C> <C>
Quarter Ended
Highest 0.88% June 30, 1995
Lowest 0.43% March 31, 1994
</TABLE>
<TABLE>
<CAPTION>
Average Annual Total Returns
(through December 31, 1999)
1 Year 5 Years Life of Fund
(since 2/22/93)
<S> <C> <C> <C>
MA Municipal Cash 2.77% 3.03% 2.77%
Trust -- Boston
1784 Funds Shares
</TABLE>
For up-to-date yield information, please call 1-800-BKB-1784.
Massachusetts Municipal Cash Trust--
Boston 1784 Funds Shares (CONTINUED)
[LOGO apprears here]
What Are The Fund's Fees And Expenses?
This table describes the fees and expenses that you may pay if you buy and hold
Boston 1784 Funds Shares of the Fund.
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------------------------
SHAREHOLDER FEES (fees paid directly from your investment)
- --------------------------------------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)....................... None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, as applicable)..................................................................... None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions)
(as a percentage of offering price)........................................................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable)......................................... None
Exchange Fee............................................................................................... None
- --------------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (Before Waivers)(1)
(expenses that are deducted from Fund assets) (as a percentage of average net assets)
- --------------------------------------------------------------------------------------------------------------------
Management Fee (2).........................................................................................
0.50%
Distribution (12b-1) Fee................................................................................... None
Shareholder Services Fee (3)...............................................................................
0.25%
Other Expenses.............................................................................................
0.16%
Total Annual Fund Operating Expenses (4)...................................................................
0.91%
- --------------------------------------------------------------------------------------------------------------------
(1) Although not contractually obligated to do so, the Adviser and shareholder
services provider expect to waive certain amounts during the fiscal year ending
October 31, 2000. These are shown below along with the net expenses the Fund
expects to actually pay for the fiscal year ending October 31, 2000.
Total Waiver of Fund Expenses..........................................................................
0.35%
Total Actual Annual Fund Operating Expenses (after waivers)............................................
0.56%
(2) The Adviser expects to voluntarily waive a portion of the management fee.
The Adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.40% for the fiscal year ending October 31, 2000.
(3) The shareholder services provider expects to voluntarily waive the
shareholder services fee. The shareholder services provider can terminate
this anticipated voluntary waiver at any time. The shareholder services fee
paid by the Fund's Boston 1784 Funds Shares (after the anticipated voluntary
waiver) is expected to be 0.00% for the fiscal year ending October 31, 2000.
(4) For the fiscal year ended October 31, 1999, prior to the reorganization of
the Former Fund, as a Portfolio of the Trust, the Total Annual Fund
Operating Expenses and Total Actual Annual Fund Operating Expenses (after
waivers) for the Former Fund's Boston 1784 Funds Shares were 0.91% and
0.56%, respectively.
</TABLE>
- --------------------------------------------------------------------------------
EXAMPLE
- --------------------------------------------------------------------------------
This Example is intended to help you compare the cost of investing in the Fund's
Boston 1784 Funds Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Boston 1784 Funds
Shares for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's Boston 1784 Funds Shares operating expenses
are before waivers as estimated in the table above and remain the same. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$93 $290 $504 $1,120
- --------------------------------------------------------------------------------
</TABLE>
Shareholder Services
How To Reach The Fund
By telephone 1-800-BKB-1784 Call for
account or Fund information or an
account application.
By regular mail Boston 1784 Funds
P.O. Box 8524
Boston, MA 02266-8524
By express or Boston 1784 Funds
overnight service c/o Boston Financial Data Services
2 Heritage Drive
North Quincy, MA 02171
Pricing Of Fund Shares
You can purchase, redeem, or exchange shares any day the New York Stock Exchange
(NYSE) and the Federal Reserve Bank of Boston are open, except Columbus Day and
Veteran's Day. The Fund does not impose a sales charge.
The Fund attempts to maintain the NAV of its shares at $1.00 by valuing the
portfolio securities using the amortized cost method, which is approximately
equal to market value. The Fund cannot guarantee that its NAV will always remain
at $1.00 per share. NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time)
and as of the end of regular trading (normally 4:00 p.m. Eastern time) each day
the NYSE is open.
The required minimum initial investment for Fund shares is $1,000. Subsequent
investments must be in amounts of at least $250. 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.
How The Fund Is Sold
The Fund offers two share classes: Boston 1784 Funds Shares and Institutional
Service Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Boston 1784 Funds Shares. Each share class has
other expenses that affect their performance. Please call 1-800-341-7400 for
more information concerning Institutional Service Shares.
The Fund's Distributor, Federated Securities Corp., markets the shares described
in this prospectus to financial institutions or to individuals, directly or
though investment professionals. The Fund may not be a suitable investment for
retirement plans or for non-Massachusetts taxpayers because it invests in
Massachusetts municipal securities.
The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).
How To Open An Account And Purchase Shares
You may purchase shares through an investment professional or through an
exchange from another fund in the Boston 1784 Funds family. You may also
purchase shares through certain financial institutions, including BankBoston.
These institutions may have their own procedures for buying and selling shares,
and may charge fees. Contact your financial institution for more information.
The Fund and the Distributor reserve the right to reject any request to purchase
or exchange shares, and will do so when it believes that a purchase is part of a
market-timing strategy.
Complete and sign the appropriate account application. Purchase orders must be
received by 11:30 a.m. (Eastern time) in order to receive that day's dividend.
You will become the owner of shares and receive dividends when the Fund receives
your payment.
By Wire. Purchases may also be made by wiring money from your bank account to
your Fund account. Each time you wish to send a wire, you must call 1-800-BKB-
1784 to receive wiring instructions before you send money. Once the money has
been wired, please call 1-800-BKB-1784 to purchase your shares.
By Check. If you wish to make your purchase by mail, please send a completed
application and check payable to Boston 1784 Funds to:
Boston 1784 Funds
PO Box 8524
Boston, MA 02266-8524
If you send your check by express or overnight service and require a street
address, see "How to Reach the Fund."
By Electronic Transfer. Once you have opened an account, you may purchase
additional shares by debiting your designated bank account. You can establish
this option by completing the "Electronic Transfer and Bank Wire" section of the
application.
By Automatic Investment. Automatic investing is an easy way to add to your
account on a regular basis. Boston 1784 Funds offer an automatic investment plan
to help you achieve your financial goals as simply and conveniently as possible.
Please note that minimum purchase amounts apply. Call 1-800-BKB-1784 for
information.
Through An Exchange. On any business day, you may exchange all or a portion of
your shares into any other Fund in the Boston 1784 Funds family. To make
exchanges, call 1-800-BKB-1784. Exchanges are processed at the NAV next
calculated after an exchange request in good order is received and approved.
Please read the prospectus for the Fund into which you are exchanging. The Fund
reserves the right to reject any exchange request or to change or terminate the
exchange privilege at any time. An exchange is the sale of shares of one Fund
and purchase of shares of another Fund, and could result in taxable gains or
losses.
Paying for Shares
. Payments must be made in U.S. dollars and drawn on a U.S. bank;
. Checks that are not made payable directly to Boston 1784 Funds ("third party
checks") are not accepted;
. Orders by mail are considered received when payment by check is converted
into immediately available funds (normally the business day after the check
is received) and shares begin earning dividends the next day;
. Cash and credit cards are not accepted;
. If the check does not clear your bank, the Fund reserves the right to cancel
your purchase; or
. If the Fund is unable to debit your designated bank account on the day you
purchase shares, the Fund may make additional attempts or cancel the
purchase.
How To Sell And Exchange Shares
Submit your redemption or exchange request by the end of regular trading on the
NYSE (normally 4:00 p.m. Eastern time). Redemption or exchange requests received
by the Fund before 12:00 noon (Eastern time) will not include that day's
dividend. Requests for redemptions over $100,000 must be in writing with
signatures guaranteed (see below).
Please note that your redemption proceeds may be delayed for up to ten business
days after purchase. This is to assure that money from the purchase of shares
being redeemed has been received and collected. You may gain or lose money when
you redeem shares.
By Telephone. If you selected this option on your account application, you may
make redemptions from your account by calling 1-800-BKB-1784. You may not close
your account by telephone. If you would like to establish this option on an
existing account, please call 1-800-BKB-1784.
By Mail. To redeem all or part of your shares by mail, please send your request
in writing to one of the addresses listed above under "How To Open An Account"
and include the following information:
. the name of the Fund,
. the account number(s),
. the amount of money or number of shares being redeemed,
. the name(s) on the account,
. the signature of a registered account owner, and
. your daytime telephone number.
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 account you
designated on your account application. You will be charged a fee for each wire
redemption, which will be deducted from your redemption proceeds.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address on our
records;
. your redemption will be sent to an address on our records that was changed in
the past 30 days; or
. a redemption is payable to someone other than the shareholder(s) of record.
The Fund may also require signature guarantees for other redemptions. A
signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union, broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
Payment Methods For Redemptions
Redemption proceeds may be credited to your designated bank account, paid by
check, or paid by wire or electronic transfer as you previously designated on
your account application.
By Check. Redemption proceeds will be sent to the shareholder(s) on our records
at the address on our records within seven days after receipt of a valid
redemption request.
By Wire. If you have selected this option, your redemption proceeds will be
wired directly into your designated bank account, normally within one business
day. There is no limitation on the number of redemption transactions by wire.
However, there is a fee for each wire and your bank may charge an additional fee
to receive the wire. If you would like to establish this option on an existing
account, please call 1-800-BKB-1784 to sign up for this service.
By Electronic Transfer. If you have established this option, your redemption
proceeds will be transferred electronically to your designated bank account. To
establish this option on an existing account, please call 1-800-BKB-1784 to
request the appropriate form.
Redemption In Kind. Although the Fund intends to pay share redemptions in cash,
it reserves the right to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Limitations On Redemption Proceeds
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund. If
those checks are undeliverable and returned to the Fund, the proceeds will be
reinvested in shares.
Additional Conditions
Telephone Transactions. The Fund and its agents will each follow reasonable
procedures to confirm that instructions received by telephone are genuine, which
may include taping telephone conversations. The Fund and its agents will not be
responsible for any losses that may result from acting on telephone instructions
that it reasonably believes to be genuine. The Fund may refuse any telephone
transaction for any reason.
Share Certificates. The Fund does not issue share certificates.
Account And Share Information
Account Activity. You will receive periodic statements reporting all account
activity, including dividends and capital gains paid.
Taxpayer Identification Number. On your account application or other appropriate
form, you will be asked to certify that your social security or taxpayer
identification number is correct and that you are not subject to backup
withholding for failing to report income to the IRS. If you are subject to
backup withholding or you did not certify your taxpayer identification number,
the IRS requires the Fund to withhold 31% of any dividends and redemption or
exchange proceeds. The Fund reserves the right to reject any application that
does not include a certified social security or taxpayer identification number.
Address Changes. A change in address on your account must be made in writing
with your signature guaranteed, and be signed by all account owners. Include the
name of the Fund, the account number(s), the name(s) on the account and both the
old and new addresses. Call 1-800-BKB-1784 if you need more information.
Dividends And Capital Gains. The Fund declares any dividends daily and pays them
monthly to shareholders. If you purchase shares by wire, you begin earning
dividends on the day your wire is received. If you purchase shares by check, you
begin earning dividends on the business day after the Fund receives your check.
In either case, you earn dividends through the day your redemption request is
received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
shares without a sales charge, unless you elect cash payments. If you elect cash
payments and the payment is returned as undeliverable, your cash payment will be
reinvested in shares and your distribution option will convert to automatic
reinvestment. If any distribution check remains uncashed for six months the
check will no longer be honored, the check amount will be reinvested in shares,
and you will not accrue any interest or dividends on this amount prior to the
reinvestment.
Accounts With Low Balances. Accounts may be closed if redemptions or exchanges
cause the account balance to fall below the minimum initial investment amount.
Before an account is closed, you will be notified and allowed 60 days to
purchase additional shares to meet the minimum.
Tax Information
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes. The Fund's dividends will be
exempt from Massachusetts state personal income tax if they are derived from
interest on obligations exempt from Massachusetts personal income taxes. Capital
gains and non-exempt dividends are taxable whether paid in cash or reinvested in
the Fund. Redemptions and exchanges are taxable sales. Please consult your tax
preparer regarding your federal, state and local tax liability.
More About Massachusetts Municipal
Cash Trust--Boston 1784 Funds Shares
Principal Investment Strategies
The Fund invests in a portfolio of high-quality Massachusetts tax-exempt
securities maturing in 397 days or less. The Fund will invest so that at least
80% of its annual interest income is exempt from federal regular income tax and
Massachusetts state income taxes. Interest from the Fund's investments may be
subject to the alternative minimum tax (AMT). The dollar-weighted average
maturity of the Fund's portfolio will be 90 days or less. The portfolio manager
actively manages the Fund's portfolio, seeking to select investments with
enhanced yields and to limit credit risk.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The portfolio manager targets an average portfolio maturity based on interest
rate outlook and the tax-exempt securities available. The portfolio manager
formulates interest rate outlook by analyzing a variety of factors such as
current and expected U.S. economic growth, current and expected interest rates
and inflation, and the Federal Reserve Board's monetary policy. The portfolio
manager structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The portfolio manager generally shortens the
portfolio's maturity when interest rates are expected to rise and extends the
maturity when interest rates are expected to fall. This strategy seeks to
enhance the returns from favorable interest rate changes and reduce the effect
of unfavorable changes.
Temporary Defensive Investments. The Fund may temporarily depart from its
principal investment strategies by investing its assets in securities subject to
federal and Massachusetts income tax. It may do this to minimize potential
losses and maintain liquidity to meet shareholder redemptions during adverse
market conditions. This may cause the Fund to receive and distribute taxable
income to investors.
Principal Securities In Which The Fund Invests
Tax-Exempt Securities. Tax-exempt securities are fixed income securities that
pay interest that is not subject to federal income taxes. Fixed income
securities pay interest, dividends or distributions at a specified rate. The
rate may be fixed or adjusted periodically. The issuer must also repay the
principal amount of the security, normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax-exempt securities, which are categorized by their source
of repayment.
Variable Rate Demand Instruments. Variable rate demand instruments are
tax-exempt securities that require the issuer or a third party, such as a dealer
or bank, to repurchase the security for its face value upon demand. The
securities also pay interest at a variable rate intended to cause the securities
to trade at their face value. The Fund treats demand instruments as short-term
securities because their variable interest rate adjusts in response to changes
in market rates, even though their stated maturity may extend beyond 397 days.
Municipal Notes. Municipal notes are short-term tax-exempt securities. Many
municipalities issue such notes to fund their current operations before
collecting taxes or other municipal revenues. Municipalities may also issue
notes to fund capital projects prior to issuing long-term bonds. The issuers
typically repay the notes at the end of their fiscal year, either with taxes,
other revenues or proceeds from newly issued notes or bonds.
Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases,
the company providing credit enhancement makes all payments directly to the
security holders and receives reimbursement from the issuer. Normally, the
credit enhancer has greater financial resources and liquidity than the issuer.
For this reason, the Adviser usually evaluates the credit risk of a fixed income
security based solely on its credit enhancement.
Investment 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 or be of comparable quality to securities having such
rating.
Specific Risks Of Investing In The Fund
Credit Risk. Credit risk is the possibility that an issuer will default on a
security by failing to pay interest or principal when due. If an issuer
defaults, the Fund will lose money. Money market funds try to minimize this risk
by purchasing higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
Interest Rate Risk. Prices of fixed income securities rise and fall in response
to changes in the interest rate paid by similar securities. Generally, when
interest rates rise, the prices of fixed income securities fall. However, market
factors, such as the demand for particular fixed income securities, may cause
the price of certain fixed income securities to fall while the prices of other
securities rise or remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
Massachusetts Risk. A substantial part of the Fund's portfolio may be comprised
of securities issued by Massachusetts issuers or credit enhanced by insurance
companies or companies with similar characteristics. As a result,the Fund will
be more subsceptible to any economic, business, potitical or other developments
which generally affect these entites. Massachusetts' economy is relatively
diversified across the manufacturing, trade, finance insurance and real estate
and services sectors. Any downturn in these industries may adversely affect the
economy of the state.
Management
Investment Adviser
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222- 3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
Management Fees
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Highlights
The Financial Highlights will help you understand the Fund's financial
performance for the past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report which
can be obtained by calling 1-800-BKB-1784.
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended October 31,
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income 0.03 0.03 0.03 0.03 0.03
Less Distributions:
Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return (1) 2.70% 3.03% 3.07% 3.05% 3.30%
Ratios to Average Net Assets:
Expenses (2) 0.91% 0.93% 0.96% 1.00% 1.05%
Net investment income (2) 2.32% 2.61% 2.64% 2.59% 2.80%
Expenses (after waivers) 0.56% 0.57% 0.57% 0.58% 0.60%
Net investment income (after waivers) 2.67% 2.97% 3.03% 3.01% 3.25%
Supplemental Data:
Net assets, end of period (000 omitted) $199,860 $162,557 $73,837 $54,667 $46,580
</TABLE>
(1) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(2) During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Notes
PROSPECTUS
Massachusetts Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and Massachusetts state income tax by investing in a
portfolio of high-quality Massachusetts tax exempt securities maturing in 397
days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Contents
<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 7
How to Redeem Shares 8
Account and Share Information 10
Who Manages the Fund? 10
Financial Information 11
</TABLE>
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Massachusetts Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value of $1.00 per share. The Fund's investment
objective is to provide current income which is exempt from federal regular
income tax and Massachusetts state income tax consistent with stability of
principal. While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the strategies and policies
described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Massachusetts tax exempt securities maturing in
397 days or less. The Fund will invest its assets so that at least 80% of its
annual interest income is exempt from federal regular income tax and
Massachusetts state income tax. Interest from the Fund's investments may be
subject to the federal alternative minimum tax for individuals and corporations
(AMT). The dollar-weighted average maturity of the Fund's portfolio will be 90
days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Service Shares of Massachusetts Municipal Cash Trust (the
"Former Fund") prior to it's reorganization into the Fund, which is a newly
created portfolio of Money Market Obligations Trust (the "Trust"). On the date
of the reorganization, February 1, 2000, the Former Fund will be dissolved and
its net assets (inclusive of liabilities recorded on the Former Fund's records)
will be transferred to the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Institutional Service Shares of the Former Fund as of
the calendar year-end for each of nine years.
The `y' axis reflects the "% Total Return" beginning with "0%" and increasing in
increments of 1% up to 5%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's start of business through the calendar
year ended December 31, 1999. The light gray shaded chart features nine distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for Institutional Service Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1991 through 1999. The percentages noted are: 4.32%, 2.60%,
1.92%, 2.34%, 3.40%, 3.00%, 3.13%, 2.97% and 2.78%.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Service Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Service Shares were sold without a sales charge
(load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Service
Shares highest quarterly return was 1.14% (quarter ended March 31, 1991). Its
lowest quarterly return was 0.46% (quarter ended March 31, 1993).
Average Annual Total Return Table
The following table represents the Former Fund's Institutional Service Shares
Average Annual Total Returns for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year 2.78%
5 Years 3.05%
Start of Performance/1/ 3.12%
</TABLE>
1 The Former Fund's Institutional Service Shares start of performance date was
May 18, 1990.
The Former Fund's Institutional Service Shares 7-Day Net Yield as of December
31, 1999 was 3.89%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
MASSACHUSETTS MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Service Shares of the Fund.
<TABLE>
<CAPTION>
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, asapplicable) None Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and other Distributions) (as a percentage of
offeringprice) None
Redemption Fee (as a percentage of amount redeemed, if
applicable) None
Exchange
Fee
None
<CAPTION>
Annual Fund Operating Expenses (Before Waivers)/1/
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
<S>
<C>
Management
Fee/2/
0.50%
Distribution (12b-1)
Fee None
Shareholder Services
Fee/3/ 0.25%
Other
Expenses
0.15%
Total Annual Fund Operating
Expenses/4/ 0.90%
</TABLE>
1 Although not contractually obligated to do so, the Adviser and shareholder
services provider expect to waive certain amounts during the fiscal year
ending October 31, 2000. These are shown below along with the net expenses the
Fund expects to actually pay for the fiscal year ending October 31, 2000.
Total Waiver of Fund Expenses 0.34%
Total Actual Annual Fund Operating Expenses (after waivers) 0.56%
2 The Adviser expects to voluntarily waive a portion of the management fee. The
Adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.40% for the fiscal year ending October 31, 2000.
3 The shareholder services provider expects to voluntarily waive a portion of
the shareholder services fee. The shareholder services provider can terminate
this anticipated voluntary waiver at any time. The shareholder services fee
paid by the Fund's Institutional Service Shares (after the anticipated
voluntary waiver) is expected to be 0.01% for the fiscal year ending
October31, 2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of
Massachusetts Municipal Cash Trust, the Former Fund, as a portfolio of Money
Market Obligations Trust, the Total Annual Fund Operating Expenses and Total
Actual Fund Operating Expenses (after waivers) for the Former Fund's
Institutional Service Shares were 0.90% and 0.56%, respectively.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional
Service Shares for the time periods indicated and then redeem all of your Shares
at the end of those periods. The Example also assumes that your investment has a
5% return each year and that the Fund's Institutional Service Shares operating
expenses are before waivers as estimated in the table above and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year $ 92
3 Years $ 287
5 Years $ 498
10 Years $1,108
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Massachusetts tax exempt
securities maturing in 397 days or less. The Fund will invest its assets so that
at least 80% of its annual interest income is exempt from federal regular income
tax and Massachusetts state income tax. Interest from the Fund's investments may
be subject to AMT. The dollar-weighted average maturity of the Fund's portfolio
will be 90 days or less. The Adviser actively manages the Fund's portfolio,
seeking to limit the credit risk taken by the Fund and select investments with
enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and Massachusetts income
tax. It may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as
Standard & Poor's and Moody's Investors Service. These services assign ratings
to securities by assessing the likelihood of issuer default. Lower credit
ratings correspond to higher credit risk. If a security has not received a
rating, the Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
MASSACHUSETTS RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Massachusetts issuers or credit enhanced by insurance companies or companies
with similar characteristics. As a result, the Fund will be more susceptible to
any economic, business, political or other developments which generally affect
these entities. Massachusetts' economy is relatively diversified across the
manufacturing, trade, finance insurance and real estate and services sectors.
Any downturn in these industries may adversely affect the economy of the state.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum
is reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Service Shares and Boston 1784
Funds Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Service Shares. Each share class
has different expenses, which affect their performance. Contact your investment
professional or call 1-800-BKB-1784 for more information concerning the other
class.
The Fund's Distributor, Federated Securities Corp., markets the Shares
described in this prospectus to financial institutions acting in an agency or
fiduciary capacity or to individuals directly or through investment
professionals. The Fund may not be a suitable investment for retirement plans or
for non-Massachusetts taxpayers because it invests in Massachusetts municipal
securities.
The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 1:00
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time) your redemption will be wired to
you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for same-
day payment of redemption proceeds, without that day's dividend, for redemption
requests received before 2:00 p.m. (Eastern time).
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is an
ACH member; or
. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from Massachusetts state personal income tax to the extent they
are derived from interest on obligations exempt from such taxes. Capital gains
and non- exempt dividends are taxable whether paid in cash or reinvested in the
Fund. Redemptions are taxable sales. Please consult your tax adviser regarding
your federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance since inception. Some of the information is presented on a per share
basis. Total returns represent the rate an investor would have earned (or lost)
on an investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights-Institutional Service Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended October 31 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Income From Investment Operations:
Net investment income 0.03 0.03 0.03
0.03 0.03
Less Distributions:
Distributions from net investment income (0.03) (0.03) (0.03)
(0.03) (0.03)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Total Return/1/ 2.71% 3.04% 3.09%
3.07% 3.34%
Ratios to Average Net Assets:
Expenses/2/ 0.90% 0.91% 0.95%
0.97% 1.00%
Net investment income/2/ 2.35% 2.62% 2.65%
2.60% 2.85%
Expenses (after waivers) 0.56% 0.55% 0.55%
0.55% 0.55%
Net investment income (after waivers) 2.69% 2.98% 3.05%
3.02% 3.30%
Supplemental Data:
Net assets, end of period (000 omitted) $411,292 $256,386 $141,869
$119,739 $99,628
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
Massachusetts Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and it's investments is contained in the Fund's SAI and Annual and
SemiAnnual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
Annual Report, Semi-Annual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
[FEDERATED LOGO]
Massachusetts Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N518
0032603A-ISS (1/00)
Federated is a registered mark of Federated Investors, Inc.
2000 Federated Investors, Inc. [RECYCLED LOGO]
PROSPECTUS
Massachusetts Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
BOSTON 1784 FUNDS SHARES
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Massachusetts Municipal Cash Trust-
Boston 1784 Funds Shares (Fund), dated January 31, 2000. This SAI incorporates
by reference the Fund's Annual Report. Obtain the prospectus or the Annual
Report without charge by calling 1-800-BKB-1784.
JANUARY 31, 2000
0032603B (1/00)
Contents
How is the Fund Organized? 0
Securities in Which the Fund Invests 1
What Do Shares Cost? 1
How is the Fund Sold? 0
Subaccounting Services 0
Redemption in Kind 0
Massachusetts Partnership Law 1
Account and Share Information 1
Tax Information 1
Who Manages and Provides Services to the Fund? 1
How Does the Fund Measure Performance? 1
Who is Federated Investors, Inc.? 1
Financial Information 2
Investment Ratings 1
Addresses 1
How is the Fund Organized?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on May 18, 1990, will
be reorganized as a portfolio of the Trust on February 1, 2000.
The Board of Trustees (the Board) has established two classes of shares of the
Fund, known as Institutional Service Shares and Boston 1784 Funds Shares
(Shares). This SAI relates to Boston 1784 Funds Shares. The Fund's investment
adviser is Federated Investment Management Company (Adviser). Effective March
31, 1999, Federated Management, former adviser to the Fund, became Federated
Investment Management Company (formerly, Federated Advisers).
Securities in Which the Fund Invests
The Fund's principal securities are described in its prospectus. Additional
securities, and further details regarding the principal securities, are outlined
below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal regular income taxes. Typically, states, counties, cities and
other political subdivisions and authorities issue tax exempt securities. The
market categorizes tax exempt securities by their source of repayment.
GENERAL OBLIGATION BONDS
General obligation bonds are supported by the issuer's power to exact property
or other taxes. The issuer must impose and collect taxes sufficient to pay
principal and interest on the bonds. However, the issuer's authority to impose
additional taxes may be limited by its charter or state law.
SPECIAL REVENUE BONDS
Special revenue bonds are payable solely from specific revenues received by the
issuer such as specific taxes, assessments, tolls or fees. Bondholders may not
collect from the municipality's general taxes or revenues. For example, a
municipality may issue bonds to build a toll road, and pledge the tolls to repay
the bonds. Therefore, a shortfall in the tolls normally would result in a
default on the bonds.
PRIVATE ACTIVITY BONDS
Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new factory
to improve its local economy. The municipality would lend the proceeds from its
bonds to the company using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable solely from
the company's loan payments, not from any other revenues of the municipality.
Therefore, any default on the loan normally would result in a default on the
bonds.
The interest on many types of private activity bonds is subject to the federal
alternative minimum tax (AMT). The Fund may invest in bonds subject to AMT.
MUNICIPAL LEASES
Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically subject to
annual appropriation. In other words, a municipality may end a lease, without
penalty, by not providing for the lease payments in its annual budget. After the
lease ends, the lessor can resell the equipment or facility but may lose money
on the sale. The Fund may invest in securities supported by individual leases or
pools of leases.
ZERO COUPON SECURITIES
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate risks and credit risks of a zero coupon security.
CREDIT ENHANCEMENT
Common types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement also includes arrangements where
securities or other liquid assets secure payment of a fixed income security. If
a default occurs, these assets may be sold and the proceeds paid to the
security's holders. Either form of credit enhancement reduces credit risks by
providing another source of payment for a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
INTER-FUND BORROWING AND LENDING ARRANGEMENTS
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. (Federated funds) to lend
and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary
for both borrowing and lending funds, and an inter-fund loan is only made if it
benefits each participating fund. Federated administers the program according to
procedures approved by the Fund's Board of Trustees (Board), and the Board
monitors the operation of the program. Any inter-fund loan must comply with
certain conditions set out in the exemption, which are designed to assure
fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may be
made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the Bank Loan Rate), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate.
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
ASSET COVERAGE
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the underlying
assets or set aside readily marketable securities with a value that equals or
exceeds the Fund's obligations. Unless the Fund has other readily marketable
assets to set aside, it cannot trade assets used to secure such obligations
without terminating the special transaction. This may cause the Fund to miss
favorable trading opportunities or to realize losses on special transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. TREASURY SECURITIES
U.S. Treasury securities are direct obligations of the federal government of the
United States.
AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities.
BANK INSTRUMENTS
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
INVESTMENT RATINGS
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's (S&P), MIG-1 or MIG-2
by Moody's Investors Service (Moody's), or F-1+, F-1 or F-2 by Fitch IBCA, 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 rating service can be treated as being in one of
the two highest short-term rating categories; currently, such securities must be
rated by two nationally recognized statistical rating organizations in one of
their two highest rating categories. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICY
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and Massachusetts state income tax
consistent with stability of principal.
The Fund invests in tax-exempt securities so that at least 80% of its annual
interest income is exempt from federal regular income tax and Massachusetts
state income tax.
This investment objective and policy may not be changed by the Board without
shareholder approval.
INVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
Securities Act of 1933.
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.
For purposes of the concentration limitation: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, the Fund
will not exclude foreign bank instruments from industry concentration limitation
tests so long as the policy of the SEC remains in effect. In addition,
investments in certain industrial development bonds funded by activities in a
single industry will be deemed to constitute investment in an industry, except
when held for temporary defensive purposes. The investment of more than 25% of
the value of the Fund's total assets in any one industry will constitute
"concentration."
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 SAI, in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7
(Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board will take any steps it considers 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.
What Do Shares Cost?
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best- efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related
or shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving the portfolio securities and selling them
before their maturity could receive less than the redemption value of the
securities and could incur certain transaction costs.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
Account and Share Information
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting.
A special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of the outstanding Boston 1784 Funds Shares:
Bantustan, Boston, MA, owned approximately 227,963,408 shares (100%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
STATE TAXES
Under existing Massachusetts laws, distributions made by the Fund will not be
subject to Massachusetts personal income taxes to the extent that such dividends
qualify as exempt interest dividends under the Internal Revenue Code, and
represent (i) interest or gain on obligations issued by the Commonwealth of
Massachusetts, its political subdivisions or agencies; or (ii) interest on
obligations of the United States, its territories or possessions to the extent
exempt from taxation by the states pursuant to federal law. Conversely, to the
extent that the distributions made by the Fund are derived from other types of
obligations, such dividends will be subject to Massachusetts personal income
taxes.
Shareholders subject to the Massachusetts corporate excise tax must include
all dividends paid by the Fund in their net income, and the value of their
shares of stock in the Fund in their net worth, when computing the Massachusetts
excise tax.
Who Manages and Provides Services to the Fund?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
54 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January 12, 2000, the Fund's Board and Officers as a group owned less
than 1% of the Fund's outstanding Shares.
<TABLE>
<CAPTION>
Name
Total
Birth Date Aggregate
Compensation
Address Principal Occupations Compensation
From Trust
Position With Trust for Past Five Years From Fund and
Fund Complex
<S> <C> <C> <C>
John F. Donahue*# Birth Chief Executive Officer and Director or Trustee of the $0 $0
for the Trust
Date: July 28, 1924 Federated Fund Complex; Chairman and Trustee,
and 43 other
Federated Investors Tower Federated Investment Management Company; Chairman and
investment
1001 Liberty Avenue Director, Federated Investors, Inc., Federated Investment
companies in the
Pittsburgh, PA CHAIRMAN AND Counseling and Federated Global Investment Management Corp.;
Fund Complex
TRUSTEE Chairman, Passport Research, Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas G. Bigley Birth Date: Director or Trustee of the Federated Fund Complex; Director, $338.81
$116,760.63 for the
February 3, 1934 15 Old Member of Executive Committee, Children's Hospital of
Trust and 43 other
Timber Trail Pittsburgh, PA Pittsburgh; Director, Robroy Industries, Inc. (coated steel
investment
TRUSTEE conduits/computer storage equipment); formerly: Senior
companies in the
Partner, Ernst & Young LLP; Director, MED 3000
Group, Inc.
Fund Complex
(physician practice management); Director, Member of
Executive Committee, University of Pittsburgh.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Birth Director or Trustee of the Federated Fund Complex; $372.74
$128,455.37 for the
Date: June 23, 1937 Grubb & President, Investment Properties Corporation; Senior Vice
Trust and 43 other
Ellis/Investment Properties President, John R. Wood and Associates, Inc., Realtors;
investment
Corporation 3201 Tamiami Partner or Trustee in private real estate ventures in
companies in the
Trail North Naples, FL Southwest Florida; formerly: President, Naples
Fund Complex
TRUSTEE Property Management, Inc. and Northgate Village Development
Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Nicholas P. Constantakis Director or Trustee of the Federated Fund Complex; Director, $0
$73,191.21 for the
Birth Date: September 3, Michael Baker Corporation (engineering, construction,
Trust and 37 other
1939 175 Woodshire Drive operations and technical services); formerly: Partner,
investment
Pittsburgh, PA TRUSTEE Andersen Worldwide SC.
companies in the
Fund Complex
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
John F. Cunningham Birth Director or Trustee of some of the Federated Fund $256.91
$93,190.48 for the
Date: March 5, 1943 353 El Complex;Chairman, President and Chief Executive Officer,
Trust and 37 other
Brillo Way Palm Beach, FL Cunningham & Co., Inc. (strategic business consulting);
investment
TRUSTEE Trustee Associate, Boston College; Director, Iperia Corp.
companies in the
(communications/software); formerly: Director, Redgate
Fund Complex
Communications and EMC Corporation (computer
storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.;
President and Chief Operating Officer, Wang
Laboratories; Director, First National Bank of
Boston; Director, Apollo Computer, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue Birth President or Executive Vice President of the $0 $0
for the Trust
Date: April 11, 1949 Federated Funding Complex; Director or Trustee of some of the
and 30 other
Federated Investors Tower Funds in the Federated Fund Complex; President, Chief
investment
1001 Liberty Avenue Executive Officer and Director, Federated Investors, Inc.;
companies in the
Pittsburgh, PA PRESIDENT AND President and Trustee, Federated Investment Management
Fund Complex
TRUSTEE Company and Federated Investment Counseling; President and
Director, Federated Global Investment Management Corp.;
President, Passport Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director, Federated Services
Company.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; Professor $338.81
$116,760.63 for the
Birth Date: October 11, 1932 of Medicine, University of Pittsburgh; Medical Director,
Trust and 43 other
3471 Fifth Avenue Suite 1111 University of Pittsburgh Medical Center Downtown;
investment
Pittsburgh, PA TRUSTEE Hematologist, Oncologist and Internist, University of
companies in the
Pittsburgh Medical Center; Member, National Board of
Fund Complex
Trustees, Leukemia Society of America.
- ------------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Birth Date: Director or Trustee of the Federated Fund Complex; formerly: $308.66
$109,153.60 for the
March 16, 1942 One Royal Representative, Commonwealth of Massachusetts General Court;
Trust and 43 other
Palm Way 100 Royal Palm Way President, State Street Bank and Trust Company and State
investment
Palm Beach, FL TRUSTEE Street Corporation.
companies in the
Previous Positions: Director, VISA USA and VISA
Fund Complex
International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $266.10
$102,573.91 for the
Birth Date: April 10, 1945 Complex;Executive Vice President, Legal and External
Trust and 40 other
80 South Road Westhampton Affairs, Dugan Valva Contess, Inc. (marketing,
investment
Beach, NY TRUSTEE communications, technology and consulting); formerly
companies in the
Management Consultant.
Fund Complex
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase Manhattan
Bank; Senior Vice President, Marine Midland Bank;
Vice President, Citibank; Assistant Professor of
Banking and Finance, Frank G. Zarb School of
Business, Hofstra University.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; President, $364.53
$128,455.37 for the
S.J.D.# Birth Date: December Law Professor, Duquesne University; Consulting Partner,
Trust and 43 other
20, 1932 President, Duquesne Mollica & Murray; Director, Michael Baker Corp.(engineering,
investment
University Pittsburgh, PA construction, operations and technical services).
companies in the
TRUSTEE Previous Positions: Dean and Professor of Law, University
Fund Complex
of Pittsburgh School of Law; Dean and Professor of Law,
Villanova University School of law.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Birth Director or Trustee of the Federated Fund Complex; Public $338.81
$116,760.63 for the
Date: June 21, 1935 4905 Relations/ Marketing/Conference Planning.
Trust and 43 other
Bayard Street Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum Company
investment
TRUSTEE of America; television producer; business owner.
companies in the
Fund Complex
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
John S. Walsh Birth Date: Director or Trustee of some of the Federated Fund Complex; $256.91
$94,536.85 for the
November 28, 1957 2007 President and Director, Heat Wagon, Inc. (manufacturer of
Trust and 39 other
Sherwood Drive Valparaiso, construction temporary heaters); President and Director,
investment
IN TRUSTEE Manufacturers Products, Inc. (distributor of portable
companies in the
construction heaters); President, Portable Heater Parts, a
Fund Complex
division of Manufacturers Products, Inc.; Director, Walsh &
Kelly, Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Birth Trustee or Director of some of the Funds in the $0 $0
for the Trust
Date: October 22, 1930 Federated Fund Complex;President, Executive Vice President
and 42 other
Federated Investors Tower and Treasurer of some of the Funds in the Federated Fund
investment
1001 Liberty Avenue Complex; Vice Chairman, Federated Investors, Inc.; Vice
companies in the
Pittsburgh, PA EXECUTIVE President, Federated Investment Management Company,
Fund Complex
VICE PRESIDENT Federated Investment Counseling, Federated Global Investment
Management Corp.and Passport Research, Ltd.;
Executive Vice President and Director, Federated
Securities Corp.; Trustee, Federated Shareholder
Services Company.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Birth Executive Vice President and Secretary of the Federated Fund $0 $0
for the Trust
Date: October 26, 1938 Complex; Executive Vice President, Secretary and Director,
and 43 other
Federated Investors Tower Federated Investors, Inc.; Trustee, Federated Investment
investment
1001 Liberty Avenue Management Company and Federated Investment Counseling;
companies in the
Pittsburgh, PA EXECUTIVE Director, Federated Global Investment Management Corp.,
Fund Complex
VICE PRESIDENT AND SECRETARY Federated Services Company and Federated Securities Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Richard J. Thomas Birth Treasurer of the Federated Fund Complex; Vice President - $0 $0
for the Trust
Date: June 17, 1954 Funds Financial Services Division, Federated Investors,
and 43 other
Federated Investors Tower Inc.; formerly: various management positions within Funds
investment
1001 Liberty Avenue Financial Services Division of Federated Investors, Inc.
companies in the
Pittsburgh, PA TREASURER
Fund Complex
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher Birth President or Vice President of some of the Funds in the $0 $0
for the Trust
Date: May 17, 1923 Federated Federated Fund Complex; Director or Trustee of some of the
and 41 other
Investors Tower 1001 Liberty Funds in the Federated Fund Complex; Executive Vice
investment
Avenue Pittsburgh, PA VICE President, Federated Investors, Inc.; Chairman and Director,
companies in the
PRESIDENT Federated Securities Corp.
Fund Complex
- ------------------------------------------------------------------------------------------------------------------------------------
William D. Dawson, III Birth Chief Investment Officer of this Fund and various other $0 $0
for the Trust
Date: March 3, 1949 Funds in the Federated Fund Complex; Executive Vice
and 42 other
Federated Investors Tower President, Federated Investment Counseling, Federated Global
investment
1001 Liberty Avenue Investment Management Corp., Federated Investment Management
companies in the
Pittsburgh, PA CHIEF Company and Passport Research, Ltd.; Registered
Fund Complex
INVESTMENT OFFICER Representative, Federated Securities Corp.; Portfolio
Manager, Federated Administrative Services; Vice
President, Federated Investors, Inc.; formerly:
Executive Vice President and Senior Vice
President, Federated Investment Counseling
Institutional Portfolio Management Services
Division; Senior Vice President, Federated
Investment Management Company and Passport
Research, Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Deborah A. Cunningham Birth Deborah A. Cunningham is Vice President of the Trust. $0 $0
for the Trust
Date: September 15, 1959 Ms.Cunningham joined Federated in 1981 and has been a Senior
and 6 other
Federated Investors Tower Portfolio Manager and a Senior Vice President of the Funds'
investment
1001 Liberty Avenue Adviser since 1997. Ms. Cunningham served as a Portfolio
companies in the
Pittsburgh, PA VICE PRESIDENT Manager and a Vice President of the Adviser from 1993
Fund Complex
through 1996. Ms. Gunningham is a Chartered Financial
Analyst and received her M.B.A. in Finance from Robert
Morris College.
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Mary Jo Ochson Birth Date: Mary Jo Ochson is Vice President of the Trust. Ms. Ochson $0 $0
for the Trust
September 12, 1953 Federated joined Federated in 1982 and has been a Senior Portfolio
and 7 other
Investors Tower 1001 Liberty Manager and a Senior Vice President of the Funds' Adviser
investment
Avenue Pittsburgh, PA VICE since 1996. From 1988 through 1995, Ms. Ochson served as a
companies in the
PRESIDENT Portfolio Manager and a Vice President of the Funds'
Fund Complex
Adviser. Ms. Ochson is a Chartered Financial Analyst
and received her M.B.A. in Finance from the University of
Pittsburgh.
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the 1940 Act.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Nicholas P. Constantakis became a member of the Board on October 1, 1999. He
did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
<TABLE>
<CAPTION>
Maximum Administrative Fee Average Aggregate Daily Net
Assets of the Federated Funds
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
For the Year Ended October 31 1999 1998 1997
<S> <C> <C> <C>
Advisory Fee Earned $2,574,407 $1,810,446 $1,006,548
Advisory Fee Reduction 493,904 397,073 294,305
Brokerage Commissions 0 0 0
Administrative Fee 388,221 273,047 158,069
Shareholder Services Fee
Boston 1784 Funds Shares 0
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for shareholder services fees, which are borne only by the applicable
class of Shares.
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year and Start of Performance
periods ended October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the 7-day period
ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
Start of
7-Day Performance on
Share Class Period 1 Year 5 Years February 22, 1993
Boston 1784
Funds Shares
<S> <C> <C> <C> <C>
Total Return 2.07% 3.03% 2.76%
Yield 2.93%
Effective Yield 2.97%
Tax-Equivalent Yield 5.38%
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD, EFFECTIVE YIELD AND TAX-EQUIVALENT YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized base-
period return by: adding one to the base-period return, raising the sum to the
365/7th power; and subtracting one from the result. The tax-equivalent yield of
Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to AMT and
state and/or local taxes.
<TABLE>
<CAPTION>
Taxable Yield Equivalent for 2000 State of Massachusets
Tax Bracket:
<S> <C> <C> <C> <C> <C>
<C>
Federal 15.00% 28.00% 31.00%
36.00% 39.60%
Combined Federal and State: 20.950% 33.950% 36.950%
41.950% 45.550%
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $ 16,451-288,350
OVER 288,350
Single Return $1-26,250 $ 26,251-63,550 $ 63,551-132,600 $132,601-288,350
OVER 288,350
Tax Exempt Yield: Taxable Yield
Equivalent:
1.00% 1.27% 1.51% 1.59%
1.72% 1.84%
1.50% 1.90% 2.27% 2.38%
2.58% 2.75%
2.00% 2.53% 3.03% 3.17%
3.45% 3.67%
2.50% 3.16% 3.79% 3.97%
4.31% 4.59%
3.00% 3.80% 4.54% 4.76%
5.17% 5.51%
3.50% 4.43% 5.30% 5.55%
6.03% 6.43%
4.00% 5.06% 6.06% 6.34%
6.89% 7.35%
4.50% 5.69% 6.81% 7.14%
7.75% 8.26%
5.00% 6.33% 7.57% 7.93%
8.61% 9.18%
5.50% 6.96% 8.33% 8.72%
9.47% 10.10%
6.00% 7.59% 9.08% 9.52%
10.34% 11.02%
6.50% 8.22% 9.84% 10.31%
11.20% 11.94%
7.00% 8.86% 10.60% 11.10%
12.06% 12.86%
7.50% 9.49% 11.36% 11.90%
12.92% 13.77%
8.00% 10.12% 12.11% 12.69%
13.78% 14.69%
8.50% 10.75% 12.87% 13.48%
14.64% 15.61%
9.00% 11.39% 13.63% 14.27%
15.50% 16.53%
</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.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
. references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
. charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
. discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Fund; and
. information about the mutual fund industry from sources such as the Investment
Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete
view of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
Lipper Analytical Services, Inc.
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.
IBC/Donoghue's Money Fund Report
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.
Money
Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999 Federated managed 53 equity funds totaling approximately $18.3
billion in assets across growth, value, equity income, international, index and
sector (i.e. utility) styles. Federated's value-oriented management style
combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion. Government Funds In the government
sector, as of December 31, 1999, Federated managed 9 mortgage backed, 11
government/agency and 16 government money market mutual funds, with assets
approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges. Money Market Funds In the money market sector,
Federated 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, 1999, Federated
managed more than $83.0 billion in assets across 54 money market funds,
including 16 government, 13 prime and 24 municipal and 1 euro- denominated, with
assets approximating $34.1 billion, $35.7 billion and $13.1 billion and $115
million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield--J. Thomas
Madden; U.S. fixed income--William D. Dawson, III; and global equities and fixed
income--Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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 advisers. The
marketing effort to these institutional clients is headed by John B. Fisher,
President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
Financial Information
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
Investment Ratings
STANDARD & POOR'S SHORT-TERM MUNICIPAL OBLIGATION RATINGS An 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 AND TENDER OPTION BONDS RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short- term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER 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 rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
MOODY'S INVESTORS SERVICE SHORT-TERM MUNICIPAL OBLIGATION RATINGS
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 AND TENDER OPTION BONDS RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
LONG-TERM DEBT RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
FITCH IBCA, 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.
Addresses
MASSACHUSETTS MUNICIPAL CASH TRUST
Boston 1784 Funds Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
STATEMENT OF ADDITIONAL INFORMATION
MASSACHUSETTS MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Massachusetts Municipal Cash Trust
(Fund), dated January 31, 2000. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectuses or the Annual Report without charge by
calling 1-800-341-7400.
JANUARY 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
What Do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip 60934N518
0032603B-ISS (1/00)
How is the Fund Organized?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on May 18, 1990, will
be reorganized as a portfolio of the Trust on February 1, 2000.
The Board of Trustees (the Board) has established two classes of shares of the
Fund, known as Institutional Service Shares and Boston 1784 Funds Shares
(Shares). This SAI relates to Institutional Service Shares. The Fund's
investment adviser is Federated Investment Management Company (Adviser).
Effective March 31, 1999, Federated Management, former adviser to the Fund,
became Federated Investment Management Company (formerly, Federated Advisers).
Securities in Which the Fund Invests
The Fund's principal securities are described in its prospectus. Additional
securities, and further details regarding the principal securities, are outlined
below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its charter
or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues received by
the issuer such as specific taxes, assessments, tolls or fees. Bondholders
may not collect from the municipality's general taxes or revenues. For
example, a municipality may issue bonds to build a toll road, and pledge
the tolls to repay the bonds. Therefore, a shortfall in the tolls normally
would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new
factory to improve its local economy. The municipality would lend the
proceeds from its bonds to the company using the factory, and the company
would agree to make loan payments sufficient to repay the bonds. The bonds
would be payable solely from the company's loan payments, not from any
other revenues of the municipality. Therefore, any default on the loan
normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to the
federal alternative minimum tax (AMT). The Fund may invest in bonds subject
to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order
to comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end a
lease, without penalty, by not providing for the lease payments in its
annual budget. After the lease ends, the lessor can resell the equipment or
facility but may lose money on the sale. The Fund may invest in securities
supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final
maturity unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities at
a price below the amount payable at maturity. The difference between the
purchase price and the amount paid at maturity represents interest on the
zero coupon security. Investors must wait until maturity to receive
interest and principal, which increases the interest rate risks and credit
risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of credit,
bond insurance and surety bonds. Credit enhancement also includes
arrangements where securities or other liquid assets secure payment of a
fixed income security. If a default occurs, these assets may be sold and
the proceeds paid to the security's holders. Either form of credit
enhancement reduces credit risks by providing another source of payment for
a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
Inter-fund Borrowing and Lending Arrangements
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. ("Federated funds") to
lend and borrow money for certain temporary purposes directly to and from
other Federated funds. Participation in this inter-fund lending program is
voluntary for both borrowing and lending funds, and an inter-fund loan is only
made if it benefits each participating fund. Federated administers the program
according to procedures approved by the Fund's Board of Trustees (Board), and
the Board monitors the operation of the program. Any inter-fund loan must
comply with certain conditions set out in the exemption, which are designed to
assure fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may
be made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the "Repo Rate") and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term
borrowings (the "Bank Loan Rate"), as determined by the Board. The interest
rate imposed on inter-fund loans is the average of the Repo Rate and the Bank
Loan Rate.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment
and delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into
these transactions so that the market values of the securities bought may vary
from the purchase prices. Therefore, delayed delivery transactions create
interest rate risks for the Fund. Delayed delivery transactions also involve
credit risks in the event of a counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will set aside readily
marketable securities with a value that equals or exceeds the Fund's
obligations. Unless the Fund has other readily marketable assets to set aside,
it cannot trade assets used to secure such obligations without terminating the
special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on special transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government of
the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and
use the proceeds (or bank loans) to repay maturing paper. If the issuer
cannot continue to obtain liquidity in this fashion, its commercial paper
may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from
a dealer or bank and agrees to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price, reflecting
the Fund's return on the transaction. This return is unrelated to the interest
rate on the underlying security. The Fund will enter into repurchase
agreements only with banks and other recognized financial institutions, such
as securities dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is
the seller (rather than the buyer) of the securities, and agrees to repurchase
them at an agreed upon time and price. A reverse repurchase agreement may be
viewed as a type of borrowing by the Fund. Reverse repurchase agreements are
subject to credit risks. In addition, reverse repurchase agreements create
leverage risks because the Fund must repurchase the underlying security at a
higher price, regardless of the market value of the security at the time of
repurchase.
INVESTMENT RATINGS
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's (S&P), MIG-1 or MIG-2
by Moody's Investors Service (Moody's), or F-1+, F-1 or F-2 by Fitch IBCA, 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 rating service can be treated as being in one of
the two highest short-term rating categories; currently, such securities must be
rated by two nationally recognized statistical rating organizations in one of
their two highest rating categories. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICY
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and Massachusetts state income tax
consistent with stability of principal.
The Fund invests in tax-exempt securities so that at least 80% of its annual
interest income is exempt from federal regular income tax and Massachusetts
state income tax.
This investment objective and policy may not be changed by the Board without
shareholder approval.
INVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
Securities Act of 1933.
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.
For purposes of the concentration limitation: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, the Fund
will not exclude foreign bank instruments from industry concentration limitation
tests so long as the policy of the SEC remains in effect. In addition,
investments in certain industrial development bonds funded by activities in a
single industry will be deemed to constitute investment in an industry, except
when held for temporary defensive purposes. The investment of more than 25% of
the value of the Fund's total assets in any one industry will constitute
"concentration."
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 SAI, in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7
(Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board will take any steps it considers 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.
What Do Shares Cost?
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Fund. To protect its
shareholders, the Fund has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Fund is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Fund will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Fund. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Fund itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
Account and Share Information
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of the outstanding Institutional Service
Shares: Charles Schwab & Co. Inc., San Francisco, CA, owned approximately
136,440, 137 shares (25.99%); Turtle & Co., Boston, MA, owned approximately
105,116,968 shares (20.03%); State Street Bank & Trust, North Quincy, MA, owned
approximately 55,256,944 shares (10.52%); and Bob & Co, Boston, MA, owned
approximately 42,915,798 shares (8.17%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
STATE TAXES
Under existing Massachusetts laws, distributions made by the Fund will not be
subject to Massachusetts personal income taxes to the extent that such dividends
qualify as exempt interest dividends under the Internal Revenue Code, and
represent (i) interest or gain on obligations issued by the Commonwealth of
Massachusetts, its political subdivisions or agencies; or (ii) interest on
obligations of the United States, its territories or possessions to the extent
exempt from taxation by the states pursuant to federal law. Conversely, to the
extent that the distributions made by the Fund are derived from other types of
obligations, such dividends will be subject to Massachusetts personal income
taxes.
Shareholders subject to the Massachusetts corporate excise tax must include all
dividends paid by the Fund in their net income, and the value of their shares of
stock in the Fund in their net worth, when computing the Massachusetts excise
tax.
Who Manages and Provides Services to the Fund?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
54 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January 12, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.
<TABLE>
<CAPTION>
Name
Birth Date Aggregate Total
Compensation
Address Principal Occupations Compensation From
Trust and Fund
Position With Trust for Past Five Years From Fund
Complex
<S> <C> <C>
<C>
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of $ 0 $0 for
the Trust and 43
Birth Date: July 28, 1924 the Federated Fund Complex; Chairman and Director, other
investment
Federated Investors Tower Federated Investors, Inc.; Chairman and Trustee,
companies in the Fund
1001 Liberty Avenue Federated Investment Management Company; Chairman and
Complex
Pittsburgh, PA Director, Federated Investment Counseling
and
CHAIRMAN AND TRUSTEE Federated Global Investment Management
Corp.;
Chairman, Passport Research,
Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $338.81
$116,760.63 for the Trust
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's and 43
other investment
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries,
companies in the Fund
Pittsburgh, PA Inc. (coated steel conduits/computer storage
Complex
TRUSTEE equipment); formerly: Senior Partner, Ernst &
Young
LLP; Director, MED 3000 Group, Inc.
(physician
practice management); Director, Member of
Executive
Committee, University of
Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $372.74
$128,455.37 for the Trust
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior and 43
other investment
Vice President, John R. Wood and Associates, Inc.,
companies in the Fund
Wood/Commercial Dept. Realtors; Partner or Trustee in private real estate
Complex
John R. Wood Associates, Inc. ventures in Southwest Florida; formerly:
President,
Realtors Naples Property Management, Inc. and
Northgate
3255 Tamiami Trail North Grubb Village Development
Corporation.
& Ellis/Investment Properties
Corporation
3201 Tamiami Trail
North
Naples,
FL
TRUSTEE
Nicholas P. Constantakis++ Director or Trustee of the Federated Fund Complex; $ 0
$73,191.21 for the
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering, Trust
and
175 Woodshire Drive construction, operations and technical services); 37
other investment
Pittsburgh, PA formerly: Partner, Andersen Worldwide SC.
companies
TRUSTEE in the
Fund Complex
John F. Cunningham Director or Trustee of some of the Federated Fund $256.91
$93,190.48 for the
++ Complex; Chairman, President and Chief Executive Trust
and 37
Birth Date: March 5, 1943 Officer, Cunningham & Co., Inc. (strategic business other
investment
353 El Brillo Way consulting); Trustee Associate, Boston College;
companies in the Fund
Palm Beach, FL Director, Iperia Corp. (communications/software);
Complex
TRUSTEE formerly: Director, Redgate Communications and
EMC
Corporation (computer storage
systems).
Previous Positions: Chairman of the Board and
Chief
Executive Officer, Computer Consoles, Inc.;
President
and Chief Operating Officer, Wang
Laboratories;
Director, First National Bank of Boston;
Director,
Apollo Computer,
Inc.
J. Christopher Donahue+ President or Executive Vice President of the $ 0 $0 for
the Trust and 30
Birth Date: April 11, 1949 Federated Fund Complex; Director or Trustee of some other
investment
Federated Investors Tower of the Funds in the Federated Fund Complex;
companies in the Fund
1001 Liberty Avenue President, Chief Executive Officer and Director,
Complex
Pittsburgh, PA Federated Investors, Inc.; President and
Trustee,
PRESIDENT AND TRUSTEE Federated Investment Management Company and
Federated
Investment Counseling; President and
Director,
Federated Global Investment Management
Corp.;
President, Passport Research, Ltd.;
Trustee,
Federated Shareholder Services Company;
Director,
Federated Services
Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $338.81
$116,760.63 for the Trust
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; and 43
other investment
3471 Fifth Avenue Medical Director, University of Pittsburgh Medical
companies in the Fund
Suite 1111 Center - Downtown; Hematologist, Oncologist and
Complex
Pittsburgh, PA Internist, University of Pittsburgh Medical
Center;
TRUSTEE Member, National Board of Trustees, Leukemia
Society
of
America.
Peter E. Madden Director or Trustee of the Federated Fund Complex; $308.66
$109,153.60 for the Trust
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of and 43
other investment
One Royal Palm Way Massachusetts General Court; President, State Street
companies in the Fund
100 Royal Palm Way Bank and Trust Company and State Street Corporation.
Complex
Palm Beach, FL Previous Positions: Director, VISA USA and
VISA
TRUSTEE International; Chairman and Director,
Massachusetts
Bankers Association; Director, Depository
Trust
Corporation; Director, The Boston Stock
Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $266.10
$102,573.91 for the
++ Complex; Executive Vice President, Legal and External Trust
and 40
Birth Date: April 10, 1945 Affairs, Dugan Valva Contess, Inc. (marketing, other
investment
80 South Road communications, technology and consulting); formerly
companies in the Fund
Westhampton Beach, NY Management Consultant.
Complex
TRUSTEE Previous Positions: Chief Executive Officer,
PBTC
International Bank; Partner, Arthur Young &
Company
(now Ernst & Young LLP); Chief Financial Officer
of
Retail Banking Sector, Chase Manhattan Bank;
Senior
Vice President, Marine Midland Bank; Vice
President,
Citibank; Assistant Professor of Banking and
Finance,
Frank G. Zarb School of Business, Hofstra
University.
John E. Murray, Jr., J.D., S.J. Director or Trustee of the Federated Fund Complex; $364.53
$128,455.37 for the Trust
Birth Date: December 20, 1932 President, Law Professor, Duquesne University; and 43
other investment
President, Duquesne University Consulting Partner, Mollica & Murray; Director,
companies in the Fund
Pittsburgh, PA Michael Baker Corp. (engineering, construction,
Complex
TRUSTEE operations and technical
services).
Previous Positions: Dean and Professor of
Law,
University of Pittsburgh School of Law; Dean
and
Professor of Law, Villanova University School of
Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $338.81
$116,760.63 for the Trust
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. and 43
other investment
4905 Bayard Street Previous Positions: National Spokesperson, Aluminum
companies in the Fund
Pittsburgh, PA Company of America; television producer; business
Complex
TRUSTEE
owner.
John S. Walsh Director or Trustee of some of the Federated Fund $256.91
$94,536.85 for the Trust
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. and
39
2007 Sherwood Drive (manufacturer of construction temporary heaters); other
investment
Valparaiso, IN President and Director, Manufacturers Products, Inc.
companies in the Fund
TRUSTEE (distributor of portable construction heaters);
Complex
President, Portable Heater Parts, a division
of
Manufacturers Products, Inc.; Director, Walsh
&
Kelly, Inc. (heavy highway contractor);
formerly:
Vice President, Walsh & Kelly,
Inc.
Edward C. Gonzales Trustee or Director of some of the Funds in the $ 0 $0 for
the Trust and 42
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice other
investment
Federated Investors Tower President and Treasurer of some of the Funds in the company
in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated Fund
Complex
Pittsburgh, PA Investors, Inc.; Vice President, Federated
Investment
EXECUTIVE VICE PRESIDENT Management Company, Federated Investment
Counseling,
Federated Global Investment Management Corp.
and
Passport Research, Ltd.; Executive Vice President
and
Director, Federated Securities Corp.;
Trustee,
Federated Shareholder Services
Company.
John W. McGonigle Executive Vice President and Secretary of the $ 0 $0 for
the Trust and 54
Birth Date: October 26, 1938 Federated Fund Complex; Executive Vice President, other
investment
Federated Investors Tower Secretary and Director, Federated Investors, Inc.;
companies in the Fund
1001 Liberty Avenue Trustee, Federated Investment Management Company and
Complex
Pittsburgh, PA Federated Investment Counseling; Director,
Federated
EXECUTIVE VICE PRESIDENT AND Global Investment Management Corp.,
Federated
SECRETARY Services Company and Federated Securities
Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice $ 0 $0 for
the Trust and 43
Birth Date: June 17, 1954 President - Funds Financial Services Division, other
investment
Federated Investors Tower Federated Investors, Inc.; formerly: various
companies in the Fund
1001 Liberty Avenue management positions within Funds Financial Services
Complex
Pittsburgh, PA Division of Federated Investors,
Inc.
TREASURER
Richard B. Fisher President or Vice President of some of the Funds in $ 0 $0 for
the Trust and 41
Birth Date: May 17, 1923 the Federated Fund Complex; Director or Trustee of other
investment
Federated Investors Tower some of the Funds in the Federated Fund Complex;
companies in the Fund
1001 Liberty Avenue Executive Vice President, Federated Investors, Inc.;
Complex
Pittsburgh, PA Chairman and Director, Federated Securities
Corp.
VICE
PRESIDENT
William D. Dawson, III Chief Investment Officer of this Fund and various $ 0 $0 for
the Trust and 42
Birth Date: March 3, 1949 other Funds in the Federated Fund Complex; Executive other
investment
Federated Investors Tower Vice President, Federated Investment Counseling,
companies in the Fund
1001 Liberty Avenue Federated Global Investment Management Corp.,
Complex
Pittsburgh, PA Federated Investment Management Company and
Passport
CHIEF INVESTMENT OFFICER Research, Ltd.; Registered Representative,
Federated
Securities Corp.; Portfolio Manager,
Federated
Administrative Services; Vice President,
Federated
Investors, Inc.; formerly: Executive Vice
President
and Senior Vice President, Federated
Investment
Counseling Institutional Portfolio
Management
Services Division; Senior Vice President,
Federated
Investment Management Company and Passport
Research,
Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. $ 0 $0 for
the Trust and 6
Birth Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been other
investment
Federated Investors Tower a Senior Portfolio Manager and a Senior Vice
companies in the Fund
1001 Liberty Avenue President of the Funds' Adviser since 1997. Ms.
Complex
Pittsburgh, PA Cunningham served as a Portfolio Manager and a
Vice
VICE PRESIDENT President of the Adviser from 1993 through 1996.
Ms.
Cunningham is a Chartered Financial Analyst and received
her M.B.A. in Finance from Robert Morris
College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $ 0 $0 for
the Trust and 7
Birth Date: September 12, 1953 Ochson joined Federated in 1982 and has been a Senior other
investment
Federated Investors Tower Portfolio Manager and a Senior Vice President of the
companies in the Fund
1001 Liberty Avenue Funds' Adviser since 1996. From 1988 through 1995,
Complex
Pittsburgh, PA Ms. Ochson served as a Portfolio Manager and a
Vice
VICE PRESIDENT President of the Funds' Adviser. Ms. Ochson is
a
Chartered Financial Analyst and received her
M.B.A.
in Finance from the University of
Pittsburgh.
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the 1940 Act.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Nicholas P. Constantakis became a member of the Board on October 1, 1999. He
did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
<TABLE>
<CAPTION>
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated Funds
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
For the Year Ended October 31 1999
1998 1997
<S> <C> <C>
<C>
Advisory Fee Earned $2,574,407 $1,810,446
$1,006,548
Advisory Fee Reduction $ 493,904 $ 397,073
$ 294,305
Brokerage Commissions $ 0 $ 0
$ 0
Administrative Fee $ 388,221 $ 273,047
$ 158,069
Shareholder Services
Fee
Institutional Service Shares $ 22,975
- -- --
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for shareholder services fees, which are borne only by the applicable
class of Shares.
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year and Start of Performance
periods ended October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the 7-day period
ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
Start
of Performance on
7-Day Period 1 Year 5 Years May
18, 1990
Institutional Service
Shares
<S> <C> <C> <C>
<C>
Total Return -- 2.71% 3.05%
3.12%
Yield 2.94% --
- -- --
Effective Yield 2.98% --
- -- --
Tax-Equivalent Yield 5.40% --
- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
Yield, Effective Yield and Tax-Equivalent Yield
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized base-
period return by: adding one to the base-period return, raising the sum to the
365/7th power; and subtracting one from the result. The tax-equivalent yield of
Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to AMT and
state and/or local taxes.
TAX EQUIVALENCY TABLE
Taxable Yield Equivalent for 2000 - STATE OF MASSACHUSETS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
<C> <C>
Tax Bracket:
Federal 15.00% 28.00% 31.00%
36.00% 39.60%
Combined Federal and State: 20.950% 33.950% 36.950%
41.950% 45.550%
- ----------------------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $
16,451-288,350 Over 288,350
Single Return $1-26,250 $ 26,251-63,550 $ 63,551-132,600
$132,601-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield
Equivalent:
1.00% 1.27% 1.51% 1.59%
1.72% 1.84%
1.50% 1.90% 2.27% 2.38%
2.58% 2.75%
2.00% 2.53% 3.03% 3.17%
3.45% 3.67%
2.50% 3.16% 3.79% 3.97%
4.31% 4.59%
3.00% 3.80% 4.54% 4.76%
5.17% 5.51%
3.50% 4.43% 5.30% 5.55%
6.03% 6.43%
4.00% 5.06% 6.06% 6.34%
6.89% 7.35%
4.50% 5.69% 6.81% 7.14%
7.75% 8.26%
5.00% 6.33% 7.57% 7.93%
8.61% 9.18%
5.50% 6.96% 8.33% 8.72%
9.47% 10.10%
6.00% 7.59% 9.08% 9.52%
10.34% 11.02%
6.50% 8.22% 9.84% 10.31%
11.20% 11.94%
7.00% 8.86% 10.60% 11.10%
12.06% 12.86%
7.50% 9.49% 11.36% 11.90%
12.92% 13.77%
8.00% 10.12% 12.11% 12.69%
13.78% 14.69%
8.50% 10.75% 12.87% 13.48%
14.64% 15.61%
9.00% 11.39% 13.63% 14.27%
15.50% 16.53%
</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.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
. references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
. charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
. discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
. information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
. 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.
. 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.
. Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999 Federated managed 53 equity funds totaling approximately $18.3
billion in assets across growth, value, equity income, international, index and
sector (i.e. utility) styles. Federated's value-oriented management style
combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion. Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion and $13.1 billion and
$115 million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
Financial Information
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
Investment Ratings
STANDARD & POOR'S SHORT-TERM MUNICIPAL OBLIGATION RATINGS An 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 AND TENDER OPTION BONDS RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER 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 rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
MOODY'S INVESTORS SERVICE SHORT-TERM MUNICIPAL OBLIGATION RATINGS
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 AND TENDER OPTION BONDS RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER 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 IBCA, 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.
Addresses
MASSACHUSETTS MUNICIPAL CASH TRUST
Institutional Service Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PROSPECTUS
MICHIGAN MUNICIPAL CASH TRUST
Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income tax imposed by the State of Michigan
consistent with stability of principal and liquidity by investing in a portfolio
of high-quality Michigan tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 4
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 6
How to Redeem Shares 7
Account and Share Information 9
Who Manages the Fund? 10
Financial Information 10
Report of Independent Public Accountants
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Michigan Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value of $1.00 per share. The Fund's investment
objective is to provide current income exempt from federal regular income tax
and the personal income tax imposed by the State of Michigan consistent with
stability of principal and liquidity. While there is no assurance that the Fund
will achieve its investment objective, it endeavors to do so by following the
strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Michigan tax exempt securities maturing in 397
days or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax and Michigan state
income and intangibles tax. Interest from the Fund's investments may be subject
to the federal alternative minimum tax for individuals and corporations (AMT).
The dollar-weighted average maturity of the Fund's portfolio will be 90 days or
less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
Risk/Return Bar Chart and Table
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Service Shares of Michigan Municipal Cash Trust (Former Fund)
prior to its reorganization into the Fund, which is a newly created portfolio of
Money Market Obligations Trust (Trust). On the date of the reorganization,
February 1, 2000, the Former Fund was dissolved and its net assets (inclusive of
liabilities recorded on the Former Fund's records) were transferred into the
Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Former Fund's Institutional Service Shares as of the
calendar year-end for each of four years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's Institutional Service Shares start of
business through the calendar year ended 1999. The light gray shaded chart
features four distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Former
Fund's Institutional Service Shares for each calendar year is stated directly at
the top of each respective bar, for the calendar years 1996 through 1999, The
percentages noted are: 3.18%, 3.31%, 3.11%, and 2.91%, respectively.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Service Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Service Shares were not sold subject to a sales
charge (load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Service
Shares highest quarterly return was 0.86% (quarter ended June 30, 1997). Its
lowest quarterly return was 0.64% (quarter ended March 31, 1999).
Average Annual Total Return Table
The following table represents the Former Fund's Institutional Service Shares
Average Annual Total Returns, for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year 2.91%
Start of Performance/1/ 3.19%
</TABLE>
/1/ The Former Fund's Institutional Service Shares start of performance date
was June 20, 1995.
The Former Fund's Institutional Service Shares 7-Day Net Yield as of December
31, 1999 was 4.06%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
MICHIGAN MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Service Shares of the Fund.
<TABLE>
<CAPTION>
<S>
<C>
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, as applicable) None Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and other Distributions) (as a percentage of offering
price)
None
Redemption Fee (as a percentage of amount redeemed, if
applicable) None
Exchange
Fee
None
Annual Fund Operating Expenses (Before Waivers)/1/
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management
Fee/2/
0.50%
Distribution (12b-1)
Fee None
Shareholder Services
Fee/3/ 0.25%
Other
Expenses
0.21%
Total Annual Fund Operating
Expenses/4/ 0.96%
</TABLE>
/1/ Although not contractually obligated to do so, the Adviser and shareholder
services provider expect to waive certain amounts during the fiscal year
ending October 31, 2000. These are shown below along with the net expenses
the Fund expects to actually pay for the fiscal year ending October 31,
2000.
Total Waiver of Fund Expenses 0.40%
Total Actual Annual Fund Operating Expenses (after waivers) 0.56%
/2/ The Adviser expects to voluntarily waive a portion of the management fee.
The Adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.19% for the fiscal year ending October 31, 2000.
/3/ The shareholder services provider expects to voluntarily waive a portion of
the shareholder services fee. The shareholder services provider can
terminate this anticipated voluntary waiver at any time. The shareholder
services fee paid by the Fund's Institutional Service Shares (after the
anticipated voluntary waiver) is expected to be 0.16% for the fiscal year
ending October31, 2000.
/4/ For the fiscal year ended October 31, 1999, prior to the reorganization of
the Former Fund as a portfolio of the Trust, the Total Annual Fund Operating
Expenses and Total Actual Annual Fund Operating Expenses (after waivers) for
the Former Fund's Institutional Service Shares were 0.96% and 0.56%,
respectively.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional
Service Shares for the time periods indicated and then redeem all of your Shares
at the end of those periods. The Example also assumes that your investment has a
5% return each year and that the Fund's Institutional Service Shares operating
expenses are before waivers as estimated in the table above and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year $ 98
3 Years $ 306
5 Years $ 531
10 Years $1,178
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Michigan tax exempt securities
maturing in 397 days or less. The Fund will invest its assets so that at least
80% of its annual interest income is exempt from federal regular income tax and
Michigan state income and intangibles tax. Interest from the Fund's investments
may be subject to AMT. The dollar- weighted average maturity of the Fund's
portfolio will be 90 days or less. The Adviser actively manages the Fund's
portfolio, seeking to limit the credit risk taken by the Fund and select
investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
Temporary Defensive Investments
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and Michigan income tax.
It may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
Variable Rate Demand Instruments
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
Municipal Notes
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
Investment 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
Credit Risks
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as
Standard & Poor's and Moody's Investors Service. These services assign ratings
to securities by assessing the likelihood of issuer default. Lower credit
ratings correspond to higher credit risk. If a security has not received a
rating, the Fund must rely entirely on the Adviser's credit assessment.
Interest Rate Risks
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
Sector Risks
A substantial part of the Fund's portfolio may be comprised of securities issued
by Michigan issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
Michigan Risks
Since the Fund invests primarily in issuers from Michigan, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Although it has diversified, Michigan's economy is still heavily dependent upon
certain industries, especially automobile, manufacturing and related industries.
Any downturn in these industries may adversely affect the economy of the state.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $10,000 minimum
is reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Shares and Institutional
Service Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Service Shares. Each share class
has different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.
The Fund's Distributor, Federated Securities Corp., markets the Shares
described in this prospectus to financial institutions acting in an agency or
fiduciary capacity or to individuals directly or through investment
professionals. The Fund may not be a suitable investment for retirement plans or
for non-Michigan taxpayers because it invests in Michigan municipal securities.
The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 1:00
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at
1-800-341-7400 once you have completed the appropriate authorization form for
telephone transactions.
If you call before 12:00 noon (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time) your redemption will be wired to
you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for same-
day payment of redemption proceeds, without that day's dividend, for redemption
requests received before 2:00 p.m. (Eastern time).
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317 All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is an
ACH member; or
. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from Michigan taxes discussed above to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance since inception. Some of the information is presented on a per share
basis. Total returns represent the rate an investor would have earned (or lost)
on an investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<S> <C> <C> <C>
<C> <C>
Year Ended October31 1999 1998 1997
1996 1995/1/
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Income From Investment
Operations:
Net investment income 0.03 0.03 0.03
0.03 0.01
Less
Distributions:
Distributions from net investment income (0.03) (0.03) (0.03)
(0.03) (0.01)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Total Return/2/ 2.84% 3.20% 3.27%
3.26% 1.35%
Ratios to Average Net
Assets:
Expenses/3/ 0.96% 0.98% 1.06%
1.26% 1.95%/4/
Net investment income/3/ 2.40% 2.74% 2.71%
2.45% 2.04%/4/
Expenses (after waivers) 0.56% 0.56% 0.55%
0.50% 0.32%/4/
Net investment income (after waivers) 2.80% 3.16% 3.22%
3.21% 3.67%/4/
Supplemental
Data:
Net assets, end of period (000 omitted) $182,610 $184,989 $147,105
$92,275 $30,133
</TABLE>
/1/ Reflects operations for the period June 20, 1995 (date of initial public
investment) to October 31, 1995.
/2/ Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable./3/ During the period,
certain fees were voluntarily waived. If such waivers had not occurred, the
ratios would have been as indicated.
/4/ Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Federated Logo]
World-Class Investment Manager (R)
Michigan Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and it's investments is contained in the Fund's SAI and Annual and
SemiAnnual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
Annual Report, Semi-Annual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
[LOGO]
Michigan Municipal Cash Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N377
G01212-01 (1/00)
Federated is a registered mark of Federated Investors, Inc.
2000 (c)Federated Investors, Inc.
[logo]
RECYCLED
PAPER
PROSPECTUS
MICHIGAN MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income tax imposed by the State of Michigan
consistent with stability of principal and liquidity by investing in a portfolio
of high-quality Michigan tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 4
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 6
How to Redeem Shares 7
Account and Share Information 9
Who Manages the Fund? 10
Financial Information 10
- -------------------
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
- -------------------
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Michigan Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value of $1.00 per share. The Fund's investment
objective is to provide current income exempt from federal regular income tax
and the personal income tax imposed by the State of Michigan consistent with
stability of principal and liquidity. While there is no assurance that the Fund
will achieve its investment objective, it endeavors to do so by following the
strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN
INVESTMENT STRATEGIES?
The Fund invests in high-quality Michigan tax exempt securities maturing in 397
days or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax and Michigan state
income and intangibles tax. Interest from the Fund's investments may be subject
to the federal alternative minimum tax for individuals and corporations (AMT).
The dollar-weighted average maturity of the Fund's portfolio will be 90 days or
less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
Risk/Return Bar Chart and Table
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Shares of Michigan Municipal Cash Trust (Former Fund) prior to
its reorganization into the Fund, which is a newly created portfolio of Money
Market Obligations Trust (Trust). On the date of the reorganization, February 1,
2000, the Former Fund was dissolved and its net assets (inclusive of liabilities
recorded on the Former Fund's records) were transferred into the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Former Fund's Institutional Shares as of the
calendar year-end for each of three years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's Institutional Shares start of business
through the calendar year ended 1999. The light gray shaded chart features three
distinct vertical bars, each shaded in charcoal, and each visually representing
by height the total return percentages for the calendar year stated directly at
its base. The calculated total return percentage for the Former Fund's
Institutional Shares for each calendar year is stated directly at the top of
each respective bar, for the calendar years 1997 through 1999, The percentages
noted are: 3.47%, 3.28%, and 3.07%, respectively.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Shares were not sold subject to a sales charge
(load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Shares
highest quarterly return was 0.90% (quarter ended June 30, 1997). Its lowest
quarterly return was 0.68% (quarter ended March 31, 1999).
Average Annual Total Return Table
The following table represents the Former Fund's Institutional Shares Average
Annual Total Returns, for the calendar periods ended December 31, 1998.
<TABLE>
<CAPTION>
Calendar Period Fund
- -------------------------------------------------------------------
<S> <C>
1 Year 3.07%
- -------------------------------------------------------------------
Start of Performance/1/ 3.29%
- -------------------------------------------------------------------
</TABLE>
1 The Former Fund's Institutional Shares start of performance date was March 4,
1996.
The Former Fund's Institutional Shares 7-Day Net Yield as of December 31,
1999 was 4.22%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
MICHIGAN MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the Fund.
<TABLE>
<S>
<C>
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, as applicable) None Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and other Distributions) (as a percentage of offering
price) None
Redemption Fee (as a percentage of amount redeemed, if
applicable) None
Exchange
Fee
None
Annual Fund Operating Expenses (Before Waivers)/1/
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management
Fee/2/
0.50%
Distribution (12b-1)
Fee None
Shareholder Services
Fee/3/ 0.25%
Other
Expenses
0.21%
Total Annual Fund Operating
Expenses/4/ 0.96%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
1 Although not contractually obligated to do so, the Adviser and shareholder
services provider expect to waive certain amounts during the fiscal year
ending October 31, 2000. These are shown below along with the net expenses
the Fund expects to actually pay for the fiscal year ending October 31, 2000.
<TABLE>
<S> <C>
Total Waiver of Fund Expenses 0.56%
Total Actual Annual Fund Operating Expenses (after waivers) 0.40%
</TABLE>
2 The Adviser expects to voluntarily waive a portion of the management fee. The
Adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.19% for the fiscal year ending October 31, 2000.
3 The shareholder services provider expects to voluntarily waive a portion of
the shareholder services fee. The shareholder services provider can terminate
this anticipated voluntary waiver at any time. The shareholder services fee
paid by the Fund's Institutional Shares (after the anticipated voluntary
waiver) is expected to be 0.00% for the fiscal year ending October 31, 2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of
the Former Fund as a portfolio of the Trust, the Total Annual Fund Operating
Expenses and Total Actual Annual Fund Operating Expenses (after waivers) for
the Former Fund's Institutional Shares were 0.97% and 0.40%, respectively.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Institutional Shares operating expenses are before
waivers as estimated in the table above and remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
Calendar Period Fund
- ----------------------------------------------------------------
<S> <C>
1 Year $ 98
- ----------------------------------------------------------------
3 Years $ 306
- ----------------------------------------------------------------
5 Years $ 531
- ----------------------------------------------------------------
10 Years $1,178
- ----------------------------------------------------------------
</TABLE>
What are the Fund's
Investment Strategies?
The Fund invests in a portfolio of high-quality Michigan tax exempt securities
maturing in 397 days or less. The Fund will invest its assets so that at least
80% of its annual interest income is exempt from federal regular income tax and
Michigan state income and intangibles tax. Interest from the Fund's investments
may be subject to AMT. The dollar- weighted average maturity of the Fund's
portfolio will be 90 days or less. The Adviser actively manages the Fund's
portfolio, seeking to limit the credit risk taken by the Fund and select
investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
Temporary Defensive Investments
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and Michigan income tax.
It may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal
Securities in Which the
Fund Invests?
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
Variable Rate Demand Instruments
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
Municipal Notes
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
Investment 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
Credit Risks
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as
Standard & Poor's and Moody's Investors Service. These services assign ratings
to securities by assessing the likelihood of issuer default. Lower credit
ratings correspond to higher credit risk. If a security has not received a
rating, the Fund must rely entirely on the Adviser's credit assessment.
Interest Rate Risks
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
Sector Risks
A substantial part of the Fund's portfolio may be comprised of securities issued
by Michigan issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
Michigan Risks
Since the Fund invests primarily in issuers from Michigan, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Although it has diversified, Michigan's economy is still heavily dependent upon
certain industries, especially automobile, manufacturing and related industries.
Any downturn in these industries may adversely affect the economy of the state.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum
is reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Shares and Institutional
Service Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Shares. Each share class has
different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.
The Fund's Distributor, Federated Securities Corp., markets the Shares
described in this prospectus to financial institutions acting in an agency or
fiduciary capacity or to individuals directly or through investment
professionals. The Fund may not be a suitable investment for retirement plans or
for non-Michigan taxpayers because it invests in Michigan municipal securities.
The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 1:00
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time) your redemption will be wired to
you the following business day. You will receive that day's dividend.
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is an
ACH member; or
. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and
Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from Michigan taxes discussed above to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance since inception. Some of the information is presented on a per share
basis. Total returns represent the rate an investor would have earned (or lost)
on an investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
For Year Ended October 31 1999 1998 1997 1996/1/
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income From Investment Operations:
Net investment income 0.03 0.03 0.03 0.02
Less Distributions:
Distributions from net investment income (0.03) (0.03) (0.03) (0.02)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return/2/ 3.00% 3.36% 3.43% 2.19%
Ratios to Average Net Assets:
Expenses/3/ 0.97% 0.98% 1.06%
1.26%/4/
Net investment income/3/ 2.42% 2.73% 2.73%
2.51%/4/
Expenses (after waivers and reimbursements) 0.40% 0.40% 0.40%
0.37%/4/
Net investment income (after waivers) 2.99% 3.31% 3.39%
3.40%/4/
Supplemental Data:
Net assets, end of period (000 omitted) $18,890 $19,564 $13,370 $11,614
</TABLE>
1 Reflects operations for the period March 4, 1996 (date of initial public
investment) to October 31, 1996.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 During the period, certain fees were voluntarily waived. If such waivers had
not occurred, the ratios would have been as indicated.
4 Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
Michigan Municipal Cash Trust
Notes
Notes
Notes
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and it's investments is contained in the Fund's SAI and Annual and
SemiAnnual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
Annual Report, Semi-Annual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
[LOGO OF FEDERATED INVESTORS]
Michigan Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N385
G01212-04-IS (1/00)
Federated is a registered mark
of Federated Investors, Inc.
2000 (C)Federated Investors, Inc.
[RECYCLED PAPER LOGO]
[LOGO OF FEDERATED INVESTORS]
World-Class Investment Manger(R)
Michigan
Municipal Cash
Trust
A Portfolio of Money Market
Obligations Trust
INSTITUTIONAL SHARES
JANUARY 31, 2000
STATEMENT OF ADDITIONAL INFORMATION
MICHIGAN MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Michigan Municipal Cash Trust
(Fund), dated January 31, 2000. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectuses or the Annual Report without charge by
calling 1-800-341-7400.
JANUARY 31, 2000
CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
What Do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip 60934N385
Cusip 60934N377
G01212-02(1/00)
How is the Fund Organized?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on June 7, 1995, will
be reorganized as a portfolio of the Trust on February 1, 2000.
The Board of Trustees (Board) has established two classes of shares of the Fund,
known as Institutional Shares and Institutional Service Shares (Shares). This
SAI relates to both classes of Shares. The Fund's investment adviser is
Federated Investment Management Company (Adviser). Effective March 31, 1999,
Federated Management, former adviser to the Fund, became Federated Investment
Management Company (formerly, Federated Advisers).
Securities in Which the Fund Invests
The Fund's principal securities are described in its prospectus. Additional
securities, and further information regarding the principal securities, are
outlined below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its charter
or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues received by
the issuer such as specific taxes, assessments, tolls or fees. Bondholders
may not collect from the municipality's general taxes or revenues. For
example, a municipality may issue bonds to build a toll road, and pledge
the tolls to repay the bonds. Therefore, a shortfall in the tolls normally
would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new
factory to improve its local economy. The municipality would lend the
proceeds from its bonds to the company using the factory, and the company
would agree to make loan payments sufficient to repay the bonds. The
bonds would be payable solely from the company's loan payments, not from
any other revenues of the municipality. Therefore, any default on the
loan normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to the
federal alternative minimum tax (AMT). The Fund may invest in bonds
subject to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order
to comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end a
lease, without penalty, by not providing for the lease payments in its
annual budget. After the lease ends, the lessor can resell the equipment or
facility but may lose money on the sale. The Fund may invest in securities
supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final
maturity unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities at
a price below the amount payable at maturity. The difference between the
purchase price and the amount paid at maturity represents interest on the
zero coupon security. Investors must wait until maturity to receive
interest and principal, which increases the interest rate risks and credit
risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of credit,
bond insurance and surety bonds. Credit enhancement also includes
arrangements where securities or other liquid assets secure payment of a
fixed income security. If a default occurs, these assets may be sold and
the proceeds paid to the security's holders. Either form of credit
enhancement reduces credit risks by providing another source of payment for
a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
Inter-fund Borrowing and Lending Arrangements
The Securities and Exchange Commission (SEC) has granted an exemption that
permits the Fund and all other funds advised by subsidiaries of Federated
Investors, Inc. (Federated funds) to lend and borrow money for certain
temporary purposes directly to and from other Federated funds. Participation
in this inter-fund lending program is voluntary for both borrowing and lending
funds, and an inter-fund loan is only made if it benefits each participating
fund. Federated administers the program according to procedures approved by
the Fund's Board, and the Board monitors the operation of the program. Any
inter-fund loan must comply with certain conditions set out in the exemption,
which are designed to assure fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may
be made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term
borrowings (the Bank Loan Rate), as determined by the Board. The interest rate
imposed on inter-fund loans is the average of the Repo Rate and the Bank Loan
Rate.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment
and delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into
these transactions so that the market values of the securities bought may vary
from the purchase prices. Therefore, delayed delivery transactions create
interest rate risks for the Fund. Delayed delivery transactions also involve
credit risks in the event of a counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the
underlying assets or set aside readily marketable securities with a value that
equals or exceeds the Fund's obligations. Unless the Fund has other readily
marketable assets to set aside, it cannot trade assets used to secure such
obligations without terminating the special transaction. This may cause the
Fund to miss favorable trading opportunities or to realize losses on special
transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government of
the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and
use the proceeds (or bank loans) to repay maturing paper. If the issuer
cannot continue to obtain liquidity in this fashion, its commercial paper
may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from
a dealer or bank and agrees to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price, reflecting
the Fund's return on the transaction. This return is unrelated to the interest
rate on the underlying security. The Fund will enter into repurchase
agreements only with banks and other recognized financial institutions, such
as securities dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is
the seller (rather than the buyer) of the securities, and agrees to repurchase
them at an agreed upon time and price. A reverse repurchase agreement may be
viewed as a type of borrowing by the Fund. Reverse repurchase agreements are
subject to credit risks. In addition, reverse repurchase agreements create
leverage risks because the Fund must repurchase the underlying security at a
higher price, regardless of the market value of the security at the time of
repurchase.
INVESTMENT RATINGS
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's (S&P), MIG-1 or MIG-2
by Moody's Investors Service (Moody's), or F-1+, F-1 or F-2 by Fitch IBCA, 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 rating service can be treated as being in one of
the two highest short-term rating categories; currently, such securities must be
rated by two nationally recognized statistical rating organizations in one of
their two highest rating categories. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICY
The investment objective of the Fund is to provide current income exempt from
federal regular income tax and the personal income tax imposed by the State of
Michigan consistent with stability of principal and liquidity.
The Fund invests in tax-exempt securities so that at least 80% of its annual
interest income is exempt from federal regular income tax and Michigan state
income and intangibles tax.
This investment objective and policy may not be changed by the Fund's Board
without shareholder approval.
INVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
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 limitations 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.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
Securities Act of 1933.
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.
For purposes of the concentration limitation: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, the Fund
will not exclude foreign bank instruments from industry concentration limitation
tests so long as the policy of the SEC remains in effect. In addition,
investments in certain industrial development bonds funded by activities in a
single industry will be deemed to constitute investment in an industry, except
when held for temporary defensive purposes. The investment of more than 25% of
the value of the Fund's total assets in any one industry will constitute
"concentration."
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 1940 Act. In particular, the Fund will comply with the various
requirements of Rule 2a-7 (Rule), which regulates money market mutual funds. The
Fund will determine the effective maturity of its investments according to the
Rule. The Fund may change these operational policies to reflect changes in the
laws and regulations without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board will take any steps it considers 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.
What Do Shares Cost?
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
Account and Share Information
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of the outstanding Institutional Shares:
Sunatco Partnership, Hancock, Michigan owned approximately 1,652,729 Shares
(9.21%); First Mar & Co., Marquette, Michigan owned 10,244,428 Shares (57.12%);
Sturgis Bank & Trust Company FSB, Sturgis, Michigan owned approximately
1,398,538 Shares (7.80%) and National City Bank, Cleveland, Ohio owned
approximately 2,533,614 Shares (14.13%)
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of the outstanding Institutional Service
Shares: Comercia Bank, Detroit, Michigan owned approximately 74,795,935 Shares
(39.00%) and McDonald % Co. Securities, Inc., Cincinnati, Ohio owned
approximately 42,765,006 Shares (22.30%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
STATE TAXES
Under existing Michigan laws, distributions made by the Fund will not be subject
to Michigan personal income taxes to the extent that such distributions qualify
as exempt-interest dividends under the Internal Revenue Code, and represent (i)
interest from obligations of Michigan or any of its political subdivisions, or
(ii) income from obligations of the United States government which are exempted
from state income taxation by a law of the United States.
The portion of a shareholder's shares in the Fund representing (i) bonds or
other similar obligations of Michigan or its political subdivisions, or (ii)
obligations of the United States which are exempt from taxation by a law of the
United States, and dividends paid by the Fund representing interest payments on
securities, will be exempt from Michigan intangibles tax. 1995 Public Act 5
repeals the intangibles tax effective January 1, 1998.
Distributions of the Fund are not subject to the Michigan Single Business Tax to
the extent that such distributions are derived from interest on obligations of
Michigan or its political subdivisions, or obligations of the United States
government that are exempt from state taxation by a law of the United States.
Certain municipalities in Michigan also impose an income tax on individuals and
corporations. However, to the extent that the dividends from the Fund are exempt
from federal regular income taxes, such dividends also will be exempt from
Michigan municipal income taxes.
Who Manages and Provides Services to the Fund?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
43 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January 12, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.
<TABLE>
<CAPTION>
Name
Birth Date Aggregate
Total Compensation
Address Principal Occupations Compensation From
Trust and Fund
Position With Trust for Past Five Years From Fund
Complex
- -------------------------------------- --------------------------------------------------- --------------
- -----------------------
<S> <C> <C> <C>
John F. Donahue*#+ Chief Executive Officer and Director or Trustee $ 0 $0
for the Trust and 43
Birth Date: July 28, 1924 of the Federated Fund Complex; Chairman and other
investment
Federated Investors Tower Trustee, Federated Investment Management
companies in the Fund
1001 Liberty Avenue Company; Chairman and Director, Federated
Complex
Pittsburgh, PA Investors, Inc., Federated Investment
CHAIRMAN AND TRUSTEE Counseling, and Federated Global Investment
Management Corp.; Chairman, Passport Research,
Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas G. Bigley Director or Trustee of the Federated Fund $183.70
$116,760.63 for the
Birth Date: February 3, 1934 Complex; Director, Member of Executive
Trust
15 Old Timber Trail Committee, Children's Hospital of Pittsburgh; and
43 other investment
Pittsburgh, PA Director, Robroy Industries, Inc. (coated steel
companies in the Fund
TRUSTEE conduits/computer storage equipment); formerly:
Complex
Senior Partner, Ernst & Young LLP; Director, MED
3000 Group, Inc. (physician practice
management); Director, Member of Executive
Committee, University of Pittsburgh.
- ------------------------------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Director or Trustee of the Federated Fund $202.09
$128,455.37 for the
Birth Date: June 23, 1937 Complex; President, Investment Properties Trust
Grubb & Ellis/Investment Properties Corporation; Senior Vice President, John R. Wood and
43 other investment
Corporation and Associates, Inc., Realtors; Partner or
companies in the Fund
3201 Tamiami Trail North Trustee in private real estate ventures in
Complex
Naples, FL Southwest Florida; formerly: President, Naples
TRUSTEE Property Management, Inc. and Northgate Village
Development Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
Nicholas P. Constantakis ++ Director or Trustee of the Federated Fund $ 0
$73,191.21 for the
Birth Date: September 3, 1939 Complex; Director, Michael Baker Corporation
Trust and
175 Woodshire Drive (engineering, construction, operations and 37
other investment
Pittsburgh, PA technical services); formerly: Partner,
companies
TRUSTEE Andersen Worldwide SC. in
the Fund Complex
- ------------------------------------------------------------------------------------------------------------------------------------
John F. Cunningham Director or Trustee of some of the Federated $137.63
$93,190.48 for the
Birth Date: March 5, 1943 Fund Complex; Chairman, President and Chief
Trust and 37
353 El Brillo Way Executive Officer, Cunningham & Co., Inc.
other investment
Palm Beach, FL (strategic business consulting); Trustee
companies in the Fund
TRUSTEE Associate, Boston College; Director, Iperia
Complex
Corp. (communications/software); formerly:
Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board and
Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer,
Wang Laboratories; Director, First National Bank
of Boston; Director, Apollo Computer, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue+ President or Executive Vice President of the $ 0 $0
for the Trust and 30
Birth Date: April 11, 1949 Federated Fund Complex; Director or Trustee of
other investment
Federated Investors Tower some of the Funds in the Federated Fund Complex;
companies in the Fund
1001 Liberty Avenue President, Chief Executive Officer and Director,
Complex
Pittsburgh, PA Federated Investors, Inc.; President and
PRESIDENT AND TRUSTEE Trustee, Federated Investment Management
Company; President and Trustee,
Federated Investment Counseling,
President and Director, Federated Global
Investment Management Corp.; President,
Passport Research, Ltd.; Trustee,
Federated Shareholder Services Company;
Director, Federated Services Company.
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund $183.70
$116,760.63 for the
Birth Date: October 11, 1932 Complex; Professor of Medicine, University of Trust
3471 Fifth Avenue Pittsburgh; Medical Director, University of and
43 other investment
Suite 1111 Pittsburgh Medical Center - Downtown;
companies in the Fund
Pittsburgh, PA Hematologist, Oncologist and Internist,
Complex
TRUSTEE University of Pittsburgh Medical Center; Member,
National Board of Trustees, Leukemia Society of
America.
- ------------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Director or Trustee of the Federated Fund $167.65
$109,153.60 for the
Birth Date: March 16, 1942 Complex; formerly: Representative, Commonwealth Trust
One Royal Palm Way of Massachusetts General Court; President, State and
43 other investment
100 Royal Palm Way Street Bank and Trust Company and State Street
companies in the Fund
Palm Beach, FL Corporation.
Complex
TRUSTEE
Previous Positions: Director, VISA USA and VISA
International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.
- ------------------------------------------------------------------------------------------------------------------------------------
Charles F. Mansfield, Jr. Birth Director or Trustee of some of the Federated $142.25
$102,573.91 for the
Date: April 10, 1945 Fund Complex; Executive Vice President, Legal
Trust and 40
80 South Road and External Affairs, Dugan Valva Contess, Inc.
other investment
Westhampton Beach, NY (marketing, communications, technology and
companies in the Fund
TRUSTEE consulting).; formerly Management Consultant
Complex
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
- ------------------------------------------------------------------------------------------------------------------------------------
John E. Murray, Jr., J.D., S.J.D.# Director or Trustee of the Federated Fund $197.47
$128,455.37 for the
Birth Date: December 20, 1932 Complex; President, Law Professor, Duquesne Trust
President, Duquesne University University; Consulting Partner, Mollica & and
43 other investment
Pittsburgh, PA Murray; Director, Michael Baker Corp.
companies in the Fund
TRUSTEE (engineering, construction, operations and
Complex
technical services).
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of
Law.
- ------------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Director or Trustee of the Federated Fund $ 183.7
$113,860.22 for the
Birth Date: June 21, 1935 Complex; Public Relations/Marketing/Conference Trust
4905 Bayard Street Planning. and
43 other investment
Pittsburgh, PA
companies in the Fund
TRUSTEE Previous Positions: National Spokesperson,
Complex
Aluminum Company of America; television
producer; business owner.
- ------------------------------------------------------------------------------------------------------------------------------------
John S. Walsh Director or Trustee of some of the Federated $137.63
$94,536.85 for the
Birth Date: November 28, 1957 Fund Complex; President and Director, Heat
Trust and 39
2007 Sherwood Drive Wagon, Inc. (manufacturer of construction
other investment
Valparaiso, IN temporary heaters); President and Director,
companies in the Fund
TRUSTEE Manufacturers Products, Inc. (distributor of
Complex
portable construction heaters); President,
Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh &
Kelly, Inc. (heavy highway contractor);
formerly: Vice President, Walsh & Kelly, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Trustee or Director of some of the Funds in the $ 0 $0
for the Trust and 42
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive
other investment
Federated Investors Tower Vice President and Treasurer of some of the
companies in the
1001 Liberty Avenue Funds in the Federated Fund Complex; Vice Fund
Complex
Pittsburgh, PA Chairman, Federated Investors, Inc.; Vice
EXECUTIVE VICE PRESIDENT President, Federated Investment Management
Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice
President and Director, Federated Securities
Corp.; Trustee, Federated Shareholder Services
Company.
- ------------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Executive Vice President and Secretary of the $ 0 $0
for the Trust and 43
Birth Date: October 26, 1938 Federated Fund Complex; Executive Vice
other investment
Federated Investors Tower President, Secretary and Director, Federated
companies in the Fund
1001 Liberty Avenue Investors, Inc.; Trustee, Federated Investment
Complex
Pittsburgh, PA Management Company and Federated Investment
EXECUTIVE VICE PRESIDENT AND Counseling; Director, Federated Global
SECRETARY Investment Management Corp., Federated Services
Company and Federated Securities Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice $ 0 $0
for the Trust and 43
Birth Date: June 17, 1954 President - Funds Financial Services Division,
other investment
Federated Investors Tower Federated Investors, Inc.; formerly: various
companies in the Fund
1001 Liberty Avenue management positions within Funds Financial
Complex
Pittsburgh, PA Services Division of Federated Investors, Inc.
TREASURER
- ------------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher President or Vice President of some of the Funds $ 0 $0
for the Trust and 41
Birth Date: May 17, 1923 in the Federated Fund Complex; Director or
other investment
Federated Investors Tower Trustee of some of the Funds in the Federated
companies in the Fund
1001 Liberty Avenue Fund Complex; Executive Vice President,
Complex
Pittsburgh, PA Federated Investors, Inc.; Chairman and
VICE PRESIDENT Director, Federated Securities Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
William D. Dawson, III Chief Investment Officer of this Fund and $ 0 $0
for the Trust and 42
Birth Date: March 3, 1949 various other Funds in the Federated Fund
other investment
Federated Investors Tower Complex; Executive Vice President, Federated
companies in the Fund
1001 Liberty Avenue Investment Counseling, Federated Global
Complex
Pittsburgh, PA Investment Management Corp., Federated
CHIEF INVESTMENT OFFICER Investment Management Company and Passport
Research, Ltd.; Registered Representative,
Federated Securities Corp.; Portfolio Manager,
Federated Administrative Services; Vice
President, Federated Investors, Inc.; formerly:
Executive Vice President and Senior Vice
President, Federated Investment Counseling
Institutional Portfolio Management Services
Division; Senior Vice President, Federated
Investment Management Company and Passport
Research, Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the $ 0 $0
for the Trust and 6
Birth Date: September 15, 1959 Trust. Ms. Cunningham joined Federated in 1981
other investment
Federated Investors Tower and has been a Senior Portfolio Manager and a
companies in the Fund
1001 Liberty Avenue Senior Vice President of the Funds' Adviser
Complex
Pittsburgh, PA since 1997. Ms. Cunningham served as a Portfolio
VICE PRESIDENT Manager and a Vice President of the Adviser from
1993 until 1996. Ms.
Cunningham is a Chartered Financial Analyst and
received her M.B.A. in Finance from Robert
Morris College.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. $ 0 $0
for the Trust and 7
Birth Date: September 12, 1953 Ms. Ochson joined Federated in 1982 and has been
other investment
Federated Investors Tower a Senior Portfolio Manager and a Senior Vice
companies in the Fund
1001 Liberty Avenue President of the Funds' Adviser since 1996. From
Complex
Pittsburgh, PA 1988 through 1995, Ms. Ochson served as a
VICE PRESIDENT Portfolio Manager and a Vice President of the
Funds' Adviser. Ms. Ochson is a Chartered
Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the 1940 Act.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Mr. Constantakis became a member of the Board of Trustees on October 1, 1999.
He did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
<TABLE>
<CAPTION>
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated Funds
- --------------------------------------------------------------------------------------------------------------
<S> <C>
0.150 of 1% on the first $250 million
- --------------------------------------------------------------------------------------------------------------
0.125 of 1% on the next $250 million
- --------------------------------------------------------------------------------------------------------------
0.100 of 1% on the next $250 million
- --------------------------------------------------------------------------------------------------------------
0.075 of 1% on assets in excess of $750 million
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
For the Year Ended October 31 1999
1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
<C> <C>
Advisory Fee Earned $1,085,080
$938,574 $655,534
- --------------------------------------------------------------------------------------------------------------------------------
Advisory Fee Reduction $ 681,608
$614,954 $542,531
- --------------------------------------------------------------------------------------------------------------------------------
Brokerage Commissions $ 0 $
0 $ 0
- --------------------------------------------------------------------------------------------------------------------------------
Administrative Fee $ 162,511
$155,001 $155,000
- --------------------------------------------------------------------------------------------------------------------------------
Shareholder Services
Fee
- --------------------------------------------------------------------------------------------------------------------------------
Institutional Shares --
- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Institutional Service Shares $ 318,127
- -- --
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for shareholder services fees, which are borne only by the applicable
class of Shares.
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year and Start of Performance periods ended
October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the 7-day period
ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
Start of Performance on
7-Day Period 1 Year March 2, 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Shares
- -------------------------------------------------------------------------------------------------------------------
Total Return -- 3.00% 3.27%
- -------------------------------------------------------------------------------------------------------------------
Yield 3.15% -- --
- -------------------------------------------------------------------------------------------------------------------
Effective Yield 3.20% -- --
- -------------------------------------------------------------------------------------------------------------------
Tax-Equivalent Yield 5.72% -- --
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Start of Performance on
7-Day Period 1 Year June 20, 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Institutional Service Shares
- -------------------------------------------------------------------------------------------------------------------
Total Return -- 2.84% 3.19%
- -------------------------------------------------------------------------------------------------------------------
Yield 2.99% -- --
- -------------------------------------------------------------------------------------------------------------------
Effective Yield 3.04% -- --
- -------------------------------------------------------------------------------------------------------------------
Tax-Equivalent Yield 5.43% -- --
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD, EFFECTIVE YIELD AND TAX-EQUIVALENT YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized base-
period return by: adding one to the base-period return, raising the sum to the
365/7th power; and subtracting one from the result. The tax-equivalent yield of
Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to AMT and
state and/or local taxes.
TAX EQUIVALENCY TABLE
Taxable Yield Equivalent for 2000 - STATE OF MICHIGAN
<TABLE>
<CAPTION>
Tax Bracket:
Federal 15.00% 28.00% 31.00%
36.00% 39.60%
Combined Federal and State 19.300% 32.300% 35.300%
40.300% 44.900%
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
<C> <C>
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450
$161,451-288,350 Over 288,350
- --------------------------------------------------------------------------------------------------------------------------------
Single Return $1-26,250 $ 26,251-63,550 $ 63,551-132,600
$132,601-288,350 Over 288,350
- --------------------------------------------------------------------------------------------------------------------------------
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.24% 1.48% 1.55%
1.68% 1.78%
- --------------------------------------------------------------------------------------------------------------------------------
1.50% 1.86% 2.22% 2.32%
2.51% 2.67%
- --------------------------------------------------------------------------------------------------------------------------------
2.00% 2.48% 2.95% 3.09%
3.35% 3.57%
- --------------------------------------------------------------------------------------------------------------------------------
2.50% 3.10% 3.69% 3.86%
4.19% 4.46%
- --------------------------------------------------------------------------------------------------------------------------------
3.00% 3.72% 4.43% 4.64%
5.03% 5.35%
- --------------------------------------------------------------------------------------------------------------------------------
3.50% 4.34% 5.17% 5.41%
5.86% 6.24%
- --------------------------------------------------------------------------------------------------------------------------------
4.00% 4.96% 5.91% 6.18%
6.70% 7.13%
- --------------------------------------------------------------------------------------------------------------------------------
4.50% 5.58% 6.65% 6.96%
7.54% 8.02%
- --------------------------------------------------------------------------------------------------------------------------------
5.00% 6.20% 7.39% 7.73%
8.38% 8.91%
- --------------------------------------------------------------------------------------------------------------------------------
5.50% 6.82% 8.12% 8.50%
9.21% 9.80%
- --------------------------------------------------------------------------------------------------------------------------------
6.00% 7.43% 8.86% 9.27%
10.05% 10.70%
- --------------------------------------------------------------------------------------------------------------------------------
6.50% 8.05% 9.60% 10.05%
10.89% 11.59%
- --------------------------------------------------------------------------------------------------------------------------------
7.00% 8.67% 10.34% 10.82%
11.73% 12.48%
- --------------------------------------------------------------------------------------------------------------------------------
7.50% 9.29% 11.08% 11.59%
12.56% 13.37%
- --------------------------------------------------------------------------------------------------------------------------------
8.00% 9.91% 11.82% 12.36%
13.40% 14.26%
- --------------------------------------------------------------------------------------------------------------------------------
8.50% 10.53% 12.565 13.14%
14.24% 15.15%
- --------------------------------------------------------------------------------------------------------------------------------
9.00% 11.155 13.29% 13.91%
15.08% 16.04%
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
. references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
. charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
. discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
. information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
. 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.
. 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.
. Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion, $13.1 billion and $115
million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income - William D. Dawson, III; and global equities and
fixed income - Henry A. Frantzen. The Chief Investment Officers are Executive
Vice Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
Financial Information
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
Investment Ratings
STANDARD & POOR'S SHORT-TERM MUNICIPAL OBLIGATION RATINGS
An 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 AND TENDER OPTION BONDS RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER 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 rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
MOODY'S INVESTORS SERVICE SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investors Service (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 AND TENDER OPTION BONDS RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER 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 IBCA, 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.
Addresses
MICHIGAN MUNICIPAL CASH TRUST
Institutional Shares
Institutional Service Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
60
PROSPECTUS
Minnesota Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
CASH SERIES SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the regular personal income taxes imposed by the state of
Minnesota consistent with stability of principal by investing in a portfolio of
high-quality Minnesota tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 7
How to Redeem Shares 9
Account and Share Information 11
Who Manages the Fund? 12
Financial Information 13
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is to provide current income
exempt from federal regular income tax and the regular personal income taxes
imposed by the state of Minnesota consistent with stability of principal. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the strategies and policies described in this
prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Minnesota tax exempt securities maturing in 397
days or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax and Minnesota regular
personal income tax (exempt interest dividends). Interest from the Fund's
investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table reflect historical performance data for Cash
Series Shares of Minnesota Municipal Cash Trust (Former Fund) prior to its
reorganization into the Fund, which is a newly created portfolio of Money Market
Obligations Trust (Trust). On the date of the reorganization, February 1, 2000,
the Former Fund was dissolved and its net assets (inclusive of liabilities
recorded on the Former Fund's records) were transferred into the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Former Fund's Cash Series Shares as of the calendar
year-end for each of nine years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 5%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's Cash Series Shares start of business
through the calendar year ended 1999. The light gray shaded chart features nine
distinct vertical bars, each shaded in charcoal, and each visually representing
by height the total return percentages for the calendar year stated directly at
its base. The calculated total return percentage for the Former Fund's Cash
Series Shares for each calendar year is stated directly at the top of each
respective bar, for the calendar years 1991 through 1999, The percentages noted
are: 4.24%, 2.51%, 1.98%, 2.37%, 3.45%, 2.88%, 3.01%, 2.85%, and 2.64%,
respectively.
Historically, the Former Fund has maintained a constant
$1.00 net asset value per share. The bar chart shows the variability of the
Former Fund's Cash Series Shares total returns on a calendar year-end basis.
The Former Fund's Cash Series Shares were not sold subject to a sales charge
(load). The total returns displayed above are based upon net asset value.
Within the period show in the Chart, the Former Fund's Cash Series Shares
highest quarterly return was 1.14% (quarter ended March 31, 1991). Its lowest
quarterly return was 0.46% (quarter ended March 31, 1994).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Cash Series Shares Average
Annual Total Returns for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
CALENDAR PERIOD FUND
<S> <C>
1 Year 2.64%
5 Years 2.96%
Start of Performance 1 2.88%
</TABLE>
1 The Former Fund's Cash Series Shares start of performance date was December
31, 1990.
The Former Fund's Cash Series Shares 7-Day Net Yield as of December 31, 1999,
was 3.73%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
MINNESOTA MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Cash Series Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original
purchase price or redemption proceeds, as applicable) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
(and other Distributions) (as a percentage of offering price) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 2 0.40%
Distribution (12b-1) Fee 3 0.50%
Shareholder Services Fee 0.25%
Other Expenses 0.15%
Total Annual Fund
Operating Expenses 4 1.30%
1 Although not contractually obligated to do so, the Adviser and distributor
expect to waive certain amounts during the fiscal year ending October 31, 2000.
These are shown below along with the net expenses the Fund expects to actually
pay for the fiscal year ending October 31, 2000.
Total Waivers of Fund Expenses 0.50%
Total Actual Annual Fund
Operating Expenses (after waivers) 0.80%
2 The Adviser expects to voluntarily waive a portion of the management fee. The
Adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.15% for the fiscal year ending October 31, 2000.
3 The distributor expects to voluntarily waive a portion of the distribution (12b-1)
fee for Cash Series Shares. The distributor can terminate this anticipated
voluntary waiver at any time. The distribution (12b-1) fee paid by the Fund's
Cash Series Shares (after the anticipated voluntary waiver) is expected to be
0.25% for the fiscal year ending October 31, 2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of the
Former Fund as a portfolio of the Trust, the Total Annual Fund Operating Expenses
and Total Actual Annual Fund Operating Expenses (after waivers) for the Former
Fund's Cash Series Shares were 1.30% and 0.80%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Cash Series Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Cash Series Shares for
the time periods indicated and then redeem all of your Shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Cash Series Shares operating expenses are BEFORE
WAIVERS as estimated in the table and remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 132
3 Years $ 412
5 Years $ 713
10 Years $ 1,568
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Minnesota tax exempt securities
maturing in 397 days or less. The Fund will invest its assets so that at least
80% of its annual interest income is exempt from federal regular income tax and
Minnesota regular personal income tax (exempt interest dividends). Interest from
the Fund's investments may be subject to AMT. The dollar-weighted average
maturity of the Fund's portfolio will be 90 days or less. The Adviser actively
manages the Fund's portfolio, seeking to limit the credit risk taken by the Fund
and to select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve's monetary policy. The Adviser structures the
portfolio by investing primarily in variable rate demand instruments and
municipal notes. The Adviser generally shortens the portfolio's maturity when it
expects interest rates to rise and extends the maturity when it expects interest
rates to fall. This strategy seeks to enhance the returns from favorable
interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal income tax and Minnesota
regular personal income tax. It may do this to minimize potential losses and
maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to receive and distribute taxable income to
investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the prices of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Minnesota issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
MINNESOTA RISKS
Since the Fund invests primarily in issuers from Minnesota, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Minnesota's economy is diversified across the services, trade and manufacturing
sectors. The diversity within the manufacturing sector, across instruments and
industrial machinery, paper, and food, enables the state to perform well even
when the nation is experiencing a decline in manufacturing.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share. The
Fund does not charge a front-end sales charge. NAV is determined at 12:00 noon
and 1:00 p.m. (Eastern time) and as of the end of regular trading (normally 4:00
p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $10,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Shares and Cash Series Shares,
each representing interests in a single portfolio of securities. This prospectus
relates only to Cash Series Shares. Each share class has different expenses,
which affect their performance. Contact your investment professional or call
1-800-341-7400 for more information concerning the other classes.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to retail customers of financial institutions or to
individuals directly or through investment professionals. The Fund may not be a
suitable investment for retirement plans or for non-Minnesota taxpayers because
it invests in Minnesota municipal securities.
When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Cash Series Shares. Because these Shares pay
marketing fees on an ongoing basis, your investment cost may be higher over time
than other shares with different sales charges and marketing fees.
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for
same-day payment of redemption proceeds, without that day's dividend, for
redemption requests received before 2:00 p.m. (Eastern time).
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the Minnesota taxes discussed above to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual
Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03 0.03 0.03 0.03 0.03
LESS DISTRIBUTIONS:
Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 1 2.57% 2.93% 2.97% 2.97% 3.41%
RATIOS TO AVERAGE NET ASSETS:
Expenses 2 1.30% 1.30% 1.31% 1.31% 1.32%
Net investment income 2 2.02% 2.39% 2.41% 2.42% 2.75%
Expenses (after waivers) 0.80% 0.80% 0.80% 0.80% 0.70%
Net investment income (after waivers) 2.52% 2.89% 2.92% 2.93% 3.37%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $250,226 $207,599 $221,227 $235,614 $131,471
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
Minnesota Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
CASH SERIES SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, Annual Report and
Semi-Annual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report and the Semi-Annual Report and other information without
charge, and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by e-mail at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Minnesota Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N484
0082715A-CSS (1/00)
[Graphic]
PROSPECTUS
Minnesota Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the regular personal income taxes imposed by the state of
Minnesota consistent with stability of principal by investing in a portfolio of
high-quality Minnesota tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 7
How to Redeem Shares 9
Account and Share Information 11
Who Manages the Fund? 12
Financial Information 12
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is to provide current income
exempt from federal regular income tax and the regular personal income taxes
imposed by the state of Minnesota consistent with stability of principal. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the strategies and policies described in this
prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Minnesota tax exempt securities maturing in 397
days or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax and Minnesota regular
personal income tax (exempt interest dividends). Interest from the Fund's
investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Shares of Minnesota Municipal Cash Trust (Former Fund) prior
to its reorganization into the Fund, which is a newly created portfolio of Money
Market Obligations Trust (Trust). On the date of the reorganization, February 1,
2000, the Former Fund was dissolved and its net assets (inclusive of liabilities
recorded on the Former Fund's records) were transferred into the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Former Fund's Institutional Shares as of the
calendar year-end for each of nine years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 5%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's Institutional Shares start of business
through the calendar year ended 1999. The light gray shaded chart features nine
distinct vertical bars, each shaded in charcoal, and each visually representing
by height the total return percentages for the calendar year stated directly at
its base. The calculated total return percentage for the Former Fund's
Institutional Shares for each calendar year is stated directly at the top of
each respective bar, for the calendar years 1991 through 1999, The percentages
noted are: 4.57%, 2.92%, 2.39%, 2.78%, 3.87%, 3.40%, 3.53%, 3.36% and 3.15%,
respectively.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Shares were not sold subject to a sales charge
(load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Shares
highest quarterly return was 1.20% (quarter ended March 31, 1991). Its lowest
quarterly return was 0.56% (quarter ended March 31, 1994).
AVERAGE ANNUAL TOTAL RETURN TABLE
The follow table represents the Former Fund's Institutional Shares Average
Annual Total Returns for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
CALENDAR PERIOD FUND
<S> <C>
1 Year 3.15%
5 Years 3.46%
Start of Performance 1 3.43%
</TABLE>
1 The Former Fund's Institutional Shares start of performance date was September
10, 1990.
The Former Fund's Institutional Shares 7-Day Net Yield as of December 31, 1998
was 4.23%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
MINNESOTA MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original
purchase price or redemption proceeds, as applicable) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
(and other Distributions) (as a percentage of offering price) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 2 0.40%
Distribution (12b-1) Fee None
Shareholder Services Fee 3 0.25%
Other Expenses 0.15%
Total Annual Fund
Operating Expenses 4 0.80%
1 Although not contractually obligated to do so, the Adviser and shareholder
services provider expect to waive certain amounts during the fiscal year ending
October 31, 2000. These are shown below along with the net expenses the Fund
expects to actually pay for the fiscal year ending October 31, 2000.
Total Waivers of Fund Expenses 0.50%
Total Actual Annual Fund Operating Expenses (after waivers) 0.30%
2 The Adviser expects to voluntarily waive a portion of the management fee. The
Adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.15% for the fiscal year ending October 31, 2000. 3 The
shareholder services provider expects to voluntarily waive the shareholder
services fee. The shareholder services provider can terminate this anticipated
voluntary waiver at any time. The shareholder services fee paid by the Fund's
Institutional Shares (after the anticipated voluntary waiver) is expected to be
0.00% for the fiscal year ending October 31, 2000. 4 For the fiscal year ended
October 31, 1999, prior to the reorganization of the Former Fund as a portfolio
of the Trust, the Total Annual Fund Operating Expenses and Total Actual Annual
Fund Operating Expenses (after waivers) for the Former Fund's Institutional
Shares were 0.80% and 0.30%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Institutional Shares operating expenses are BEFORE
WAIVERS as estimated in the table and remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 82
3 Years $ 255
5 Years $ 444
10 Years $ 990
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Minnesota tax exempt securities
maturing in 397 days or less. The Fund will invest its assets so that at least
80% of its annual interest income is exempt from federal regular income tax and
Minnesota regular personal income tax (exempt interest dividends). Interest from
the Fund's investments may be subject to AMT. The dollar-weighted average
maturity of the Fund's portfolio will be 90 days or less. The Adviser actively
manages the Fund's portfolio, seeking to limit the credit risk taken by the Fund
and to select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve's monetary policy. The Adviser structures the
portfolio by investing primarily in variable rate demand instruments and
municipal notes. The Adviser generally shortens the portfolio's maturity when it
expects interest rates to rise and extends the maturity when it expects interest
rates to fall. This strategy seeks to enhance the returns from favorable
interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal income tax and Minnesota
regular personal income tax. It may do this to minimize potential losses and
maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to receive and distribute taxable income to
investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the prices of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Minnesota issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
MINNESOTA RISKS
Since the Fund invests primarily in issuers from Minnesota, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Minnesota's economy is diversified across the services, trade and manufacturing
sectors. The diversity within the manufacturing sector, across instruments and
industrial machinery, paper, and food, enables the state to perform well even
when the nation is experiencing a decline in manufacturing.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share. The
Fund does not charge a front-end sales charge. NAV is determined at 12:00 noon
and 1:00 p.m. (Eastern time) and as of the end of regular trading (normally 4:00
p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Shares and Cash Series Shares,
each representing interests in a single portfolio of securities. This prospectus
relates only to Institutional Shares. Each share class has different expenses,
which affect their performance. Contact your investment professional or call
1-800-341-7400 for more information concerning the other classes.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-Minnesota
taxpayers because it invests in Minnesota municipal securities.
The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend.
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the Minnesota taxes discussed above to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03 0.03 0.03 0.03 0.04
LESS DISTRIBUTIONS:
Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.04)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 1 3.08% 3.44% 3.48% 3.49% 3.82%
RATIOS TO AVERAGE NET ASSETS:
Expenses 2 0.80% 0.80% 0.81% 0.81% 0.82%
Net investment income 2 2.52% 2.89% 2.91% 2.92% 3.25%
Expenses (after waivers) 0.30% 0.30% 0.30% 0.30% 0.30%
Net investment income (after waivers) 3.02% 3.39% 3.42% 3.43% 3.77%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $285,540 $328,507 $208,365 $217,443 $212,392
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
Minnesota Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, Annual Report and
Semi-Annual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report and the Semi-Annual Report and other information without
charge, and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by e-mail at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Minnesota Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N492
0082715A-IS (1/00)
[Graphic]
Statement of Additional Information
MINNESOTA MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
Institutional Shares
Cash Series Shares
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Minnesota Municipal Cash Trust
(Fund), dated January 31, 2000. Obtain the prospectuses or the Annual Report
without charge by calling 1-800-341-7400.
january 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Investment Ratings
Addresses
Cusip60934N492
Cusip60934N484
0082715B (1/00)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1998. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on August 31, 1990,
will be reorganized as a portfolio of the Trust on February 1, 2000.
The Board of Trustees (Board) has established two classes of shares of the Fund,
known as Institutional Shares and Cash Series Shares. This SAI relates to both
classes of Shares. The Fund's investment adviser is Federated Investment
Management Company (Adviser). Effective March 31, 1999, Federated Management,
former adviser to the Fund, became Federated Investment Management Company
(formerly, Federated Advisers).
SECURITIES IN WHICH THE FUND INVESTS
The Fund's principal securities are described in its prospectus. Additional
securities, and further information regarding the principal securities, are
outlined below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its
charter or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues
received by the issuer such as specific taxes, assessments, tolls or
fees. Bondholders may not collect from the municipality's general taxes
or revenues. For example, a municipality may issue bonds to build a
toll road, and pledge the tolls to repay the bonds. Therefore, a
shortfall in the tolls normally would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The
municipality would lend the proceeds from its bonds to the company
using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable
solely from the company's loan payments, not from any other
revenues of the municipality. Therefore, any default on the loan
normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to
the federal alternative minimum tax (AMT). The Fund may invest in
bonds subject to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end
a lease, without penalty, by not providing for the lease payments in
its annual budget. After the lease ends, the lessor can resell the
equipment or facility but may lose money on the sale. The Fund may
invest in securities supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities
at a price below the amount payable at maturity. The difference between
the purchase price and the amount paid at maturity represents interest
on the zero coupon security. Investors must wait until maturity to
receive interest and principal, which increases the interest rate risks
and credit risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of
credit, bond insurance and surety bonds. Credit enhancement also
includes arrangements where securities or other liquid assets secure
payment of a fixed income security. If a default occurs, these assets
may be sold and the proceeds paid to the security's holders. Either
form of credit enhancement reduces credit risks by providing another
source of payment for a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
Inter-fund Borrowing and Lending Arrangements
The Securities and Exchange Commission (SEC) has granted an exemption that
permits the Fund and all other funds advised by subsidiaries of Federated
Investors, Inc. (Federated funds) to lend and borrow money for certain
temporary purposes directly to and from other Federated funds.
Participation in this inter-fund lending program is voluntary for both
borrowing and lending funds, and an inter-fund loan is only made if it
benefits each participating fund. Federated administers the program
according to procedures approved by the Fund's Board, and the Board
monitors the operation of the program. Any inter-fund loan must comply with
certain conditions set out in the exemption, which are designed to assure
fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed"
trades. All inter-fund loans must be repaid in seven days or less. The
Fund's participation in this program must be consistent with its investment
policies and limitations, and must meet certain percentage tests.
Inter-fund loans may be made only when the rate of interest to be charged
is more attractive to the lending fund than market-competitive rates on
overnight repurchase agreements (the Repo Rate) and more attractive to the
borrowing fund than the rate of interest that would be charged by an
unaffiliated bank for short-term borrowings (the Bank Loan Rate), as
determined by the Board. The interest rate imposed on inter-fund loans is
the average of the Repo Rate and the Bank Loan Rate.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with
payment and delivery of the securities scheduled for a future time. During
the period between purchase and settlement, no payment is made by the Fund
to the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value
in determining the price of its shares. Settlement dates may be a month or
more after entering into these transactions so that the market values of
the securities bought may vary from the purchase prices. Therefore, delayed
delivery transactions create interest rate risks for the Fund. Delayed
delivery transactions also involve credit risks in the event of a
counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the
underlying assets or set aside readily marketable securities with a value
that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to
secure such obligations without terminating the special transaction. This
may cause the Fund to miss favorable trading opportunities or to realize
losses on special transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government
of the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types
of corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If
the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund
is the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must
repurchase the underlying security at a higher price, regardless of the
market value of the security at the time of repurchase.
Investment Ratings
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's ("S&P"), MIG-1 or
MIG-2 by Moody's Investors Service ("Moody's"), or F-1+, F-1 or F-2 by Fitch
IBCA, 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 rating service can be
treated as being in one of the two highest short-term rating categories;
currently, such securities must be rated by two nationally recognized
statistical rating organizations in one of their two highest rating categories.
See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
Fundamental INVESTMENT Objective and Policy
The Fund's investment objective is to provide current income exempt from federal
regular income tax and the regular personal income taxes imposed by the state of
Minnesota consistent with stability of principal.
The Fund invests in tax-exempt securities so that at least 80% of its annual
interest income is exempt from federal regular income tax and Minnesota regular
personal income tax (exempt interest dividends).
This investment objective and policy may not be changed by the Fund's Board
without shareholder approval.
INVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
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 limitations 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.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Restricted Securities
The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal
securities law. Under criteria established by the Board, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, the Fund will limit their purchase, together
with other illiquid securities, to 10% of its net assets.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
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.
For purposes of the concentration limitation: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, as a matter
of non-fundamental policy, the Fund will not exceed foreign bank instruments
from industry concentration limitation tests so long as the policy of the SEC
remains in effect. In addition, investments in certain industrial development
bonds funded by activities in a single industry will be deemed to constitute
investment in an industry, except when held for temporary defensive purposes.
The investment of more than 25% of the value of the Fund's total assets in any
one industry will constitute "concentration."
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 SAI, in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7 (the
Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board 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.
WHAT DO SHARES COST?
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
RULE 12B-1 PLAN (cash series shares)
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.
The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.
For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing-related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Institutional Shares: Firmad &
Co., Milwaulkee, Wisconsin owned approximately 20,136,690 Shares (7.49%); Lew &
Co., Minneapolis, Minnesota owned approximately 57,195,620 Shares (21.28%) and
Var & Co., Saint Paul, Minnesota owned approximately 132,061,349 Shares
(49.13%).
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Cash Series Shares: MJK
Clearing Omnibus Account, Minneapolis, Minnesota owned approximately 18,060,019
Shares (6.94%); Norwest Investment Services, Inc., Minneapolis, Minnesota owned
approximately 49,067,414 Shares (18.85%); Piper Jaffray, Inc., Minneapolis,
Minnesota owned approximately 59,345,868 Shares (22.79%); Dain Rauscher
Incorporated, Minneapolis, Minnesota owned approximately 64,618,338 Shares
(24.82%); and FBS Investment Services, Inc., Minneapolis, Minnesota owned
32,479,394 Shares (12.48%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
state TAXes
Under existing Minnesota laws, distributions made by the Fund will be exempt
from Minnesota regular personal income taxes provided that such distributions
qualify as exempt-interest dividends under the Internal Revenue Code, and
provided further that 95% of such distributions are derived from interest on
obligations issued by the State of Minnesota or any of its political or
governmental subdivisions, municipalities, or governmental agencies or
instrumentalities. Distributions made by the Fund will also be exempt to the
extent that they are derived from interest on federal obligations and are
reported federally as dividend income by shareholders. Conversely, to the extent
that distributions made by the Fund are derived from other types of obligations,
such distributions will be subject to Minnesota regular personal income taxes.
Dividends of the Fund are not exempt from Minnesota corporate income taxes.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and certain positions held prior
to the past five years, total compensation received as a Trustee from the Trust
for its most recent fiscal year, and the total compensation received from the
Federated Fund Complex for the most recent calendar year. Effective February 1,
2000, the Trust will be comprised of 40 funds. The Federated Fund Complex is
comprised of 43 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.
As of January 12, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.
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Name
Birth Date Aggregate Total Compensation
Address Principal Occupations Compensation From Trust and Fund
Position With Trust for Past Five Years From Fund Complex
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of the $0 $0 for the Trust and 43
Birth Date: July 28, 1924 Federated Fund Complex; Chairman and Trustee, Federated other investment
Federated Investors Tower Investment Management Company; Chairman and Director, companies in the Fund
1001 Liberty Avenue Federated Investors, Inc., Federated Investment Complex
Pittsburgh, PA Counseling, and Federated Global Investment Management
CHAIRMAN AND TRUSTEE Corp.; Chairman, Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $392.22 $116,760.63 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's Trust
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries, and 43 other investment
Pittsburgh, PA Inc. (coated steel conduits/computer storage equipment); companies in the Fund
TRUSTEE formerly: Senior Partner, Ernst & Young LLP; Director, Complex
MED 3000 Group, Inc. (physician practice management);
Director, Member of Executive Committee, University of
Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $431.51 $128,455.37 for the Trust
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior and 43 other investment
Grubb & Ellis/Investment Vice President, John R. Wood and Associates, Inc., companies in the Fund
Properties Corporation Realtors; Partner or Trustee in private real estate Complex
3201 Tamiami Trail North ventures in Southwest Florida; formerly: President,
Naples, FL Naples Property Management, Inc. and Northgate Village
TRUSTEE Development Corporation.
Nicholas P. Constantakis ++ Director or Trustee of the Federated Fund Complex; $0 $73,191.21 for the
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering, Trust and
175 Woodshire Drive construction, operations and technical services); 37 other investment
Pittsburgh, PA formerly: Partner, Andersen Worldwide SC. companies
TRUSTEE in the Fund Complex
John F. Cunningham Director or Trustee of some of the Federated Fund $295.46 $93,190.48 for the Trust
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive and 37 other investment
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business companies in the Fund
Palm Beach, FL consulting); Trustee Associate, Boston College; Complex
TRUSTEE Director, Iperia Corp (communications/software);
formerly: Director, Redgate Communications and
EMC Corporation (computer storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of the Federated $0 $0 for the Trust and 30
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds other investment
Federated Investors Tower in the Federated Fund Complex; President, Chief companies in the Fund
1001 Liberty Avenue Executive Officer and Director, Federated Investors, Complex
Pittsburgh, PA Inc.; President and Trustee, Federated Investment
PRESIDENT AND TRUSTEE Management Company; President and Trustee, Federated
Investment Counseling, President and Director,
Federated Global Investment Management Corp.;
President, Passport Research, Ltd.; Trustee,
Federated Shareholder Services Company;
Director, Federated Services Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $392.22 $116,760.63 for the Trust
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical and 43 other investment
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - companies in the Fund
Suite 1111 Downtown; Hematologist, Oncologist and Internist, Complex
Pittsburgh, PA University of Pittsburgh Medical Center; Member,
TRUSTEE National Board of Trustees, Leukemia Society of America.
Peter E. Madden Director or Trustee of the Federated Fund Complex; $357.93 $109,153.60 for the Trust
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts and 43 other investment
One Royal Palm Way General Court; President, State Street Bank and Trust companies in the Fund
100 Royal Palm Way Company and State Street Corporation. Complex
Palm Beach, FL
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation; Director, The Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $305.64 $102,573.91 for the
Birth Date: April 10, 1945 Complex; Executive Vice President, Legal and External Trust and 40 other
80 South Road Affairs, Dugan Valva Contess, Inc. (marketing, investment
Westhampton Beach, NY communications, technology and consulting).; formerly companies in the Fund
TRUSTEE Management Consultant Complex
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $421.82 $128,455.37 for the
S.J.D.# President, Law Professor, Duquesne University; Trust
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Michael and 43 other investment
President, Duquesne University Baker Corp. (engineering, construction, operations and companies in the Fund
Pittsburgh, PA technical services). Complex
TRUSTEE
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $392.22 $116,760.63 for the
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. Trust
4905 Bayard Street and 43 other investment
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum companies in the Fund
TRUSTEE Company of America; television producer; business owner. Complex
John S. Walsh Director or Trustee of some of the Federated Fund $295.46 $94,536.85 for the Trust
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. and 39 other investment
2007 Sherwood Drive (manufacturer of construction temporary heaters); companies in the Fund
Valparaiso, IN President and Director, Manufacturers Products, Inc. Complex
TRUSTEE (distributor of portable construction heaters);
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
<PAGE>
Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the Trust and 42
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice other investment
Federated Investors Tower President and Treasurer of some of the Funds in the companies in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
EXECUTIVE VICE PRESIDENT Management Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company.
John W. McGonigle Executive Vice President and Secretary of the Federated $0 $0 for the Trust and 43
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary, and other investment
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated companies in the Fund
1001 Liberty Avenue Investment Management Company and Federated Investment Complex
Pittsburgh, PA Counseling; Director, Federated Global Investment
EXECUTIVE VICE PRESIDENT AND Management Corp., Federated Services Company and
SECRETARY Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President $0 $0 for the Trust and 43
Birth Date: June 17, 1954 - Funds Financial Services Division, Federated other investment
Federated Investors Tower Investors, Inc.; formerly: various management positions companies in the Fund
1001 Liberty Avenue within Funds Financial Services Division of Federated Complex
Pittsburgh, PA Investors, Inc.
TREASURER
Richard B. Fisher President or Vice President of some of the Funds in the $0 $0 for the Trust and 41
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of other investment
Federated Investors Tower the Funds in the Federated Fund Complex; Executive Vice companies in the Fund
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and Complex
Pittsburgh, PA Director, Federated Securities Corp.
VICE PRESIDENT
William D. Dawson, III Chief Investment Officer of this Fund and various other $0 $0 for the Trust and 42
Birth Date: March 3, 1949 Funds in the Federated Fund Complex; Executive Vice other investment
Federated Investors Tower President, Federated Investment Counseling, Federated companies in the Fund
1001 Liberty Avenue Global Investment Management Corp., Federated Investment Complex
Pittsburgh, PA Management Company and Passport Research, Ltd.;
CHIEF INVESTMENT OFFICER Registered Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors,
Inc.; formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company and
Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. $0 $0 for the Trust and 6
Birth Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been a other investment
Federated Investors Tower Senior Portfolio Manager and a Senior Vice President of companies in the Fund
1001 Liberty Avenue the Funds' Adviser since 1997. Ms. Cunningham served as Complex
Pittsburgh, PA a Portfolio Manager and a Vice President of the Adviser
VICE PRESIDENT from 1993 trough 1996. Ms. Cunningham is a Chartered
Financial Analyst and received her M.B.A. in Finance
from Robert Morris College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $0 $0 for the Trust and 7
Birth Date: September 12, 1953 Ochson joined Federated in 1982 and has been a Senior other investment
Federated Investors Tower Portfolio Manager and a Senior Vice President of the companies in the Fund
1001 Liberty Avenue Funds' Adviser since 1996. From 1988 through 1995, Ms. Complex
Pittsburgh, PA Ochson served as a Portfolio Manager and a Vice
VICE PRESIDENT President of the Funds' Adviser. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
</TABLE>
* An asterisk denotes Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Mr. Constantakis became a member of the Board of Trustees on October 1, 1999.
He did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated
Funds 0.150 of 1% on the first $250 million 0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million 0.075 of 1% on assets in excess of $750
million The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT auditors
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
<PAGE>
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the Year Ended October 31 1999 1998 1997
Advisory Fee Earned $2,234,444 $2,168,395 $1,795,783
Advisory Fee Reduction $1,373,358 1,379,144 1,181,776
Brokerage Commissions $0 0 0
Administrative Fee $421,193 408,779 338,975
12b-1 Fee
Cash Series Shares $611,570 -- --
Shareholder Services Fee
Institutional Shares $0 -- --
Cash Series Shares $611,569 -- --
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
Average Annual Total Returns and Yield
Total returns are given for the one-year, five-year and Start of Performance
periods ended October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the seven-day
period ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
7-Day Period 1 Year 5 Years Start of Performance on
September 10, 1990
Institutional Shares
Total Return 3.08% 3.46% 3.42%
Yield 3.26%
Effective Yield 3.31%
Tax-Equivalent Yield 6.22%
7-Day Period 1 Year 5 Years Start of Performance on
December 31, 1990
Cash Series Shares
Total Return 2.57% 2.97% 2.88%
Yield 2.76%
Effective Yield 2.80%
Tax-Equivalent Yield 5.27%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
Yield, Effective Yield and Tax-Equivalent Yield
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result. The tax-equivalent yield
of Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to the federal
alternative minimum tax and state and/or local taxes.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
TAX EQUIVALENCY TABLE
Taxable Yield Equivalent for 2000 - STATE OF MINNESOTA
Combined Federal and State
Income Tax Bracket: 22.25% 36.00% 39.00% 44.00% 47.60%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $161,451-288,350 Over 288,350
Single Return $1-26,250 $26,251-63,550 $63,551-132,600 $132,601-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.29% 1.56% 1.64% 1.79% 1.91%
1.50% 1.93% 2.34% 2.46% 2.68% 2.86%
2.00% 2.57% 3.13% 3.28% 3.57% 3.82%
2.50% 3.22% 3.91% 4.10% 4.46% 4.77%
3.00% 3.86% 4.69% 4.92% 5.36% 5.73%
3.50% 4.50% 5.47% 5.74% 6.25% 6.68%
4.00% 5.14% 6.25% 6.56% 7.14% 7.63%
4.50% 5.79% 7.03% 7.38% 8.04% 8.59%
5.00% 6.43% 7.81% 8.20% 8.93% 9.54%
5.50% 7.07% 8.59% 9.02% 9.82% 10.50%
6.00% 7.72% 9.38% 9.84% 10.71% 11.45%
6.50% 8.36% 10.16% 10.66% 11.61% 12.40%
7.00% 9.00% 10.94% 11.48% 12.50% 13.36%
7.50% 9.65% 11.72% 12.30% 13.39% 14.31%
8.00% 10.29% 12.50% 13.11% 14.29% 15.27%
8.50% 10.93% 13.28% 13.93% 15.18% 16.22%
9.00% 11.58% 14.06% 14.75% 16.07% 17.18%
</TABLE>
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
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.
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.
Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
Federated Funds overview
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12bond funds
with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 11 mortgage
backed, 16 government/agency and 19 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion and $13.1 billion and
$115 million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
Federated Clients Overview
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities
Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
<PAGE>
INVESTMENT RATINGS
Standard & Poor's Short-Term Municipal Obligation Ratings
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
Commercial Paper (CP) Ratings
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
Long-Term Debt Ratings
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
Moody's Investors Service, Inc., Short-Term Municipal Obligation Ratings
Moody's Investors Service (Moody's) short-term ratings are designated Moody's
Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or VMIG
ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
Commercial Paper (CP) Ratings
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Long-Term Debt Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
Fitch IBCA, 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.
<PAGE>
106
ADDRESSES
minnesota Municipal cash trust
Institutional Shares
Cash Series Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PROSPECTUS
New Jersey Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and New Jersey state income tax imposed upon non-corporate
taxpayers consistent with stability of principal by investing in a portfolio of
high-quality New Jersey tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 7
How to Redeem Shares 8
Account and Share Information 10
Who Manages the Fund? 12
Financial Information 12
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
New Jersey Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value of $1.00 per share. The Fund's investment
objective is to provide current income exempt from federal regular income tax
and New Jersey state income tax imposed upon non-corporate taxpayers consistent
with stability of principal. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality New Jersey tax exempt securities maturing in
397 days or less. The Fund will invest its assets so that at least 80% of its
annual interest income is exempt from federal regular income tax and New Jersey
state income tax imposed upon non-corporate taxpayers. Interest from the Fund's
investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Service Shares of New Jersey Municipal Cash Trust (Former
Fund) prior to its reorganization into the Fund, which is a newly created
portfolio of Money Market Obligations Trust (Trust). On the date of the
reorganization, February 1, 2000, the Former Fund was dissolved and its net
assets (inclusive of liabilities recorded on the Former Fund's records) were
transferred into the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Former Fund's Institutional Service Shares as of the
calendar year-end for each of nine years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 6%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's start of business through the calendar
year ended 1999. The light gray shaded chart features nine distinct vertical
bars, each shaded in charcoal, and each visually representing by height the
total return percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Former Fund's Institutional Service
Shares for each calendar year is stated directly at the top of each respective
bar, for the calendar years 1991 through 1999. The percentages noted are: 4.13%,
2.60%, 2.05%, 2.36%, 3.40%, 2.99%, 3.12%, 2.93% and 2.73%, respectively
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Service Shares' total returns on a calendar year-end basis.
The Former Fund's Institutional Service Shares' were not sold subject to a sales
charge (load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Service
Shares' highest quarterly return was 1.10% (quarter ended March 31, 1991). Its
lowest quarterly return was 0.44% (quarter ended March 31, 1994).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Institutional Service
Shares' Average Annual Total Returns, for the calendar periods ended
December 31, 1999.
<TABLE>
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CALENDAR PERIOD FUND
<S> <C>
1 Year 2.73%
5 Years 3.04%
Start of Performance 1 2.94%
</TABLE>
1 The Former Fund's Institutional Service Shares' start of performance date was
December 12, 1990.
The Former Fund's Institutional Service Shares' 7-Day Net Yield as of December
31, 1999 was 3.69%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
NEW JERSEY MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Service Shares of the Fund.
<TABLE>
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SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions) (as a
percentage of offering
price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING
EXPENSES (Before Waivers)
1
Expenses That are Deducted
From Fund Assets (as a
percentage of average net
assets)
Management Fee 2 0.40%
Distribution (12b-1) Fee 3 0.10%
Shareholder Services Fee 4 0.25%
Other Expenses 0.18%
Total Annual Fund
Operating Expenses 5 0.93%
1 Although not contractually obligated to do so, the Adviser, distributor and
shareholder services provider expect to waive certain amounts during the fiscal
year ending October 31, 2000. These are shown below along with the net expenses
the Fund expects to actually pay for the fiscal year ending October 31, 2000.
Total Waivers of Fund
Expenses 0.28%
Total Actual Annual Fund
Operating Expenses (after
waivers) 0.65%
2 The Adviser expects to voluntarily waive a portion of the management fee. The
Adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.32% for the fiscal year ending October 31, 2000.
3 The distributor expects to voluntarily waive a portion of the distribution (12b-
1) fee for the Institutional Service Shares. The distributor can terminate this
anticipated voluntary waiver at any time. The distribution (12b-1) fee paid by
the Fund's Institutional Service Shares (after the anticipated voluntary waiver)
is expected to be 0.00% for the fiscal year ending October 31, 2000.
4 The shareholder services provider expects to voluntarily waive a portion of the
shareholder services fee. The shareholder services provider can terminate this
anticipated voluntary waiver at any time. The shareholder services fee paid by
the Fund's Institutional Service Shares (after the anticipated voluntary waiver)
is expected to be 0.15% for the fiscal year ending October 31, 2000.
5 For the fiscal year ended October 31, 1999, prior to the reorganization of the
Former Fund as a portfolio of the Trust, the Total Annual Fund Operating Expenses
and Total Actual Annual Fund Operating Expenses (after waivers) for the Former
Fund's Institutional Service Shares were 0.93% and 0.65%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Service
Shares for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's Institutional Service Shares operating
expenses are BEFORE WAIVERS as estimated in the table above and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 Year $ 95
3 Years $ 296
5 Years $ 515
10 Years $ 1,143
What are the Fund's Investment Strategies?
The Fund invests its assets in a portfolio of high-quality New Jersey tax exempt
securities maturing in 397 days or less. The Fund will invest its assets so that
at least 80% of its annual interest income is exempt from federal regular income
tax and New Jersey state income tax imposed upon non-corporate taxpayers.
Interest from the Fund's investments may be subject to AMT. The dollar-weighted
average maturity of the Fund's portfolio will be 90 days or less. The Adviser
actively manages the Fund's portfolio, seeking to limit the credit risk taken by
the Fund and to select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal income tax and New Jersey
income tax imposed upon non-corporate taxpayers. It may do this to minimize
potential losses and maintain liquidity to meet shareholder redemptions during
adverse market conditions. This may cause the Fund to receive and distribute
taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSRO or be of comparable quality to
securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the prices of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by New Jersey issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
NEW JERSEY RISKS
Since the Fund invests primarily in issuers from New Jersey, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
New Jersey's economy is relatively diversified across the service sectors. New
Jersey's economy has seen a long term trend of declining employment in
manufacturing industries offset by increasing employment in the diversified
services sector. Any downturn in these and other industries may adversely affect
the economy of the state.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Service Shares and
Institutional Shares, each representing interests in a single portfolio of
securities. This prospectus relates only to Institutional Service Shares. Each
share class has different expenses, which affect their performance. Contact your
investment professional or call 1-800-341-7400 for more information concerning
the other class.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-New Jersey
taxpayers because it invests in New Jersey municipal securities.
When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Institutional Service Shares. Because these
Shares pay marketing fees on an ongoing basis, your investment cost may be
higher over time than other shares with different sales charges and marketing
fees.
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for
same-day payment of redemption proceeds, without that day's dividend, for
redemption requests received before 2:00 p.m. (Eastern time).
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will
be notified and allowed 30 days to purchase additional Shares to meet the
minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the New Jersey taxes discussed above to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997
1996 1995
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03 0.03 0.03
0.03 0.03
LESS DISTRIBUTIONS:
Distributions from net investment income (0.03) (0.03) (0.03)
(0.03) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
TOTAL RETURN 1 2.67% 3.01% 3.08%
3.07% 3.36%
RATIOS TO AVERAGE NET ASSETS:
Expenses 2 0.93% 0.93% 0.96%
1.02% 1.06%
Net investment income 2 2.37% 2.67% 2.77%
2.66% 2.87%
Expenses (after waivers) 0.65% 0.65% 0.65%
0.65% 0.65%
Net investment income (after waivers) 2.65% 2.95% 3.08%
3.03% 3.28%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $58,363 $65,240 $54,538
$28,807 $29,817
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
New Jersey Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, Annual Report and
Semi-Annual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report and the Semi-Annual Report and other information without
charge, and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by e-mail at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
New Jersey Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N468
0100802A-SS (1/00)
[Graphic]
PROSPECTUS
New Jersey Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and New Jersey state income tax imposed upon non-corporate
taxpayers consistent with stability of principal by investing in a portfolio of
high-quality New Jersey tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 7
How is the Fund Sold? 7
How to Purchase Shares 8
How to Redeem Shares 9
Account and Share Information 11
Who Manages the Fund? 12
Financial Information 12
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
New Jersey Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value of $1.00 per share. The Fund's investment
objective is to provide current income exempt from federal regular income tax
and New Jersey state income tax imposed upon non-corporate taxpayers consistent
with stability of principal. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality New Jersey tax exempt securities maturing in
397 days or less. The Fund will invest its assets so that at least 80% of its
annual interest income is exempt from federal regular income tax and New Jersey
state income tax imposed upon non-corporate taxpayers. Interest from the Fund's
investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Shares of New Jersey Municipal Cash Trust (Former Fund) prior
to its reorganization into the Fund, which is a newly created portfolio of Money
Market Obligations Trust (Trust). On the date of the reorganization, February 1,
2000, the Former Fund was dissolved and its net assets (inclusive of liabilities
recorded on the Former Fund's records) were transferred into the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Institutional Shares of the Former Fund as of the
calendar year-end for each of nine years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 6%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's Institutional Shares start of business
through the calendar year ended 1999. The light gray shaded chart features nine
distinct vertical bars, each shaded in charcoal, and each visually representing
by height the total return percentages for the calendar year stated directly at
its base. The calculated total return percentage for the Former Fund's
Institutional Shares for each calendar year is stated directly at the top of
each respective bar, for the calendar years1991 through1999, The percentages
noted are: 4.20%, 2.71%, 2.16%, 2.46%, 3.51%, 3.10%, 3.23%, 3.03% and 2.84%,
respectively.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Shares' total returns on a calendar year-end basis.
The Former Fund's Institutional Shares were not sold subject to a sales charge
(load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Shares'
highest quarterly return was 1.10% (quarter ended March 31, 1991). Its lowest
quarterly return was 0.47% (quarter ended March 31, 1994).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Institutional Shares' Average
Annual Total Returns, for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
CALENDAR PERIOD FUND
<S> <C>
1 Year 2.84%
5 Years 3.14%
Start of Performance 1 3.04%
</TABLE>
1 The Former Fund's Institutional Shares' start of performance date was December
12, 1990.
The Former Fund's Institutional Shares' 7-Day Net Yield as of December 31, 1999,
was 3.79%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
NEW JERSEY MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions) (as a
percentage of offering
price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING
EXPENSES (Before Waivers)
1
Expenses That are Deducted
From Fund Assets (as a
percentage of average net
assets)
Management Fee 2 0.40%
Distribution (12b-1) Fee None
Shareholder Services Fee 3 0.25%
Other Expenses 0.18%
Total Annual Fund
Operating Expenses 4 0.83%
1 Although not contractually obligated to do so, the Adviser and shareholder
services provider expect to waive certain amounts during the fiscal year ending
October 31, 2000. These are shown below along with the net expenses the Fund
expects to actually pay for the fiscal year ending October 31, 2000.
Total Waivers of Fund
Expenses 0.28%
Total Actual Annual Fund
Operating Expenses (after
waivers) 0.55%
2 The Adviser expects to voluntarily waive a portion of the management fee. The
Adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.32% for the fiscal year ending October 31, 2000.
3 The shareholder services provider expects to voluntarily waive a portion of the
shareholder services fee. The shareholder services provider can terminate this
anticipated voluntary waiver at any time. The shareholder services fee paid by
the Fund's Institutional Shares (after the anticipated voluntary waiver) is
expected to be 0.05% for the fiscal year ending October 31, 2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of the
Former Fund as a portfolio of the Trust, the Total Annual Fund Operating Expenses
and Total Actual Annual Fund Operating Expenses (after waivers) for the Former
Fund's Institutional Shares were 0.83% and 0.55%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Institutional Shares operating expenses are BEFORE
WAIVERS as estimated in the table above and remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
1 Year $ 85
3 Years $ 265
5 Years $ 460
10 Years $ 1,025
What are the Fund's Investment Strategies?
The Fund invests its assets in a portfolio of high-quality New Jersey tax exempt
securities maturing in 397 days or less. The Fund will invest its assets so that
at least 80% of its annual interest income is exempt from federal regular income
tax and New Jersey state income tax imposed upon non-corporate taxpayers.
Interest from the Fund's investments may be subject to AMT. The dollar-weighted
average maturity of the Fund's portfolio will be 90 days or less. The Adviser
actively manages the Fund's portfolio, seeking to limit the credit risk taken by
the Fund and select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal income tax and New Jersey
income tax imposed upon non-corporate taxpayers. It may do this to minimize
potential losses and maintain liquidity to meet shareholder redemptions during
adverse market conditions. This may cause the Fund to receive and distribute
taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSRO or be of comparable quality to
securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the prices of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by New Jersey issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
NEW JERSEY RISKS
Since the Fund invests primarily in issuers from New Jersey, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
New Jersey's economy is relatively diversified across the service sectors. New
Jersey's economy has seen a long-term trend of declining employment in
manufacturing industries offset by increasing employment in the diversified
services sector. Any downturn in these and other industries may adversely affect
the economy of the state.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Shares and Institutional
Service Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Shares. Each share class has
different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-New Jersey
taxpayers because it invests in New Jersey municipal securities.
The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend.
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the New Jersey taxes discussed above to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03 0.03 0.03 0.03 0.03
LESS DISTRIBUTIONS:
Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 1 2.77% 3.12% 3.18% 3.17% 3.46%
RATIOS TO AVERAGE NET ASSETS:
Expenses 2 0.83% 0.83% 0.86% 0.92% 0.96%
Net investment income 2 2.47% 2.79% 2.82% 2.76% 3.00%
Expenses (after waivers) 0.55% 0.55% 0.55% 0.55% 0.55%
Net investment income (after waivers) 2.75% 3.07% 3.13% 3.13% 3.41%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $112,138 $106,032 $112,407 $115,722 $86,944
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
New Jersey Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, Annual Report and
Semi-Annual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report and the Semi-Annual Report and other information without
charge, and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by e-mail at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
New Jersey Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N476
0100802A-IS (1/00)
[Graphic]
Statement of Additional Information
NEW JERSEY MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
Institutional Shares
institutional Service Shares
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for New Jersey Municipal Cash Trust
(Fund), dated January 31, 2000. Obtain the prospectuses or the Annual Report
without charge by calling 1-800-341-7400.
january 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip 60934N476
Cusip60934N468
0100802B (1/00)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1998. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established December 10, 1990,
will be reorganized as a portfolio of the Trust on February 1, 2000.
The Board of Trustees (Board) has established two classes of shares of the Fund,
known as Institutional Shares and Institutional Service Shares. This SAI relates
to both classes of Shares. The Fund's investment adviser is Federated Investment
Management Company (Adviser). Effective March 31, 1999, Federated Management,
former adviser to the Fund, became Federated Investment Management Company
(formerly, Federated Advisers).
SECURITIES IN WHICH THE FUND INVESTS
The Fund's principal securities are described in its prospectus. Additional
securities, and further information regarding the principal securities, are
outlined below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its
charter or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues
received by the issuer such as specific taxes, assessments, tolls or
fees. Bondholders may not collect from the municipality's general taxes
or revenues. For example, a municipality may issue bonds to build a
toll road, and pledge the tolls to repay the bonds. Therefore, a
shortfall in the tolls normally would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The
municipality would lend the proceeds from its bonds to the company
using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable
solely from the company's loan payments, not from any other
revenues of the municipality. Therefore, any default on the loan
normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to
the federal alternative minimum tax (AMT). The Fund may invest in
bonds subject to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end
a lease, without penalty, by not providing for the lease payments in
its annual budget. After the lease ends, the lessor can resell the
equipment or facility but may lose money on the sale. The Fund may
invest in securities supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities
at a price below the amount payable at maturity. The difference between
the purchase price and the amount paid at maturity represents interest
on the zero coupon security. Investors must wait until maturity to
receive interest and principal, which increases the interest rate risks
and credit risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of
credit, bond insurance and surety bonds. Credit enhancement also
includes arrangements where securities or other liquid assets secure
payment of a fixed income security. If a default occurs, these assets
may be sold and the proceeds paid to the security's holders. Either
form of credit enhancement reduces credit risks by providing another
source of payment for a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
Inter-fund Borrowing and Lending Arrangements
The Securities and Exchange Commission (SEC) has granted an exemption that
permits the Fund and all other funds advised by subsidiaries of Federated
Investors, Inc. (Federated funds) to lend and borrow money for certain
temporary purposes directly to and from other Federated funds.
Participation in this inter-fund lending program is voluntary for both
borrowing and lending funds, and an inter-fund loan is only made if it
benefits each participating fund. Federated administers the program
according to procedures approved by the Fund's Board, and the Board
monitors the operation of the program. Any inter-fund loan must comply with
certain conditions set out in the exemption, which are designed to assure
fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed"
trades. All inter-fund loans must be repaid in seven days or less. The
Fund's participation in this program must be consistent with its investment
policies and limitations, and must meet certain percentage tests.
Inter-fund loans may be made only when the rate of interest to be charged
is more attractive to the lending fund than market-competitive rates on
overnight repurchase agreements (the Repo Rate) and more attractive to the
borrowing fund than the rate of interest that would be charged by an
unaffiliated bank for short-term borrowings (the Bank Loan Rate), as
determined by the Board. The interest rate imposed on inter-fund loans is
the average of the Repo Rate and the Bank Loan Rate.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with
payment and delivery of the securities scheduled for a future time. During
the period between purchase and settlement, no payment is made by the Fund
to the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value
in determining the price of its shares. Settlement dates may be a month or
more after entering into these transactions so that the market values of
the securities bought may vary from the purchase prices. Therefore, delayed
delivery transactions create interest rate risks for the Fund. Delayed
delivery transactions also involve credit risks in the event of a
counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the
underlying assets or set aside readily marketable securities with a value
that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to
secure such obligations without terminating the special transaction. This
may cause the Fund to miss favorable trading opportunities or to realize
losses on special transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government
of the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types
of corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If
the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund
is the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must
repurchase the underlying security at a higher price, regardless of the
market value of the security at the time of repurchase.
Investment Ratings
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's ("S&P"), MIG-1 or
MIG-2 by Moody's Investors Service ("Moody's"), or F-1+, F-1 or F-2 by Fitch
IBCA, 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 rating service can be
treated as being in one of the two highest short-term rating categories;
currently, such securities must be rated by two nationally recognized
statistical rating organizations in one of their two highest rating categories.
See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
Fundamental INVESTMENT Objective and Policy
The Fund's investment objective is to provide current income exempt from federal
regular income tax and New Jersey state income tax imposed upon non-corporate
taxpayers consistent with stability of principal.
The Fund invests in tax-exempt securities so that at least 80% of its annual
interest income is exempt from federal regular income tax and New Jersey state
income tax imposed upon non-corporate taxpayers.
This investment objective and policy may not be changed by the Fund's Board
without shareholder approval.
INVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
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 limitations 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.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Restricted Securities
The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal
securities law. Under criteria established by the Board, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, the Fund will limit their purchase, together
with other illiquid securities, to 10% of its net assets.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
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.
For purposes of the concentration limitation: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, as a matter
of non-fundamental policy, the Fund will not exceed foreign bank instruments
from industry concentration limitation tests so long as the policy of the SEC
remains in effect. In addition, investments in certain industrial development
bonds funded by activities in a single industry will be deemed to constitute
investment in an industry, except when held for temporary defensive purposes.
The investment of more than 25% of the value of the Fund's total assets in any
one industry will constitute "concentration."
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 SAI, in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7 (the
Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board 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.
WHAT DO SHARES COST?
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
RULE 12B-1 PLAN (institutional service shares)
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets. The Fund may compensate the
Distributor more or less than its actual marketing expenses. In no event will
the Fund pay for any expenses of the Distributor that exceed the maximum Rule
12b-1 Plan fee.
For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing-related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Institutional Shares: Fiduciary
Tr. Co., New York, New York owned approximately 13,693,2000 (11.15%); Naidot &
Co., Woodbridge, New Jersey owned approximately 9,226,400 Shares (7.51%); Fleet
Securities Corp., Rochester, New York owned approximately 34,278,532 Shares
(27.92%); Hudson United Bank, Darien, Connecticut owned approximately 7,051,451
Shares (5.74%); United National Bank, Bridgewater, New Jersey owned
approximately 14,916,582 Shares (12.15%); The Bopec Company, Clifton, New Jersey
owned approximately 12,852,135 Shares (10.47%) and First Union National Bank,
Charlotte, North Carolina owned approximately 15,892,140 Shares (12.94%).
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Institutional Service Shares:
Fiduciary Tr. Co. International, New York, New York owned approximately
14,349,500 Shares (20.82%); Anthony Diaco, c/o AJD Construction Co., Leonardo,
New Jersey owned approximately 8,203,429 Shares (11.90%) and Tellson & Co.,
Gladstone, New Jersey owned approximately 12,117,902 Shares (17.58%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
state TAXes
Under existing New Jersey laws, distributions made by the Fund will not be
subject to New Jersey income taxes to the extent that such distributions qualify
as exempt-interest dividends under the Internal Revenue Code, and represent (i)
interest or gain from obligations issued by or on behalf of the State of New
Jersey or any county, municipality, school, or other district, agency,
authority, commission, instrumentality, public corporation, body corporate and
politic or political subdivision of New Jersey; or (ii) interest or gain from
obligations (such as obligations of the United States) that are statutorily free
from New Jersey taxation under federal or New Jersey state laws. Conversely, to
the extent that distributions by the Fund are attributable to other types of
obligations, such distributions will be subject to New Jersey income taxes.
Distributions received by a corporate shareholder from the Fund will not be
exempt from New Jersey Corporation Business Tax or New Jersey Corporation Income
Tax.
<PAGE>
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and certain positions held prior
to the past five years, total compensation received as a Trustee from the Trust
for its most recent fiscal year, and the total compensation received from the
Federated Fund Complex for the most recent calendar year. Effective February 1,
2000, the Trust will be comprised of 40 funds. The Federated Fund Complex is
comprised of 43 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.
As of January 12, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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Name
Birth Date Aggregate Total Compensation
Address Principal Occupations Compensation From Trust and Fund
Position With Trust for Past Five Years From Fund Complex
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of the $0 $0 for the Trust and 43
Birth Date: July 28, 1924 Federated Fund Complex; Chairman and Trustee, Federated other investment
Federated Investors Tower Investment Management Company; Chairman and Director, companies in the Fund
1001 Liberty Avenue Federated Investors, Inc. Federated Investment Complex
Pittsburgh, PA Counseling, and Federated Global Investment Management
CHAIRMAN AND TRUSTEE Corp.; Chairman, Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $178.77 $116,760.63 for the Trust
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's and 43 other investment
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries, companies in the Fund
Pittsburgh, PA Inc. (coated steel conduits/computer storage equipment); Complex
TRUSTEE formerly: Senior Partner, Ernst & Young LLP; Director,
MED 3000 Group, Inc. (physician practice management);
Director, Member of Executive Committee, University of
Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $196.64 $128,455.37 for the Trust
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior and 43 other investment
Grubb & Ellis/Investment Vice President, John R. Wood and Associates, Inc., companies in the Fund
Properties Corporation Realtors; Partner or Trustee in private real estate Complex
3201 Tamiami Trail North ventures in Southwest Florida; formerly: President,
Naples, FL Naples Property Management, Inc. and Northgate Village
TRUSTEE Development Corporation.
Nicholas P. Constantakis ++ Director or Trustee of the Federated Fund Complex; $0 $73,191.21 for the
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering, Trust and
175 Woodshire Drive construction, operations and technical services); 37 other investment
Pittsburgh, PA formerly: Partner, Andersen Worldwide SC. companies
TRUSTEE in the Fund Complex
John F. Cunningham Director or Trustee of some of the Federated Fund $129.84 $93,190.48 for the Trust
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive and 37 other investment
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business companies in the Fund
Palm Beach, FL consulting); Trustee Associate, Boston College; Complex
TRUSTEE Director, Iperia Corp (communications/software);
formerly: Director, Redgate Communications and
EMC Corporation (computer storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of the Federated $0 $0 for the Trust and 30
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds other investment
Federated Investors Tower in the Federated Fund Complex; President, Chief companies in the Fund
1001 Liberty Avenue Executive Officer and Director, Federated Investors, Complex
Pittsburgh, PA Inc.; President and Trustee, Federated Investment
PRESIDENT AND TRUSTEE Management Company; President and Trustee, Federated
Investment Counseling, President and Director,
Federated Global Investment Management Corp.;
President, Passport Research, Ltd.; Trustee,
Federated Shareholder Services Company;
Director, Federated Services Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $178.77 $116,760.63 for the Trust
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical and 43 other investment
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - companies in the Fund
Suite 1111 Downtown; Hematologist, Oncologist and Internist, Complex
Pittsburgh, PA University of Pittsburgh Medical Center; Member,
TRUSTEE National Board of Trustees, Leukemia Society of America.
Peter E. Madden Director or Trustee of the Federated Fund Complex; $164.38 $109,153.60 for the Trust
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts and 43 other investment
One Royal Palm Way General Court; President, State Street Bank and Trust companies in the Fund
100 Royal Palm Way Company and State Street Corporation. Complex
Palm Beach, FL
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation; Director, The Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $134.35 $102,573.91 for the Trust
Birth Date: April 10, 1945 Complex; Executive Vice President, Legal and External and 40 other investment
80 South Road Affairs, Dugan Valva Contess, Inc. (marketing, companies in the Fund
Westhampton Beach, NY communications, technology and consulting).; formerly Complex
TRUSTEE Management Consultant.
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $191.75 $128,455.37 for the Trust
S.J.D.# President, Law Professor, Duquesne University; and 43 other investment
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Michael companies in the Fund
President, Duquesne University Baker Corp. (engineering, construction, operations and Complex
Pittsburgh, PA technical services).
TRUSTEE
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $178.77 $116,760.63 for the Trust
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. and 43 other investment
4905 Bayard Street companies in the Fund
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum Complex
TRUSTEE Company of America; television producer; business owner.
John S. Walsh Director or Trustee of some of the Federated Fund $129.84 $94,536.85 for the Trust
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. and 39 other investment
2007 Sherwood Drive (manufacturer of construction temporary heaters); companies in the Fund
Valparaiso, IN President and Director, Manufacturers Products, Inc. Complex
TRUSTEE (distributor of portable construction heaters);
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
<PAGE>
Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the Trust and 42
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice other investment
Federated Investors Tower President and Treasurer of some of the Funds in the companies in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
EXECUTIVE VICE PRESIDENT Management Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company.
John W. McGonigle Executive Vice President and Secretary of the Federated $0 $0 for the Trust and 43
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary, and other investment
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated companies in the Fund
1001 Liberty Avenue Investment Management Company and Federated Investment Complex
Pittsburgh, PA Counseling; Director, Federated Global Investment
EXECUTIVE VICE PRESIDENT AND Management Corp., Federated Services Company and
SECRETARY Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President $0 $0 for the Trust and 43
Birth Date: June 17, 1954 - Funds Financial Services Division, Federated other investment
Federated Investors Tower Investors, Inc.; formerly: various management positions companies in the Fund
1001 Liberty Avenue within Funds Financial Services Division of Federated Complex
Pittsburgh, PA Investors, Inc.
TREASURER
Richard B. Fisher President or Vice President of some of the Funds in the $0 $0 for the Trust and 41
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of other investment
Federated Investors Tower the Funds in the Federated Fund Complex; Executive Vice companies in the Fund
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and Complex
Pittsburgh, PA Director, Federated Securities Corp.
VICE PRESIDENT
William D. Dawson, III Chief Investment Officer of this Fund and various other $0 $0 for the Trust and 42
Birth Date: March 3, 1949 Funds in the Federated Fund Complex; Executive Vice other investment
Federated Investors Tower President, Federated Investment Counseling, Federated companies in the Fund
1001 Liberty Avenue Global Investment Management Corp., Federated Investment Complex
Pittsburgh, PA Management Company and Passport Research, Ltd.;
CHIEF INVESTMENT OFFICER Registered Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors,
Inc.; formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company and
Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. $0 $0 for the Trust and 6
Birth Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been a other investment
Federated Investors Tower Senior Portfolio Manager and a Senior Vice President of companies in the Fund
1001 Liberty Avenue the Funds' Adviser since 1997. Ms. Cunningham served as Complex
Pittsburgh, PA a Portfolio Manager and a Vice President of the Adviser
VICE PRESIDENT from 1993 through 1996. Ms. Cunningham is a Chartered
Financial Analyst and received her M.B.A. in Finance
from Robert Morris College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $0 $0 for the Trust and 7
Birth Date: September 12, 1953 Ochson joined Federated in 1982 and has been a Senior other investment
Federated Investors Tower Portfolio Manager and a Senior Vice President of the companies in the Fund
1001 Liberty Avenue Funds' Adviser since 1996. From 1988 through 1995, Ms. Complex
Pittsburgh, PA Ochson served as a Portfolio Manager and a Vice
VICE PRESIDENT President of the Funds' Adviser. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
</TABLE>
* An asterisk denotes Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Mr. Constantakis became a member of the Board of Trustees on October 1, 1999.
He did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated
Funds 0.150 of 1% on the first $250 million 0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million 0.075 of 1% on assets in excess of $750
million The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT auditors
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FEES PAID BY THE FUND FOR SERVICES
For the Year Ended October 31 1999 1998 1997
Advisory Fee Earned $763,407 $831,577 $669,639
Advisory Fee Waiver $155,083 162,550 176,158
Brokerage Commissions $0 0 0
Administrative Fee $155,000 155,000 155,100
12b-1 Fee
Institutional Service Shares $0 -- --
Shareholder Services Fee
Institutional Shares $61,194 -- --
Institutional Service Shares $102,695 -- --
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
Average Annual Total Returns and Yield
Total returns are given for the one-year and Start of Performance periods ended
October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the seven-day
period ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
7-Day Period 1 Year 5 Year Start of Performance on
December 12, 1990
Institutional Shares
Total Return 2.77% 3.14% 3.04%
Yield 2.96%
Effective Yield 3.00%
Tax-Equivalent Yield 5.48%
<PAGE>
7-Day Period 1 Year 5 Year Start of Performance on
December 12, 1990
Institutional Service
Shares
Total Return 2.67% 3.04% 2.94%
Yield 2.86%
Effective Yield 2.90%
Tax-Equivalent Yield 5.29%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
Yield, Effective Yield and Tax-Equivalent Yield
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result. The tax-equivalent yield
of Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLEs
Set forth below are samples of tax-equivalency tables that may be used in
advertising and sales literature. These tables are for illustrative purposes
only and are not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to the federal
alternative minimum tax and state and/or local taxes.
<TABLE>
<CAPTION>
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TAX EQUIVALENCY TABLE
Taxable Yield Equivalent for 2000 - STATE OF NEW JERSEY
SINGLE RETURN
Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%
Combined Federated and State 16.75% 33.53% 37.37% 42.37% 45.97%
- ----------------------------------------------------------------------------------------------------------------------
Single Return $1-26,250 $26,251-63,550 $63,551-132,600 $132,601-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.20% 1.50% 1.60% 1.74% 1.85%
1.50% 1.80% 2.26% 2.40% 2.60% 2.78%
2.00% 2.40% 3.01% 3.19% 3.47% 3.70%
2.50% 3.00% 3.76% 3.99% 4.34% 4.63%
3.00% 3.60% 4.51% 4.79% 5.21% 5.55%
3.50% 4.20% 5.27% 5.59% 6.07% 6.48%
4.00% 4.80% 6.02% 6.39% 6.94% 7.40%
4.50% 5.41% 6.77% 7.19% 7.81% 8.33%
5.00% 6.01% 7.52% 7.98% 8.68% 9.25%
5.50% 6.61% 8.27% 8.78% 9.54% 10.18%
6.00% 7.21% 9.03% 9.58% 10.41% 11.10%
6.50% 7.81% 9.78% 10.38% 11.28% 12.03%
7.00% 8.41% 10.535 11.18% 12.15% 12.96%
7.50% 9/01% 11.28% 11.98% 13.01% 13.88%
8.00% 9.61% 12.03% 12.77% 13.88% 14.81%
8.50% 10.21% 12.79% 13.57% 14.75% 15.73%
9.00% 10.81% 13.54% 14.37% 15.62% 16.66%
<PAGE>
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.
<PAGE>
Taxable Yield Equivalent for 2000 - STATE OF NEW JERSEY
MARRIED FILING JOINT
Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%
Combined Federated and State 16.75% 33.53% 37.37% 42.37% 45.97%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $161,451-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.20% 1.50% 1.60% 1.74% 1.85%
1.50% 1.80% 2.26% 2.40% 2.60% 2.78%
2.00% 2.40% 3.01% 3.19% 3.47% 3.70%
2.50% 3.00% 3.76% 3.99% 4.34% 4.63%
3.00% 3.60% 4.51% 4.79% 5.21% 5.55%
3.50% 4.20% 5.27% 5.59% 6.07% 6.48%
4.00% 4.80% 6.02% 6.39% 6.94% 7.40%
4.50% 5.41% 6.77% 7.19% 7.81% 8.33%
5.00% 6.01% 7.52% 7.98% 8.68% 9.25%
5.50% 6.61% 8.27% 8.78% 9.54% 10.18%
6.00% 7.21% 9.03% 9.58% 10.41% 11.10%
6.50% 7.81% 9.78% 10.38% 11.28% 12.03%
7.00% 8.41% 10.53% 11.18% 12.15% 12.96%
7.50% 9.01% 11.28% 11.98% 13.01% 13.88%
8.00% 9.61% 12.03% 12.77% 13.88% 14.81%
8.50% 10.21% 12.79% 13.57% 14.75% 15.73%
9.00% 10.81% 13.54% 14.37% 15.62% 16.66%
</TABLE>
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
Federated Funds overview
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion and $13.1 billion and
$115 million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
Federated Clients Overview
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities
Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
<PAGE>
INVESTMENT RATINGS
Standard & Poor's Short-Term Municipal Obligation Ratings
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
Commercial Paper (CP) Ratings
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
Long-Term Debt Ratings
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
Moody's Investors Service, Short-Term Municipal Obligation Ratings
Moody's Investors Service (Moody's) short-term ratings are designated Moody's
Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or VMIG
ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
Commercial Paper (CP) Ratings
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Long-Term Debt Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
Fitch IBCA, 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.
<PAGE>
116
ADDRESSES
new jersey Municipal cash trust
Institutional Shares
Institutional Service Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PROSPECTUS
New York Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
CASH II SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income tax imposed by New York and New York
municipalities by investing in a portfolio of high-quality New York tax exempt
securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 7
How to Redeem Shares 8
Account and Share Information 10
Who Manages the Fund? 12
Financial Information 12
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
New York Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value (NAV) of $1.00 per share. The Fund's
investment objective is to provide current income which is exempt from federal
regular income tax and the personal income taxes imposed by New York State and
New York municipalities consistent with stability of principal. While there is
no assurance that the Fund will achieve its investment objective, it endeavors
to do so by following the strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality New York tax exempt securities maturing in 397
days or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax and the personal
income taxes imposed by New York State and New York municipalities or so that at
least 80% of its net assets is invested in obligations, the interest income from
which is exempt from federal regular income tax and the personal income taxes
imposed by New York State and New York municipalities. Interest from the Fund's
investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable NAV, it is possible to lose
money by investing in the Fund. 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. The Shares offered by this prospectus are not deposits or obligations of
any bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table below reflect historical performance data
for Cash II Shares of New York Municipal Cash Trust (the "Former Fund") prior to
its reorganization into the Fund, which is a newly created portfolio of Money
Market Obligations Trust (the "Trust"). On the date of the reorganization,
February 1, 2000, the Former Fund was dissolved and its net assets (inclusive of
liabilities recorded on the Former Fund's records) were transferred into the
Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Cash II Shares as of the calendar year-end for each of
eight years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's Cash II Shares start of business through
the calendar year ended. The light gray shaded chart features eight distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Former Fund's Cash II Shares for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1992 through 1999, the percentages noted are: 2.59%, 1.93%,
2.38%, 3.41%, 2.98%, 3.12%, 2.94%, and 2.73%, respectively.
Historically, the Former Fund has maintained a constant $1.00 NAV per share. The
bar chart shows the variability of the Former Fund's Cash II Shares total
returns on a calendar year-end basis.
The Former Fund's Cash II Shares are not sold subject to a sales charge (load).
The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Cash II Shares highest
quarterly return was 0.88% (quarter ended June 30, 1995). Its lowest quarterly
return was 0.45% (quarter ended March 31, 1994).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Cash II Shares Average Annual
Total Returns for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
CALENDAR PERIOD FUND
<S> <C>
1 Year 2.73%
5 Years 3.04%
Start of Performance 1 2.87%
</TABLE>
1 The Former Fund's Cash II Shares start of performance date was April 25, 1991.
The Former Fund's Cash II Shares 7-Day Net Yield as of December 31, 1999 was
3.93%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
NEW YORK MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Cash II Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions) (as a
percentage of offering
price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING
EXPENSES (Before Waivers)
1
Expenses That are Deducted
From Fund Assets (as a
percentage of average net
assets)
Management Fee 2 0.40%
Distribution (12b-1) Fee 3 0.25%
Shareholder Services Fee 0.25%
Other Expenses 0.14%
Total Annual Fund
Operating Expenses 4 1.04%
1 Although not contractually obligated to do so, the adviser and distributor
expect to waive certain amounts during the fiscal year ending October 31, 2000.
These are shown below along with the net expenses the Fund expects to actually
pay for the fiscal year ending October 31, 2000.
Total Waiver of Fund
Expenses 0.33%
Total Actual Annual Fund
Operating Expenses (after
waivers) 0.71%
2 The adviser expects to voluntarily waive a portion of the management fee. The
adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.32% for the fiscal year ending October 31, 2000.
3 The distributor expects to voluntarily waive a portion of the distribution (12b-
1) fee. The distributor can terminate this anticipated voluntary waiver at any
time. The distribution (12b-1) fee paid by the Fund's Cash II Shares (after the
anticipated voluntary waiver) is expected to be 0.00% for the fiscal year ending
October 31, 2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of the
Former Fund, as a portfolio of the Trust, the Total Annual Fund Operating
Expenses and Total Actual Annual Fund Operating Expenses (after waivers) for the
Former Fund's Cash II Shares were 1.04% and 0.71%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Cash II Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Cash II Shares for the
time periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Cash II Shares operating expenses are BEFORE WAIVERS as
estimated in the table above and remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 106
3 Years $ 331
5 Years $ 574
10 Years $ 1,271
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality New York tax exempt securities
maturing in 397 days or less. The Fund will invest its assets so that at least
80% of its annual interest income is exempt from federal regular income tax and
the personal income taxes imposed by New York State and New York municipalities
or so that at least 80% of its net assets is invested in obligations, the
interest income from which is exempt from federal regular income tax and the
personal income taxes imposed by New York State and New York municipalities.
Interest from the Fund's investments may be subject to the AMT. The
dollar-weighted average maturity of the Fund's portfolio will be 90 days or
less. The Adviser actively manages the Fund's portfolio, seeking to limit the
credit risk taken by the Fund and select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and New York income tax.
It may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by New York issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
NEW YORK RISKS
Since the Fund invests primarily in issuers from New York, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
New York's economy is relatively diversified across the manufacturing,
agricultural and services sectors. However, New York City is a major component
of the state's economy and is therefore heavily dependent on the historically
volatile financial, real estate and insurance industries.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 3:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Service Shares and Cash II
Shares, each representing interests in a single portfolio of securities. This
prospectus relates only to Cash II Shares. Each share class has different
expenses, which affect their performance. Contact your investment professional
or call 1-800-341-7400 for more information concerning the other class.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions or to individuals directly or
through investment professionals. The Fund may not be a suitable investment for
retirement plans or for non-New York taxpayers because it invests in New York
municipal securities.
When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Class II Shares. Because these Shares pay
marketing fees on an ongoing basis, your investment cost may be higher over time
than other shares with different sales charges and marketing fees.
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend.
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase
Shares by check, you begin earning dividends on the business day after the Fund
receives your check. In either case, you earn dividends through the day your
redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the New York state taxes discussed above to the extent they
are derived from interest on obligations exempt from such taxes. Capital gains
and non-exempt dividends are taxable whether paid in cash or reinvested in the
Fund. Redemptions are taxable sales. Please consult your tax adviser regarding
your federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance since inception. Some of the information is presented on a per share
basis. Total returns represent the rate an investor would have earned (or lost)
on an investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03 0.03 0.03
0.03 0.03
LESS DISTRIBUTIONS:
Distributions from net investment income (0.03) (0.03) (0.03)
(0.03) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
TOTAL RETURN 1 2.67% 3.02% 3.07%
3.05% 3.37%
RATIOS TO AVERAGE NET ASSETS:
Expenses 2 1.04% 1.05% 1.05%
1.07% 1.07%
Net investment income 2 2.34% 2.64% 2.67%
2.66% 2.84%
Expenses (after waivers) 0.71% 0.71% 0.71%
0.71% 0.71%
Net investment income (after waivers) 2.67% 2.98% 3.01%
3.02% 3.20%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $62,713 $43,957 $21,402
$25,571 $14,439
</TABLE>
1 Based on NAV, which does not reflect the sales charge or contingent deferred
sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such waivers had
not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
New York Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
CASH II SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
Annual Report, Semi-Annual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
New York Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N310
G00208-02 (1/00)
[Graphic]
PROSPECTUS
New York Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income tax imposed by New York and New York
municipalities by investing in a portfolio of high-quality New York tax exempt
securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 7
How to Redeem Shares 8
Account and Share Information 11
Who Manages the Fund? 11
Financial Information 12
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
New York Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value (NAV) of $1.00 per share. The Fund's
investment objective is to provide current income which is exempt from federal
regular income tax and the personal income taxes imposed by New York State and
New York municipalities consistent with stability of principal. While there is
no assurance that the Fund will achieve its investment objective, it endeavors
to do so by following the strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality New York tax exempt securities maturing in 397
days or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax and the personal
income taxes imposed by New York State and New York municipalities or so that at
least 80% of its net assets is invested in obligations, the interest income from
which is exempt from federal regular income tax and the personal income taxes
imposed by New York State and New York municipalities. Interest from the Fund's
investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable NAV, it is possible to lose
money by investing in the Fund. 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. The Shares offered by this prospectus are not deposits or obligations of
any bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Service Shares of New York Municipal Cash Trust (the "Former
Fund") prior to its reorganization into the Fund, which is a newly created
portfolio of Money Market Obligations Trust (the "Trust"). On the date of the
reorganization, February 1, 2000, the Former Fund was dissolved and its net
assets (inclusive of liabilities recorded on the Former Fund's records) were
transferred into the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Institutional Service Shares of the Former Fund as of
the calendar year-end for one year.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 2 % up to 6 %
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's Institutional Service Shares start of
business through the calendar year ended 1999. The light gray shaded chart
features ten distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Former
Fund's Institutional Service Shares for each calendar year is stated directly at
the top of each respective bar, for the calendar years 1990 through 1999, The
percentages noted are: 5.52%, 4.30%, 2.75%, 2.10%, 2.57%, 3.59%, 3.17%, 3.30%,
3.11%, 2.89%, respectively.
Historically, the Former Fund has maintained a constant $1.00 NAV per share. The
bar chart shows the variability of the Former Fund's Institutional Service
Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Service Shares were not sold subject to a sales
charge (load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Service
Shares highest quarterly return was 1.41% (quarter ended December 31, 1990). Its
lowest quarterly return was 0.49% (quarter ended March 31, 1994).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Institutional Service
Shares Average Annual Total Returns, for the calendar periods ended
December 31, 1999.
CALENDAR PERIOD FUND
1 Year 2.89%
5 Years 3.21%
10 Years 3.33%
The Former Fund's Institutional Service Shares 7-Day Net Yield as of December
31, 1999 was 4.09%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
NEW YORK MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Service Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions)
(as a percentage of
offering price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
<CAPTION>
<S> <C>
ANNUAL FUND OPERATING
EXPENSES (Before Waivers) 1 Expenses That are Deducted From Fund Assets (as a
percentage of average net assets)
Management Fee 2 0.40%
Distribution (12b-1) Fee 3 0.25%
Shareholder Services Fee 4 0.25%
Other Expenses 0.14%
Total Annual Fund
Operating Expenses 5 1.04%
1 Although not contractually obligated to do so, the adviser, distributor and
shareholder services provider expect to waive certain amounts during the fiscal
year ending October 31, 2000. These are shown below along with the net expenses
the Fund expects to actually pay for the fiscal year ending October 31, 2000.
Total Waiver of Fund
Expenses 0.49%
Total Actual Annual Fund
Operating Expenses (after
waivers) 0.55%
2 The adviser expects to voluntarily waive a portion of the management fee. The
adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticpated voluntary waiver) is
expected to be 0.32% for the fiscal year ending October 31, 2000.
3 The distributor expects to voluntarily waive a portion of the distribution (12b-
1). The distributor can terminate this anticipated voluntary waiver at any time.
The distribution (12b-1) fee paid by the Fund's Institutional Service Shares
(after the anticipated voluntary waiver) is expected to be 0.00% for the fiscal
year ending October 31, 2000.
4 The shareholder services provider expects to voluntarily waive a portion of the
shareholder services fee. The shareholder services provider can terminate this
anticipated voluntary waiver at any time. The shareholder services fee paid by
the Fund's Institutional Service Shares (after the anticipated voluntary waiver)
is expected to be 0.09% for the fiscal year ending October 31, 2000.
5 For the fiscal year ended October 31, 1999, prior to the reorganization of the
Former Fund, as a portfolio of the Trust, the Total Annual Fund Operating
Expenses and Total Actual Annual Fund Operating Expenses (after waivers) for the
Former Fund's Institutional Service Shares were 1.04% and 0.55%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Service
Shares for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's Institutional Service Shares operating
expenses are BEFORE WAIVERS as estimated in the table above and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 Year $ 106
2 Years $ 331
5 Years $ 574
10 Years $ 1,271
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality New York tax exempt securities
maturing in 397 days or less. The Fund will invest its assets so that at least
80% of its annual interest income is exempt from federal regular income tax and
the personal income taxes imposed by New York State and New York municipalities
or so that at least 80% of its net assets is invested in obligations, the
interest income from which is exempt from federal regular income tax and the
personal income taxes imposed by New York State and New York municipalities.
Interest from the Fund's investments may be subject to the AMT. The
dollar-weighted average maturity of the Fund's portfolio will be 90 days or
less. The Adviser actively manages the Fund's portfolio, seeking to limit the
credit risk taken by the Fund and select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and New York income tax.
It may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit rating from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by New York issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
NEW YORK RISKS
Since the Fund invests primarily in issuers from New York, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
New York's economy is relatively diversified across the manufacturing,
agricultural and services sectors. However, New York City is a major component
of the state's economy and is therefore heavily dependent on the historically
volatile financial, real estate and insurance industries.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 3:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Service Shares and Cash II
Shares, each representing interests in a single portfolio of securities. This
prospectus relates only to Institutional Service Shares. Each share class has
different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-New York
taxpayers because it invests in New York municipal securities.
When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Class II Shares. Because these Shares pay
marketing fees on an ongoing basis, your investment cost may be higher over time
than other shares with different sales charges and marketing fees.
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for
same-day payment of redemption proceeds, without that day's dividend, for
redemption requests received before 2:00 p.m. (Eastern time).
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the New York state taxes discussed above to the extent they
are derived from interest on obligations exempt from such taxes. Capital gains
and non-exempt dividends are taxable whether paid in cash or reinvested in the
Fund. Redemptions are taxable sales. Please consult your tax adviser regarding
your federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance since inception. Some of the information is presented on a per share
basis. Total returns represent the rate an investor would have earned (or lost)
on an investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.03 0.03 0.03 0.03 0.04
LESS DISTRIBUTIONS:
Distributions from
net investment income (0.03) (0.03) (0.03) (0.03) (0.04)
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 1 2.83% 3.19% 3.26% 3.24% 3.56%
RATIOS TO AVERAGE
NET ASSETS:
Expenses 2 1.04% 1.05% 1.05% 1.07% 1.07%
Net investment income 2 2.30% 2.62% 2.69% 2.64% 2.96%
Expenses (after waivers) 0.55% 0.55% 0.53% 0.53% 0.54%
Net investment
income (after waivers) 2.79% 3.12% 3.21% 3.18% 3.49%
SUPPLEMENTAL DATA:
Net assets, end of
period (000 omitted) $577,269 $513,011 $424,174 $305,533 $276,149
</TABLE>
1 Based on NAV, which does not reflect the sales charge or contingent deferred
sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such waivers had
not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
New York Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
Annual Report, Semi-Annual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
New York Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N294
G00208-01 (1/00)
[Graphic]
Statement of Additional Information
NEW YORK MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
institutional service shares
cash ii shares
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for New York Municipal Cash Trust
(Fund), dated January 31, 2000. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectuses or the Annual Report without charge by
calling
1-800-341-7400.
january 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
What Do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip 60934N294
Cusip 60934N310
022390(1/00)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on May 30, 1994, will
be reorganized as a portfolio of the Trust on February 1, 2000.
The Board of Trustees (Board) has established two classes of shares of the Fund,
known as Institutional Service Shares and Cash II Shares (Shares). This SAI
relates to both classes of Shares. The Fund's investment adviser is Federated
Investment Management Company (Adviser). Effective March 31, 1999, Federated
Management, former adviser to the Fund, became Federated Investment Management
Company (formerly, Federated Advisers).
SECURITIES IN WHICH THE FUND INVESTS
The Fund's principal securities are described in its prospectus. Additional
securities, and further information regarding the principal securities, are
outlined below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its
charter or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues
received by the issuer such as specific taxes, assessments, tolls or
fees. Bondholders may not collect from the municipality's general taxes
or revenues. For example, a municipality may issue bonds to build a
toll road, and pledge the tolls to repay the bonds. Therefore, a
shortfall in the tolls normally would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The municipality
would lend the proceeds from its bonds to the company using the
factory, and the company would agree to make loan payments sufficient
to repay the bonds. The bonds would be payable solely from the
company's loan payments, not from any other revenues of the
municipality. Therefore, any default on the loan normally would result
in a default on the bonds.
The interest on many types of private activity bonds is subject to
the federal alternative minimum tax (AMT) the Fund may invest in bonds subject
to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end
a lease, without penalty, by not providing for the lease payments in
its annual budget. After the lease ends, the lessor can resell the
equipment or facility but may lose money on the sale. The Fund may
invest in securities supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities
at a price below the amount payable at maturity. The difference between
the purchase price and the amount paid at maturity represents interest
on the zero coupon security. Investors must wait until maturity to
receive interest and principal, which increases the interest rate risks
and credit risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of
credit, bond insurance and surety bonds. Credit enhancement also
includes arrangements where securities or other liquid assets secure
payment of a fixed income security. If a default occurs, these assets
may be sold and the proceeds paid to the security's holders. Either
form of credit enhancement reduces credit risks by providing another
source of payment for a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment
companies, including the securities affiliated money market funds, as
an efficient means of carrying out its investment policies and
managing uninvested cash.
Special Transactions
"Inter-fund Borrowing and Lending Arrangements
The Securities and Exchange Commission (SEC) has granted an exemption that
permits the Fund and all other funds advised by subsidiaries of Federated
Investors, Inc. (Federated funds) to lend and borrow money for certain temporary
purposes directly to and from other Federated funds. Participation in this
inter-fund lending program is voluntary for both borrowing and lending funds,
and an inter-fund loan is only made if it benefits each participating fund.
Federated administers the program according to procedures approved by the Fund's
Board, and the Board monitors the operation of the program. Any inter-fund loan
must comply with certain conditions set out in the exemption, which are designed
to assure fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may be
made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the Bank Loan Rate), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate."
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the
underlying assets or set aside readily marketable securities with a value
that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to
secure such obligations without terminating the special transaction. This
may cause the Fund to miss favorable trading opportunities or to realize
losses on special transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government
of the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types
of corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If
the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchased agreements in which the Fund
is the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must
repurchase the underlying security at a higher price, regardless of the
market value of the security at the time of repurchase.
Investment Ratings
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's (S&P), MIG-1 or MIG-2
by Moody's Investors Service (Moody's), or F-1+, F-1 or F-2 by Fitch IBCA, 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 rating service can be treated as being in one of
the two highest short-term rating categories; currently, such securities must be
rated by two nationally recognized statistical rating organizations in one of
their two highest rating categories. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage Risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
Fundamental INVESTMENT Objective and Policy
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and the personal income taxes imposed by
New York State and New York municipalities consistent with stability of
principal.
The Fund invests in tax-exempt securities so that at least 80% of its annual
interest income is exempt from federal regular income tax and the personal
income taxes imposed by New York State and New York municipalities or so that at
least 80% of its net assets is invested in obligations, the interest income from
which is exempt from federal regular income tax and the personal income taxes
imposed by New York State and New York municipalities.
This investment objective and policy may not be changed by the Fund's Board
without shareholder approval.
INVESTMENT LIMITATIONS
Diversification
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized by
such U.S. government securities; and securities of other investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
For purposes of the diversification above limitation, 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."
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
<PAGE>
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
Securities Act of 1933.
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 1940 Act. In particular, the Fund will comply with the various
requirements of Rule 2a-7 (Rule), which regulates money market mutual funds. The
Fund will determine the effective maturity of its investments according to the
Rule. The Fund may change these operational policies to reflect changes in the
laws and regulations without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board will take any steps it considers 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.
WHAT DO SHARES COST?
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
RULE 12B-1 PLAN
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.
The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.
For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing-related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
As of January 20, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of the outstanding Institutional Service
Shares: Fiduciary Trust Company International., New York, New York owned
approximately 99,500,900 Shares (14.76%) ; Fleet Securities Corporation.,
Rochester, New York owned approximately 93,877,288 (13.92%).
As of January 20, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of the outstanding Cash II Shares: North Fork
Bank., Mattituck, New York owned approximately 11,751,152 Shares (15.62%);
Compass Investment Services Corporation., Melville, New York owned approximately
16,888,927 Shares (22.45%); Mark A. Martin and Nancy R. Martin, St. Louis,
Mossouri owned approximately 4,020,434 Shares (5.34%) Jonathan D. Boucher New
York, New York owned approximately 4,962,821 (6.60%)
.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
STATE TAXES
Under existing New York laws, distributions made by the Fund will not be subject
to New York State or New York City personal income taxes to the extent that such
distributions qualify as exempt-interest dividends under the Internal Revenue
Code, and represent interest income attributable to obligations issued by the
State of New York and its political subdivisions as well as certain other
obligations, the interest on which is exempt from New York State and New York
City personal income taxes, such as, for example, certain obligations of the
Commonwealth of Puerto Rico. Conversely, to the extent that distributions made
by the Fund are derived from other types of obligations, such distributions will
be subject to New York State and New York City personal income taxes.
The Fund cannot predict in advance the exact portion of its dividends that will
be exempt from New York State and New York City personal income taxes. However,
the Fund will report to shareholders at least annually what percentage of the
dividends it actually paid is exempt from such taxes.
Dividends paid by the Fund are exempt from the New York City unincorporated
business taxes to the same extent that they are exempt from the New York City
personal income taxes.
Dividends paid by the Fund are not excluded from net income in determining New
York State or New York City franchise taxes on corporations or financial
institutions.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Trust is comprised of 40
funds and the Federated Fund Complex is comprised of 43 investment companies,
whose investment advisers are affiliated with the Fund's Adviser.
As of January 12, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.
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Name
Birth Date Aggregate Total Compensation
Address Principal Occupations Compensation From Trust and Fund
Position With Trust for Past Five Years From Fund Complex
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of the $0 $0 for the Trust and 43
Birth Date: July 28, 1924 Federated Fund Complex; Chairman and Trustee, Federated other investment
Federated Investors Tower Investment Management Company; Chairman and Director, companies in the Fund
1001 Liberty Avenue Federated investors, Inc. Federated Investment Complex
Pittsburgh, PA Counseling, and Federated Global Investment Management
CHAIRMAN AND TRUSTEE Corp.; Chairman, Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $439.02 $116,760.63 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's Trust
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries, and 43 other investment
Pittsburgh, PA Inc. (coated steel conduits/computer storage companies in the Fund
TRUSTEE equipment); formerly: Senior Partner, Ernst & Young Complex
LLP; Director, MED 3000 Group, Inc. (physician practice
management); Director, Member of Executive Committee,
University of Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $482.99 $128,455.37 for the Trust
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior and 43 other investment
Wood/Commercial Dept. Vice President, John R. Wood and Associates, Inc., companies in the Fund
John R. Wood Associates, Inc. Realtors; Partner or Trustee in private real estate Complex
Realtors ventures in Southwest Florida; formerly: President,
3255 Tamiami Trail North Naples Property Management, Inc. and Northgate Village
Naples, FL Development Corporation.
TRUSTEE
Nicholas Constantakis++ Director or Trustee of the Federated Fund Complex; $0 $73,191.21 for the
Birth Date: September 3, 1939 formerly: Partner, Andersen Worldwide SC. Trust and
175 Woodshire Drive 37 other investment
Pittsburgh, PA companies
TRUSTEE in the Fund Complex
John F. Cunningham Director or Trustee of some of the Federated Fund $330.72 $93,190.48 for the Trust
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive and 37
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business other investment
Palm Beach, FL consulting); Trustee Associate, Boston College; companies in the Fund
TRUSTEE Director, Iperia Corp. (communications/software); Complex
formerly: Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of the Federated $0 $0 for the Trust and 30
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds other investment
Federated Investors Tower in the Federated Fund Complex; President, Chief companies in the Fund
1001 Liberty Avenue Executive Officer and Director, Federated Investors, Complex
Pittsburgh, PA Inc.; President and Trustee, Federated Investment
PRESIDENT AND TRUSTEE Management Company; President and Trustee, Federated
Investment Counseling, President and Director,
Federated Global Investment Management Corp.;
President, Passport Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director, Federated
Services Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $439.02 $116,760.63 for the Trust
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; and 43 other investment
3471 Fifth Avenue Medical Director, University of Pittsburgh Medical companies in the Fund
Suite 1111 Center - Downtown; Hematologist, Oncologist and Complex
Pittsburgh, PA Internist, University of Pittsburgh Medical Center;
TRUSTEE Member, National Board of Trustees, Leukemia Society of
America.
Peter E. Madden Director or Trustee of the Federated Fund Complex; $403.57 $109,153.60 for the Trust
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts and 43 other investment
One Royal Palm Way General Court; President, State Street Bank and Trust companies in the Fund
100 Royal Palm Way Company and State Street Corporation. Complex
Palm Beach, FL
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation; Director, The Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $343.12 $102,573.91 for the
Complex; Management Consultant. Trust and 40
Birth Date: April 10, 1945 other investment
80 South Road Previous Positions: Chief Executive Officer, PBTC companies in the Fund
Westhampton Beach, NY International Bank; Partner, Arthur Young & Company Complex
TRUSTEE (now Ernst & Young LLP); Chief Financial Officer of
Retail Banking Sector, Chase Manhattan Bank;
Senior Vice President, Marine Midland Bank;
Vice President, Citibank; Assistant Professor
of Banking and Finance, Frank G. Zarb School of
Business, Hofstra University.
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $472.15 $128,455.37 for the
S.J.D.# President, Law Professor, Duquesne University; Trust
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Michael and 43 other investment
President, Duquesne University Baker Corp. (engineering, construction, operations and companies in the Fund
Pittsburgh, PA technical services). Complex
TRUSTEE
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $439.02 $116,760.63 for the
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. Trust
4905 Bayard Street and 43 other investment
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum companies in the Fund
TRUSTEE Company of America; television producer; business owner. Complex
John S. Walsh Director or Trustee of some of the Federated Fund $330.72 $94,536.85 for the Trust
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. and 39
2007 Sherwood Drive (manufacturer of construction temporary heaters); other investment
Valparaiso, IN President and Director, Manufacturers Products, Inc. companies in the Fund
TRUSTEE (distributor of portable construction heaters); Complex
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
<PAGE>
Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the Trust and 42
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice other investment
Federated Investors Tower President and Treasurer of some of the Funds in the company in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
EXECUTIVE VICE PRESIDENT Management Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee,
Federated Shareholder Services Company.
John W. McGonigle Executive Vice President and Secretary of the Federated $0 $0 for the Trust and 43
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary and other investment
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated companies in the Fund
1001 Liberty Avenue Investment Management Company and Federated Investment Complex
Pittsburgh, PA Counseling; Director, Federated Global Investment
EXECUTIVE VICE PRESIDENT AND Management Corp., Federated Services Company and
SECRETARY Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President $0 $0 for the Trust and 43
Birth Date: June 17, 1954 - Funds Financial Services Division, Federated other investment
Federated Investors Tower Investors, Inc.; formerly: various management positions companies in the Fund
1001 Liberty Avenue within Funds Financial Services Division of Federated Complex
Pittsburgh, PA Investors, Inc.
TREASURER
Richard B. Fisher President or Vice President of some of the Funds in the $0 $0 for the Trust and 41
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of other investment
Federated Investors Tower the Funds in the Federated Fund Complex; Executive Vice companies in the Fund
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and Complex
Pittsburgh, PA Director, Federated Securities Corp.
VICE PRESIDENT
William D. Dawson, III Chief Investment Officer of this Fund and various other $0 $0 for the Trust and 42
Birth Date: March 3, 1949 Funds in the Federated Fund Complex; Executive Vice other investment
Federated Investors Tower President, Federated Investment Counseling, Federated companies in the Fund
1001 Liberty Avenue Global Investment Management Corp., Federated Complex
Pittsburgh, PA Investment Management Company and Passport Research,
CHIEF INVESTMENT OFFICER Ltd.; Registered Representative, Federated Securities
Corp.; Portfolio Manager, Federated
Administrative Services; Vice President,
Federated Investors, Inc.; formerly: Executive
Vice President and Senior Vice President,
Federated Investment Counseling Institutional
Portfolio Management Services Division; Senior
Vice President, Federated Investment Management
Company and Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. $0 $0 for the Trust and 6
Birth Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been a other investment
Federated Investors Tower Senior Portfolio Manager and a Senior Vice President of companies in the Fund
1001 Liberty Avenue the Funds' Adviser since 1997. Ms. Cunningham served as Complex
Pittsburgh, PA a Portfolio Manager and a Vice President of the Adviser
VICE PRESIDENT from 1993 until 1996. Ms. Cunnin gham is a Chartered
Financial Analyst and received her M.B.A. in Finance
from Robert Morris College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $0 $0 for the Trust and 7
Birth Date: September 12, 1953 Ochson joined Federated in 1982 and has been a Senior other investment
Federated Investors Tower Portfolio Manager and a Senior Vice President of the companies in the Fund
1001 Liberty Avenue Funds' Adviser since 1996. From 1988 through 1995, Ms. Complex
Pittsburgh, PA Ochson served as a Portfolio Manager and a Vice
VICE PRESIDENT President of the Funds' Adviser. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the 1940 Act.
</TABLE>
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Mr. Constantakis became a member of the Board of Trustees on
October 1, 1999. He did not receive any fees as of the fiscal year end of
the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
Maximum Administrative Fee Average Aggregate Daily Net Assets of the
Federated Funds
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT auditors
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
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FEES PAID BY THE FUND FOR SERVICES
For the Year Ended October 31 1999 1998 1997
Advisory Fee Earned $2,640,056 $2,250,094 $1,787,405
Advisory Fee Reduction $535,876 $500,559 $421,045
Brokerage Commissions $0 $0 $0
Administrative Fee $497,651 $424,181 $337,389
12b-1 Fee
Institutional Service Shares -- -- --
Cash II Shares -- -- --
Shareholder Services Fee
Institutional Service Shares $540,605 -- --
Cash II Shares $148,355 -- --
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. SEC also permits this
standard performance information to be accompanied by non-standard performance
information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
Average Annual Total Returns and Yield
Total returns are given for the one-year, five-year, ten-year and Start of
Performance periods ended October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the 7-day period
ended October 31, 1999.Performance of the Fund shown is prior to its
reorganization as a portfolio of the Trust on February 1, 2000.
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10 years
7-Day Period 1 Year 5 Years
Institutional Service
Shares
Total Return -- 2.83% 3.21% 3.36%
Yield 2.96% -- -- --
Effective Yield 3.00% -- -- --
Tax-Equivalent Yield 5.53 % -- -- --
- -------------------------------------------------------------------------------------------------------
\
Start of Performance on
7-Day Period 1 Year 5 Years April 25, 1991
Cash II Shares
Total Return -- 2.67 % 3.04 % 2.86 %
Yield 2.80 % -- -- --
Effective Yield 2.84 % -- -- --
Tax-Equivalent Yield 5.23 % -- -- --
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
Yield, Effective Yield and Tax-Equivalent Yield
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result. The tax-equivalent yield
of Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to AMT and
state and/or local taxes.
TAX EQUIVALENCY TABLE
Taxable Yield Equivalent for 2000 - STATE OF NEW YORK
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Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%
Combined Federal and State 21.850% 34.850% 37.850% 42.850% 46.450%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $161,451-288,350 Over 288,350
Single Return $1-26,250 $26,251-63,550 $63,551-132,600 $132,601-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.50% 1.92% 2.30% 2.41% 2.62% 2.80%
2.00% 2.56% 3.07% 3.22% 3.50% 3.73%
2.50% 3.20% 3.84% 4.02% 4.37% 4.67%
3.00% 3.84% 4.60% 4.83% 5.25% 5.60%
3.50% 4.48% 5.37% 5.63% 6.12% 6.54%
4.00% 5.12% 6.14% 6.44% 7.00% 7.47%
4.50% 5.76% 6.91% 7.24% 7.87% 8.40%
5.00% 6.40% 7.67% 8.05% 8.75% 9.34%
5.50% 7.04% 8.44% 8.85% 9.62% 10.27%
6.00% 7.68% 9.21% 9.65% 10.50% 11.20%
6.50%
7.00%
7.50%
8.00%
8.50%
9.00%
</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.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
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.
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.
Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day effective
yield.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
Federated Funds overview
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed money
market funds and 29 bond funds with assets approximating $35.7 billion and $7.7
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 eurodenominated
with assets approximating $34.1 billion, $35.7 billion, $13.1 billion and $115
million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
Federated Clients Overview
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
<PAGE>
INVESTMENT RATINGS
Standard & Poor's Short-Term Municipal Obligation Ratings
An 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 And Tender Option Bonds Ratings
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
Commercial Paper 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 rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
Moody's Investors Service 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 And Tender Option Bonds 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 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 ibca, 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.
<PAGE>
ADDRESSES
New York municipal cash trust
Institutional Service Shares
Cash II Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
42
PROSPECTUS
North Carolina Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the income tax imposed by the State of North Carolina
consistent with stability of principal by investing in a portfolio of
high-quality North Carolina tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 7
How to Redeem Shares 9
Account and Share Information 11
Who Manages the Fund? 12
Financial Information 12
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
North Carolina Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value (NAV) of $1.00 per share. The Fund's
investment objective is to provide current income exempt from federal regular
income tax and the income tax imposed by the State of North Carolina consistent
with stability of principal. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality North Carolina tax exempt securities maturing
in 397 days or less. The Fund will invest its assets so that at least 80% of its
annual interest income will be exempt from federal regular income tax and North
Carolina state income tax or so that at least 80% of its net assets will be
invested in obligations, the interest income from which is exempt from federal
regular and North Carolina state income tax. Interest from the Fund's
investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable NAV, it is possible to lose
money by investing in the Fund. 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. The Shares offered by this prospectus are not deposits or obligations of
any bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table below reflect historical performance data
for Shares of North Carolina Municipal Cash Trust (the "Former Fund") prior to
its reorganization into the Fund, which is a newly created portfolio of Money
Market Obligations Trust (the "Trust"). On the date of the reorganization,
February 1, 2000, the Former Fund will be dissolved and its net assets
(inclusive of liabilities recorded on the Former Fund's records) will be
transferred to the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of North Carolina Municipal Cash Trust as of the calendar
year-end for each of six years. The `y' axis reflects the "% Total Return"
beginning with "0" and increasing in increments of 1% up to 4% . The `x' axis
represents calculation periods from the earliest first full calendar year-end of
the Fund's start of business through the calendar year ended October 31, 1999.
The light gray shaded chart features six distinct vertical bars, each shaded in
charcoal, and each visually representing by height the total return percentages
for the calendar year stated directly at its base. The calculated total return
percentage for the Fund for each calendar year is stated directly at the top of
each respective bar, for the calendar years 1994 through 1999. The percentages
noted are:2.63%, 3.55%, 3.16%, 3.27%, 3.09% and 2.88%.
Historically, the Former Fund has maintained a constant $1.00 NAV per share. The
bar chart shows the variability of the Former Fund's total returns on a calendar
year-end basis.
The Former Fund's Shares were not sold without a sales charge (load). The total
returns displayed above are based upon NAV.
Within the period shown in the Chart, the Former Fund's highest quarterly return
was 0.93% (quarter ended June 30, 1995). Its lowest quarterly return was 0.55%
(quarter ended March 31, 1994).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Average Annual Total Returns,
for the calendar periods ended December 31, 1999.
CALENDAR PERIOD FUND
1 Year 2.88%
5 Years 3.19%
Start of Performance 1 3.10%
1 The Former Fund's start of performance date was December 31, 1993.
The Former Fund's 7-Day Net Yield as of December 31, 1999 was 4.10%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
NORTH CAROLINA MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions)
(as a percentage of
offering price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
<CAPTION>
<S> <C>
ANNUAL FUND OPERATING
EXPENSES (Before Waivers) 1 Expenses That are Deducted From Fund Assets (as a
percentage of average net assets)
Management Fee 2 0.50%
Distribution (12b-1) Fee None
Shareholder Services Fee 0.25%
Other Expenses 0.17%
Total Annual Fund
Operating Expenses 3 0.92%
1 Although not contractually obligated to do so, the adviser expects to waive
certain amounts during the fiscal year ending October 31, 2000. These are shown
below along with the net expenses the Fund expects to actually pay for the fiscal
year ending October 31, 2000.
Total Waiver of Fund
Expenses 0.33%
Total Actual Annual Fund
Operating Expenses (after
waivers) 0.59%
2 The adviser expects to voluntarily waive a portion of the management fee. The
adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.17% for the fiscal year ending October 31, 2000.
3 For the fiscal year ended October 31, 1999, prior to the reorganization of the
Former Fund as a portfolio of the Trust, the Total Annual Fund Operating Expenses
and Total Actual Annual Fund Operating Expenses (after waivers) for the Former
Fund's Shares were 0.92% and 0.59%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses are BEFORE WAIVERS as estimated in the table and
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year $ 94
3 Years $ 293
5 Years $ 509
10 Years $ 1,131
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality North Carolina tax exempt
securities maturing in 397 days or less. The Fund will invest its assets so that
at least 80% of its annual interest income will be exempt from federal regular
income tax and North Carolina state income tax or so that at least 80% of its
net assets will be invested in obligations, the interest income from which is
exempt from federal regular and North Carolina state income tax. Interest from
the Fund's investments may be subject to AMT. The dollar-weighted average
maturity of the Fund's portfolio will be 90 days or less. The Adviser actively
manages the Fund's portfolio, seeking to limit the credit risk taken by the Fund
and select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and North Carolina income
tax. It may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by North Carolina issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
NORTH CAROLINA RISKS
Since the Fund invests primarily in issuers from North Carolina, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
North Carolina's growing and diverse economy has experienced a change from
reliance on textile and apparel manufacturing to more reliance on service,
finances and trade. The decline in the nondurable manufacturing sectors has been
somewhat compensated by rapid expansion in the high-tech industry.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge. NAV is determined at 12:00 noon and 1:00 p.m.
(Eastern time) and as of the end of regular trading (normally 4:00 p.m. Eastern
time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $10,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-North
Carolina taxpayers because it invests in North Carolina municipal securities.
The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for
same-day payment of redemption proceeds, without that day's dividend, for
redemption requests received before 2:00 p.m. (Eastern time).
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
ACCOUNT AND SHARE INFORMATION
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the North Carolina taxes discussed above to the extent they
are derived from interest on obligations exempt from such taxes. Capital gains
and non-exempt dividends are taxable whether paid in cash or reinvested in the
Fund. Redemptions are taxable sales. Please consult your tax adviser regarding
your federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.03 0.03 0.03 0.03 0.04
LESS DISTRIBUTIONS:
Distributions from
net investment income (0.03) (0.03) (0.03) (0.03) (0.04)
NET ASSET VALUE,
END OF PERIOD: $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 1 2.81% 3.17% 3.24% 3.23% 3.51%
RATIOS TO AVERAGE
NET ASSETS:
Expenses 2 0.92% 0.94% 0.99% 1.01% 0.99%
Net investment income 2 2.44% 2.74% 2.79% 2.75% 3.06%
Expenses (after waivers) 0.59% 0.59% 0.59% 0.59% 0.59%
Net investment income
(after waivers) 2.77% 3.09% 3.19% 3.17% 3.46%
SUPPLEMENTAL DATA:
Net assets, end of
period (000 omitted) $185,348 $212,111 $172,636 $137,749 $97,602
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
North Carolina Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
PROSPECTUS
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as it becomes available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
Annual Report, Semi-Annual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
North Carolina Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N278
3090803A (1/00)
[Graphic]
Statement of Additional Information
NORTH CAROLINA MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for North Carolina Municipal Cash Trust
(Fund), dated January 31, 2000. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectus or the Annual Report without charge by
calling 1-800-341-7400.
JANUARY 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip 60934N278
3090803 B (1/00)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on December 1, 1993,
will be reorganized as a portfolio of the Trust on February 1, 2000.
The Fund's investment adviser is Federated Investment Management Company
(Adviser). Effective March 31, 1999, Federated Management, former adviser to the
Fund, became Federated Investment Management Company (formerly, Federated
Adviser).
SECURITIES IN WHICH THE FUND INVESTS
The Fund's principal securities are described in its prospectus. Additional
securities, and further information regarding the principal securities, are
outlined below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its
charter or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues
received by the issuer such as specific taxes, assessments, tolls or
fees. Bondholders may not collect from the municipality's general taxes
or revenues. For example, a municipality may issue bonds to build a
toll road, and pledge the tolls to repay the bonds. Therefore, a
shortfall in the tolls normally would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The
municipality would lend the proceeds from its bonds to the company
using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable
solely from the company's loan payments, not from any other
revenues of the municipality. Therefore, any default on the loan
normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to
the federal alternative minimum tax (AMT). The Fund may invest in
bonds subject to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end
a lease, without penalty, by not providing for the lease payments in
its annual budget. After the lease ends, the lessor can resell the
equipment or facility but may lose money on the sale. The Fund may
invest in securities supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities
at a price below the amount payable at maturity. The difference between
the purchase price and the amount paid at maturity represents interest
on the zero coupon security. Investors must wait until maturity to
receive interest and principal, which increases the interest rate risks
and credit risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of
credit, bond insurance and surety bonds. Credit enhancement also
includes arrangements where securities or other liquid assets secure
payment of a fixed income security. If a default occurs, these assets
may be sold and the proceeds paid to the security's holders. Either
form of credit enhancement reduces credit risks by providing another
source of payment for a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
"Inter-fund Borrowing and Lending Arrangements"
The Securities and Exchange Commission (SEC) has granted an exemption that
permits the Fund and all other funds advised by subsidiaries of Federated
Investors, Inc. (Federated funds) to lend and borrow money for certain temporary
purposes directly to and from other Federated funds. Participation in this
inter-fund lending program is voluntary for both borrowing and lending funds,
and an inter-fund loan is only made if it benefits each participating fund.
Federated administers the program according to procedures approved by the Fund's
Board, and the Board monitors the operation of the program. Any inter-fund loan
must comply with certain conditions set out in the exemption, which are designed
to assure fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may be
made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the Bank Loan Rate), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate."
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the underlying
assets or set aside readily marketable securities with a value that equals or
exceeds the Fund's obligations. Unless the Fund has other readily marketable
assets to set aside, it cannot trade assets used to secure such obligations
without terminating the special transaction. This may cause the Fund to miss
favorable trading opportunities or to realize losses on special transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government
of the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types
of corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If
the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the
Fund is the seller (rather than the buyer) of the securities, and
agrees to repurchase them at an agreed upon time and price. A reverse
repurchase agreement may be viewed as a type of borrowing by the Fund.
Reverse repurchase agreements are subject to credit risks. In addition,
reverse repurchase agreements create leverage risks because the Fund
must repurchase the underlying security at a higher price, regardless
of the market value of the security at the time of repurchase.
Investment Ratings
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's (S&P), MIG-1 or MIG-2
by Moody's Investors Service (Moody's), or F-1+, F-1 or F-2 by Fitch IBCA, 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 rating service can be treated as being in one of
the two highest short-term rating categories; currently, such securities must be
rated by two nationally recognized statistical rating organizations in one of
their two highest rating categories. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
Fundamental INVESTMENT Objective and PolicY
The Fund's investment objective is to provide current income exempt from federal
regular income tax and the income tax imposed by the State of North Carolina
consistent with stability of principal.
The Fund will invest its assets so that at least 80% of its annual interest
income will be exempt from federal regular income tax and North Carolina state
income tax or so that at least 80% of its net assets will be invested in
obligations, the interest income from which is exempt from federal regular and
North Carolina state income tax.
This investment objective and policy may not be changed by the Fund's Board of
Trustees (Board) without shareholder approval.
INVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry. To conform to the current view of the SEC
staff that only domestic bank instruments may be excluded from industry
concentration limitations, as a matter of non-fundamental policy, the Fund will
not exclude foreign bank instruments from industry concentration limitation
tests so long as the policy of the SEC remains in effect. In addition,
investments in certain industrial development bonds funded by activities in a
single industry will be deemed to constitute investment in an industry, except
when held for temporary defense purposes. The investment of more than 25% of the
value of the Fund's total assets in any one industry will constitute
"concentration."
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940, as
amended(1940 Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
Pledging Assets
The Fund will not mortgage, pledge or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
federal securities laws.
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.
To conform to the current view of the Securities and Exchange Commission (SEC)
staff that only domestic bank instruments may be excluded from industry
concentration limitations, as a matter of non-fundamental policy, the Fund will
not exclude foreign bank instruments from industry concentration limitation
tests so long as the policy of the SEC remains in effect. In addition,
investments in certain industrial development bonds funded by activities in a
single industry will be deemed to constitute investment in an industry, except
when held for temporary defensive purposes. The investment of more than 25% of
the value of the Fund's total assets in any one industry will constitute
"concentration."
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 SAI , in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7 (the
Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 (NAV) 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 NAV 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 the Rule. Under the Rule,
the Board must establish procedures reasonably designed to stabilize the NAV 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 NAV per Share based upon available
indications of market value. The Board will decide what, if any, steps should be
taken if there is a difference of more than 0.5 of 1% between the two values.
The Board will take any steps it considers 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 NAV.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a
continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All Shares of the Trust have
equal voting rights, except that in matters affecting only a particular Fund or
class, only Shares of that Fund or class are entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January _7_, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: Central Carolina Bank &
Trust, Durham, North Carolina, owned approximately 27,027,329.60 (13.40%) shares
and First Union Securities Inc., Charlotte, North Carolina, owned approximately
28,017,024.94 (13.90%) shares..
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
STATE TAXES
Under existing North Carolina law, distributions made by the Fund will not be
subject to North Carolina income taxes to the extent that such distributions
qualify as exempt-interest dividends under the Internal Revenue Code, and
represent (i) interest on obligations of the State of North Carolina or any of
its political subdivisions; or (ii) interest on obligations of the United States
or its possessions. Conversely, to the extent that distributions made by the
Fund are derived from other types of obligations, such distributions will be
subject to North Carolina income taxes.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1,2000, the
Trust will be comprised of 40 Funds. The Federated Fund Complex is comprised of
43 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January _7_, 2000, the Fund's Board and Officers as a group owned less
than 1% of the Fund's outstanding Shares.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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Name
Birth Date Aggregate Total Compensation
Address Principal Occupations Compensation From Trust and Fund
Position With Trust for Past Five Years From Fund Complex
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of the $0 $0 for the Trust and 54
Birth Date: July 28, 1924 Federated Fund Complex;.; Chairman and Trustee, Federated other investment
Federated Investors Tower Investment Management Company; Chairman and Director, companies in the Fund
1001 Liberty Avenue Federated Investors, Inc., Federated Investment Complex
Pittsburgh, PA Counseling and Federated Global Investment Management
CHAIRMAN AND TRUSTEE Corp.; Chairman, Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $174.37 $113,860.22 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's Trust
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries, Inc. and 54 other investment
Pittsburgh, PA (coated steel conduits/computer storage equipment); companies in the Fund
TRUSTEE formerly: Senior Partner, Ernst & Young LLP; Director, Complex
MED 3000 Group, Inc. (physician practice management);
Director, Member of Executive Committee, University of
Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $191.83 $125,264.48 for the
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior Vice Trust
Grubb & Ellis/Investment President, John R. Wood and Associates, Inc., Realtors; and 54 other investment
Properties Corporation Partner or Trustee in private real estate ventures in companies in the Fund
3201 Tamiami Trail North Southwest Florida; formerly: President, Naples Property Complex
Naples, FL Management, Inc. and Northgate Village Development
TRUSTEE Corporation.
Nicholas P. Constantakis++ Director or Trustee of the Federated Fund Complex; $0 $47,958.02 for the
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering, Trust and
175 Woodshire Drive construction, operations and technical services formerly: 29 other investment
Pittsburgh, PA Partner, Andersen Worldwide SC. companies
TRUSTEE in the Fund Complex
John F. Cunningham Director or Trustee of some of the Federated Fund $130.24 $0 for the Trust and 46
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive Officer, other investment
353 El Brillo Way Cunningham & Co., Inc. (strategic business consulting) ; companies in the Fund
Palm Beach, FL Trustee Associate, Boston College; Director, Iperia Corp. Complex
TRUSTEE (communications/software); formerly: Director, Redgate
Communications and EMC Corporation (computer
storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President and
Chief Operating Officer, Wang Laboratories; Director,
First National Bank of Boston; Director, Apollo Computer,
Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue+ President or Executive Vice President of the Federated $0 $0 for the Trust and 16
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds in other investment
Federated Investors Tower the Federated Fund Complex; President, Chief Executive companies in the Fund
1001 Liberty Avenue Officer and Director, Federated Investors, Inc.; Complex
Pittsburgh, PA President and Trustee, Federated Investment Management
PRESIDENT AND TRUSTEE Company; President and Trustee, Federated Investment
Counseling; President and Director, Federated
Global Investment Management Corp.; President,
Passport Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director,
Federated Services Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; 174.37 $113,860.22 for the
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical Trust
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - and 54 other investment
Suite 1111 Downtown; Hematologist, Oncologist and Internist, companies in the Fund
Pittsburgh, PA University of Pittsburgh Medical Center; Member, National Complex
TRUSTEE Board of Trustees, Leukemia Society of America.
Peter E. Madden Director or Trustee of the Federated Fund Complex; $158.28 $113,860.22 for the
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts Trust
One Royal Palm Way General Court; President, State Street Bank and Trust and 54 other investment
100 Royal Palm Way Company and State Street Corporation. companies in the Fund
Palm Beach, FL Complex
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $134.32 $0 for the Trust and 50
Birth Date: April 10, 1945 Complex; Executive Vice President, Legal and External other investment
80 South Road Affairs, Dugan Valva Contess, Inc. (marketing, companies in the Fund
Westhampton Beach, NY communications, technology and consulting).; formerly Complex
TRUSTEE Management Consultant.
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $187.40 $113,860.22 for the
S.J.D.# President, Law Professor, Duquesne University; Consulting Trust
Birth Date: December 20, 1932 Partner, Mollica & Murray; Director, Michael Baker Corp. and 54 other investment
President, Duquesne University (engineering, construction, operations and technical companies in the Fund
Pittsburgh, PA services). Complex
TRUSTEE
Previous Positions: Dean and Professor of Law, University
of Pittsburgh School of Law; Dean and Professor of Law,
Villanova University School of Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; Public $174.37 $113,860.22 for the
Birth Date: June 21, 1935 Relations/Marketing/Conference Planning. Trust
4905 Bayard Street and 54 other investment
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum companies in the Fund
TRUSTEE Company of America; television producer; business owner. Complex
John S. Walsh Director or Trustee of some of the Federated Fund $130.24 $0 for the Trust and 48
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. other investment
2007 Sherwood Drive (manufacturer of construction temporary heaters); companies in the Fund
Valparaiso, IN President and Director, Manufacturers Products, Inc. Complex
TRUSTEE (distributor of portable construction heaters);
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Trustee or Director of some of the Funds in the Federated $0 $0 for the Trust and 1
Birth Date: October 22, 1930 Fund Complex; President, Executive Vice President and other investment
Federated Investors Tower Treasurer of some of the Funds in the Federated Fund company in the
1001 Liberty Avenue Complex; Vice Chairman, Federated Investors, Inc.; Vice Fund Complex
Pittsburgh, PA President, Federated Investment Management Company,
EXECUTIVE VICE PRESIDENT Federated Investment Counseling, Federated Global
Investment Management Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated
Securities Corp.; Trustee, Federated Shareholder Services
Company.
John W. McGonigle Executive Vice President and Secretary of the Federated $0 $0 for the Trust and 54
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary and other investment
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated companies in the Fund
1001 Liberty Avenue Investment Management Company and Federated Investment Complex
Pittsburgh, PA Counseling; Director, Federated Global Investment
EXECUTIVE VICE PRESIDENT AND Management Corp.,, Federated Services Company and
SECRETARY Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President - $0 $0 for the Trust and 54
Birth Date: June 17, 1954 Funds Financial Services Division, Federated Investors, other investment
Federated Investors Tower Inc.; formerly: various management positions within Funds companies in the Fund
1001 Liberty Avenue Financial Services Division of Federated Investors, Inc. Complex
Pittsburgh, PA
TREASURER
Richard B. Fisher President or Vice President of some of the Funds in the $0 $0 for the Trust and 6
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of other investment
Federated Investors Tower the Funds in the Federated Fund Complex; Executive Vice companies in the Fund
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and Complex
Pittsburgh, PA Director, Federated Securities Corp.
VICE PRESIDENT
William D. Dawson, III Chief Investment Officer of this Fund and various other $0 $0 for the Trust and 41
Birth Date: March 3, 1949 Funds in the Federated Fund Complex; Executive Vice other investment
Federated Investors Tower President, Federated Investment Counseling, Federated companies in the Fund
1001 Liberty Avenue Global Investment Management Corp., Federated Investment Complex
Pittsburgh, PA Management Company and Passport Research, Ltd.;
CHIEF INVESTMENT OFFICER Registered Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors,
Inc.; formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company and
Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. $0 $0 for the Trust and 6
Birth Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been a other investment
Federated Investors Tower Senior Portfolio Manager and a Senior Vice President of companies in the Fund
1001 Liberty Avenue the Funds' Adviser since 1997. Ms. Cunningham served as a Complex
Pittsburgh, PA Portfolio Manager and a Vice President of the Adviser
VICE PRESIDENT from 1993 through 1996.
Ms. Cunningham is a Chartered Financial Analyst and
received her M.B.A. in Finance from Robert Morris College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $0 $0 for the Trust and 7
Birth Date: September 12, 1953 Ochson joined Federated in 1982 and has been a Senior other investment
Federated Investors Tower Portfolio Manager and a Senior Vice President of the companies in the Fund
1001 Liberty Avenue Funds' Adviser since 1996. From 1988 through 1995, Ms. Complex
Pittsburgh, PA Ochson served as a Portfolio Manager and a Vice President
VICE PRESIDENT of the Funds' Adviser. Ms. Ochson is a Chartered
Financial Analyst and received her M.B.A. in Finance from
the University of Pittsburgh.
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</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the 1940 Act.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Mr. Constantakis became a member of the Board of Trustees on October 1, 1999.
He did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated
Funds 0.150 of 1% on the first $250 million 0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million 0.075 of 1% on assets in excess of $750
million The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio. Federated Services Company may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
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For the Year Ended October 31 1999 1998 1997
Advisory Fee Earned $946,083 $899,911 $707,395
Advisory Fee Reduction $627,679 $629,332 $559,422
Brokerage Commissions $0 $0 $0
Administrative Fee $142,669 $135,722 $126,345
Shareholder Services Fee $473,042 -- --
</TABLE>
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
Average Annual Total Returns and Yield
Total returns are given for the one-year, five-year and Start of Performance
periods ended October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the seven-day
period ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
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Start of Performance on
7-Day Period 1 Year 5 Years December 31, 1993
Total Return NA 2.81% 3.19% 3.09%
Yield 2.95% NA NA NA
Effective Yield 3.00% NA NA NA
Tax-Equivalent Yield 5.60% NA NA NA
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</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
Yield, Effective Yield and Tax-Equivalent Yield
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result. The tax-equivalent yield
of Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to AMT and
state and/or local taxes.
TAX EQUIVALENCY TABLE
Taxable Yield Equivalent for 2000 - STATE OF NORTH CAROLINA
<TABLE>
<CAPTION>
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Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%
Combined Federal and State 22.00% 35.75% 38.75% 43.75% 47.35%
- ---------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $161,451-288,350 Over 288,350
Single Return $1-26,250 $26,251-63,550 $63,551-132,600 $132,601-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.28% 1.56% 1.63% 1.78% 1.90%
1.50% 1.92% 2.33% 2.45% 2.67% 2.85%
2.00% 2.56% 3.11% 3.27% 3.56% 3.80%
2.50% 3.21% 3.89% 4.08% 4.44% 4.75%
3.00% 3.85% 4.67% 4.90% 5.33% 5.70%
3.50% 4.49% 5.45% 5.71% 6.22% 6.65%
4.00% 5.13% 6.23% 6.53% 7.11% 7.60%
4.50% 5.77% 7.00% 7.35% 8.00% 8.55%
5.00% 6.41% 7.78% 8.16% 8.89% 9.50%
5.50% 7.05% 8.56% 8.98% 9.78% 10.45%
6.00% 7.69% 9.34% 9.80% 10.67% 11.40%
6.50% 8.33% 10.12% 10.61% 11.56% 12.35%
7.00% 8.97% 10.89% 11.43% 12.44% 13.30%
7.50% 9.62% 11.67% 12.24% 13.33% 14.25%
8.00% 10.265 12.455 13.06% 14.22% 15.19%
8.50% 10.90% 13.23% 13.88% 15.11% 16.14%
9.00% 11.54% 14.01% 14.69% 16.00% 17.09%
</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.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
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.
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.
Money
A monthly magazine, regularly ranks money market funds in various categories
based on the latest available seven-day effective yield.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
Federated Funds overview
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29years' experience. As of
December 31, 1999Federated managed 53 equity funds totaling approximately $18.3
billion in assets across growth, value, equity income, international, index and
sector (i.e. utility) styles. Federated's value-oriented management style
combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 and 1 euro-denominated with
assets approximating $34.1 billion, $35.7 billion, $13.1 billion and $115
million, respectively..
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
Federated Clients Overview
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities
Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of
North Carolina Municipal Cash Trust dated October 31, 1999.
<PAGE>
INVESTMENT RATINGS
Standard & Poor's Short-Term Municipal Obligation Ratings
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
Commercial Paper (CP) Ratings
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
Long-Term Debt Ratings
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
Moody's Investors Service Short-Term Municipal Obligation Ratings
Moody's Investors Service, (Moody's) short-term ratings are designated Moody's
Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or VMIG
ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
Commercial Paper (CP) Ratings
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Long-Term Debt Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
Fitch IBCA, 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.
<PAGE>
134
ADDRESSES
North Carolina municipal cash trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PROSPECTUS
Ohio Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
CASH II SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income tax imposed by the State of Ohio and
Ohio municipalities consistent with stability of principal by investing in a
portfolio of high-quality Ohio tax exempt securities maturing in 397 days or
less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 7
How is the Fund Sold? 8
How to Purchase Shares 8
How to Redeem Shares 10
Account and Share Information 12
Who Manages the Fund? 13
Financial Information 13
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Ohio Municipal Cash Trust (Fund) is a money market fund that seeks to maintain a
stable net asset value of $1.00 per share. The Fund's investment objective is to
provide current income exempt from federal regular income tax and the personal
income taxes imposed by the State of Ohio and Ohio municipalities consistent
with stability of principal. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Ohio tax exempt securities maturing in 397 days
or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax and the personal
income taxes imposed by the State of Ohio and Ohio municipalities. Interest from
the Fund's investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table below reflect historical performance data
for Cash II Shares of Ohio Municipal Cash Trust (Former Fund) prior to its
reorganization into the Fund, which is a newly created portfolio of Money Market
Obligations Trust (Trust). On the date of the reorganization, February 1, 2000,
the Former Fund was dissolved and its net assets (inclusive of liabilities
recorded on the Former Fund's records) were transferred into the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Former Fund's Cash II Shares as of the calendar year-end
for each of eight years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 4%. The `x' axis represents calculation periods from the
earliest first full calendar year-end of the Former Fund's Cash II Shares start
of business through the calendar year ended 1999. The light gray shaded chart
features eight distinct vertical bars, each shaded in charcoal, and each
visually representing by height the total return percentages for the calendar
year stated directly at its base. The calculated total return percentage for the
Former Fund's Cash II Shares for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1992 through 1999, The
percentages noted are: 2.64%, 1.97%, 2.30%, 3.35%, 2.88%, 3.02%, 2.83%, and
2.66%, respectively.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's Cash II
Shares total returns on a calendar year-end basis.
The Former Fund's Cash II Shares were not sold subject to a sales charge (load).
The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Cash II Shares highest
quarterly return was 0.87% (quarter ended June 30, 1995). Its lowest quarterly
return was 0.44% (quarter ended March 31, 1994).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Cash II Shares Average Annual
Total Returns for the calendar period ended December 31, 1999.
<TABLE>
<CAPTION>
CALENDAR PERIOD FUND
<S> <C>
1 Year 2.66%
5 Years 2.95%
Start of Performance 1 2.82%
</TABLE>
1 The Former Fund's Cash II Shares start of performance date was April 22, 1991.
The Former Fund's Cash II Shares 7-Day Net Yield as of December 31, 1999, was
3.69%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
OHIO MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Cash II Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions) (as a
percentage of
offering price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
<CAPTION>
<S> <C>
ANNUAL FUND OPERATING
EXPENSES (Before Waivers) 1 Expenses That are Deducted From Fund Assets (as a
percentage of average net assets)
Management Fee 2 0.40%
Distribution (12b-1) Fee 3 0.30%
Shareholder Services Fee 0.25%
Other Expenses 0.20%
Total Annual Fund
Operating Expenses 4 1.15%
1 Although not contractually obligated to do so, the Adviser and distributor
expect to waive certain amounts during the fiscal year ending October 31, 2000.
These are shown below along with the net expenses the Fund expects to actually
pay for the fiscal year ending October 31, 2000.
Total Waiver of Fund
Expenses 0.20%
Total Actual Annual Fund
Operating Expenses (after
waivers) 0.95%
2 The Adviser expects to voluntarily waive a portion of the management fee. The
Adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.25% for the fiscal year ending October 31, 2000.
3 The distributor expects to voluntarily waive a portion of the distribution (12b-
1) fee. The distributor can terminate this anticipated voluntary waiver at any
time. The distribution (12b-1) fee paid by the Fund's Cash II Shares (after the
anticipated voluntary waiver) is expected to be 0.25% for the fiscal year ending
October 31, 2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of the
Former Fund, as a portfolio of the Trust, the Total Annual Fund Operating Expenses
and Total Actual Annual Fund Operating Expenses (after waivers) for the Former
Fund's Cash II Shares were 1.15% and 0.87%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Cash II Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Cash II Shares for the
time periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Cash II Shares operating expenses are BEFORE WAIVERS as
estimated in the table above and remain the same. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C>
1 Year $117
3 Years $365
5 Years $633
10 Years $1,398
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Ohio tax exempt securities
maturing in 397 days or less. The Fund will invest its assets so that at least
80% of its annual interest income is exempt from federal regular income tax and
Ohio state income taxes. Interest from the Fund's investments may be subject to
AMT. The dollar-weighted average maturity of the Fund's portfolio will be 90
days or less. The Adviser actively manages the Fund's portfolio, seeking to
limit the credit risk taken by the Fund and select investments with enhanced
yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and Ohio income tax. It
may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Ohio issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
OHIO RISKS
Since the Fund invests primarily in issuers from Ohio, the Fund may be subject
to additional risks compared to funds that invest in multiple states. Ohio's
economy is relatively diversified across the manufacturing, agriculture and
services sectors. However, the manufacturing sector, in particular automobile
manufacturing related industries, is still a major employer within Ohio and
exposes the state to the economic dislocations which occur within cyclical
industries.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge. NAV is determined at 12:00 noon and 1:00 p.m.
(Eastern time) and as of the end of regular trading (normally 4:00 p.m. Eastern
time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers three share classes: Institutional Shares, Institutional Service
Shares and Cash II Shares, each representing interests in a single portfolio of
securities. This prospectus relates only to Cash II Shares. Each share class has
different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
classes.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions or to individuals directly or
through investment professionals. The Fund may not be a suitable investment for
retirement plans or for non-Ohio taxpayers because it invests in Ohio municipal
securities.
When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Class II Shares. Because these Shares pay
marketing fees on an ongoing basis, your investment cost may be higher over time
than other shares with different sales charges and marketing fees.
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend.
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from Ohio taxes discussed above to the extent they are derived
from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights
will help you understand the Fund's financial performance since inception. Some
of the information is presented on a per share basis. Total returns represent
the rate an investor would have earned (or lost) on an investment in the Fund,
assuming reinvestment of any dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03 0.03 0.03 0.03 0.03
LESS DISTRIBUTIONS:
Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 1 2.59% 2.91% 2.98% 2.96% 3.30%
RATIOS TO AVERAGE NET ASSETS:
Expenses 2 1.15% 1.15% 1.15% 1.18% 1.16%
Net investment income 2 2.26% 2.58% 2.66% 2.61% 2.96%
Expenses (after waivers) 0.87% 0.87% 0.87% 0.87% 0.87%
Net investment income (after waivers) 2.54% 2.86% 2.94% 2.92% 3.25%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $117,596 $342,946 $245,329 $206,149 $188,234
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such waivers had
not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
Ohio Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
CASH II SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
Annual Report, Semi-Annual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Ohio Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N419
1030105A-CII (1/00)
[Graphic]
PROSPECTUS
Ohio Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income tax imposed by the State of Ohio and
Ohio municipalities consistent with stability of principal by investing in a
portfolio of high-quality Ohio tax exempt securities maturing in 397 days or
less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 7
How to Redeem Shares 9
Account and Share Information 12
Who Manages the Fund? 13
Financial Information 13
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Ohio Municipal Cash Trust (Fund) is a money market fund that seeks to maintain a
stable net asset value of $1.00 per share. The Fund's investment objective is to
provide current income exempt from federal regular income tax and the personal
income taxes imposed by the State of Ohio and Ohio municipalities consistent
with stability of principal. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Ohio tax exempt securities maturing in 397 days
or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax and the personal
income taxes imposed by the State of Ohio and Ohio municipalities. Interest from
the Fund's investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance table below reflect historical performance data
for Institutional Service Shares of Ohio Municipal Cash Trust (Former Fund)
prior to its reorganization into the Fund, which is a newly created portfolio of
Money Market Obligations Trust (Trust). On the date of the reorganization,
February 1, 2000, the Former Fund was dissolved and its net assets (inclusive of
liabilities recorded on the Former Fund's records) were transferred into the
Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Former Fund's Institutional Service Shares as of the
calendar year-end for each of eight years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's Institutional Service Shares start of
business
through the calendar year ended 1999. The light gray shaded chart features eight
distinct vertical bars, each shaded in charcoal, and each visually representing
by height the total return percentages for the calendar year stated directly at
its base. The calculated total return percentage for the Former Fund's
Institutional Service Shares for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1992 through 1999, The
percentages noted are: 2.95%, 2.27%, 2.61%, 3.66%, 3.19%, 3.33%, 3.13%, and
2.97%, respectively.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Service Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Service Shares were not sold subject to a sales
charge (load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Service
Shares highest quarterly return was 0.95% (quarter ended June 30, 1995). Its
lowest quarterly return was 0.52% (quarter ended March 31, 1994).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Institutional Service
Shares Average Annual Total Returns for the calendar periods ended
December 31, 1999.
<TABLE>
<CAPTION>
CALENDAR PERIOD FUND
<S> <C>
1 Year 2.97%
5 Years 3.26%
Start of Performance 1 3.13%
</TABLE>
1 The Former Fund's Institutional Service Shares start of performance date was
April 22, 1991.
The Former Fund's Institutional Service Shares 7-Day Net Yield as of December
31, 1999 was 3.99%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
OHIO MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Service Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage
of offering price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original
purchase price or redemption proceeds, as applicable) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
(and other Distributions) (as a percentage of offering price) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>
<S> <C>
ANNUAL FUND OPERATING EXPENSES (BEFORE WAIVERS) 1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 2 0.40%
Distribution (12b-1) Fee None
Shareholder Services Fee 3 0.25%
Other Expenses 0.20%
Total Annual Fund
Operating Expenses 4 0.85%
1 Although not contractually obligated to do so, the Adviser and shareholder
services provider expect to waive certain amounts during the fiscal year ending
October 31, 2000. These are shown below along with the net expenses the Fund
expects to actually pay for the fiscal year ending October 31, 2000.
Total Waiver of Fund Expenses 0.20%
Total Actual Annual Fund Operating Expenses (after waivers) 0.65%
2 The Adviser expects to voluntarily waive a portion of the management fee. The
Adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.25% for the fiscal year ending October 31, 2000. 3 The
shareholder services provider expects to voluntarily waive a portion of the
shareholder services fee. The shareholder services provider can terminate this
anticipated voluntary waiver at any time. The shareholder services fee paid by
the Fund's Institutional Service Shares (after the anticipated voluntary waiver)
is expected to be 0.20% for the fiscal year ending October 31, 2000. 4 For the
fiscal year ended October 31, 1999, prior to the reorganization of the Former
Fund, as a portfolio of the Trust, Total Annual Fund Operating Expenses and
Total Actual Annual Fund Operating Expenses (after waivers) for the Former
Fund's Institutional Service Shares were 0.85% and 0.57%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Service
Shares for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's Institutional Service Shares operating
expenses are BEFORE WAIVERS as estimated in the table above and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 87
3 Years $ 271
5 Years $ 471
10 Years $ 1,049
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Ohio tax exempt securities
maturing in 397 days or less. The Fund will invest its assets so that at least
80% of its annual interest income is exempt from federal regular income tax and
Ohio state income taxes. Interest from the Fund's investments may be subject to
AMT. The dollar-weighted average maturity of the Fund's portfolio will be 90
days or less. The Adviser actively manages the Fund's portfolio, seeking to
limit the credit risk taken by the Fund and select investments with enhanced
yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and Ohio income tax. It
may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Ohio issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
OHIO RISKS
Since the Fund invests primarily in issuers from Ohio, the Fund may be subject
to additional risks compared to funds that invest in multiple states. Ohio's
economy is relatively diversified across the manufacturing, agriculture and
services sectors. However, the manufacturing sector, in particular automobile
manufacturing related industries, is still a major employer within Ohio and
exposes the state to the economic dislocations which occur within cyclical
industries.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers three share classes: Institutional Shares, Institutional Service
Shares and Cash II Shares, each representing interests in a single portfolio of
securities. This prospectus relates only to Institutional Service Shares. Each
share class has different expenses, which affect their performance. Contact your
investment professional or call 1-800-341-7400 for more information concerning
the other classes.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-Ohio
taxpayers because it invests in Ohio municipal securities.
The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for
same-day payment of redemption proceeds, without that day's dividend, for
redemption requests received before 2:00 p.m. (Eastern time).
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the Ohio taxes discussed above to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights
will help you understand the Fund's financial performance since inception. Some
of the information is presented on a per share basis. Total returns represent
the rate an investor would have earned (or lost) on an investment in the Fund,
assuming reinvestment of any dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03 0.03 0.03 0.03 0.04
LESS DISTRIBUTIONS:
Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.04)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 1 2.90% 3.22% 3.29% 3.27% 3.61%
RATIOS TO AVERAGE NET ASSETS:
Expenses 2 0.85% 0.85% 0.85% 0.88% 0.86%
Net investment income 2 2.60% 2.89% 2.97% 2.92% 3.27%
Expenses (after waivers) 0.57% 0.57% 0.57% 0.57% 0.57%
Net investment income (after waivers) 2.88% 3.17% 3.25% 3.23% 3.56%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $90,294 $94,896 $80,619 $59,721 $72,931
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such waivers had
not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
Ohio Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
Annual Report, Semi-Annual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Ohio Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N393
G00211-02-SS (1/00)
[Graphic]
PROSPECTUS
Ohio Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income tax imposed by the State of Ohio and
Ohio municipalities consistent with stability of principal by investing in a
portfolio of high-quality Ohio tax exempt securities maturing in 397 days or
less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 7
How to Redeem Shares 9
Account and Share Information 11
Who Manages the Fund? 12
Financial Information 12
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Ohio Municipal Cash Trust (Fund) is a money market fund that seeks to maintain a
stable net asset value of $1.00 per share. The Fund's investment objective is to
provide current income exempt from federal regular income tax and the personal
income taxes imposed by the State of Ohio and Ohio municipalities consistent
with stability of principal. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Ohio tax exempt securities maturing in 397 days
or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax and the personal
income taxes imposed by the State of Ohio and Ohio municipalities. Interest from
the Fund's investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table reflect historical performance data for
Institutional Shares of Ohio Municipal Cash Trust (Former Fund) prior to its
reorganization into the Fund, which is a newly created portfolio of Money Market
Obligations Trust (Trust). On the date of the reorganization, February 1, 2000,
the Former Fund was dissolved and its net assets (inclusive of liabilities
recorded on the Former Fund's records) were transferred into the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Former Fund's Institutional Shares as of the calendar
year-end for each of three years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's Institutional Shares start of business
through the calendar year ended 1999. The light gray shaded chart features three
distinct vertical bars, each shaded in charcoal, and each visually representing
by height the total return percentages for the calendar year stated directly at
its base. The calculated total return percentage for the Former Fund's
Institutional Shares for each calendar year is stated directly at the top of
each respective bar, for the calendar years 1997 through 1999. The percentages
noted are: 3.53%, 3.34% and 3.17%, respectively.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Shares were not sold subject to a sales charge
(load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Shares
highest quarterly return was 0.91% (quarter ended June 30, 1997). Its lowest
quarterly return was 0.71% (quarter ended March 31, 1999).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Institutional Shares Average
Annual Total Returns for the calendar period ended December 31, 1999.
CALENDAR PERIOD FUND
1 Year 3.17%
Start of Performance 1 3.36%
1 The Former Fund's Institutional Shares start of performance date was March 5,
1996.
The Former Fund's Institutional Shares 7-Day Net Yield as of December 31, 1998,
was 4.19%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
OHIO MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions) (as a
percentage of
offering price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
<CAPTION>
<S> <C>
ANNUAL FUND OPERATING
EXPENSES (Before Waivers)1 Expenses That are Deducted From Fund Assets (as a
percentage of average net assets)
Management Fee 2 0.40%
Distribution (12b-1) Fee None
Shareholder Services Fee 3 0.25%
Other Expenses 0.20%
Total Annual Fund
Operating Expenses 4 0.85%
1 Although not contractually obligated to do so, the Adviser and shareholder
services provider expect to waive certain amounts during the fiscal year ending
October 31, 2000. These are shown below along with the net expenses the Fund
expects to actually pay for the fiscal year ending October 31, 2000.
Total Waiver of Fund Expenses 0.40%
Total Actual Annual Fund
Operating Expenses (after waivers) 0.45%
2 The Adviser expects to voluntarily waive a portion of the management fee. The
Adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.25% for the fiscal year ending October 31, 2000.
3 The shareholder services provider expects to voluntarily waive a portion of the
shareholder services fee. The shareholder services provider can terminate this
anticipated voluntary waiver at any time. The shareholder services fee paid by
the Fund's Institutional Shares (after the anticipated voluntary waiver) is
expected to be 0.00% for the fiscal year ending October 31, 2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of the
Former Fund, as a portfolio of the Trust, the Total Annual Fund Operating
Expenses and Total Actual Annual Fund Operating Expenses (after waivers) for the
Former Fund's Institutional Shares were 0.86% and 0.38%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Institutional Shares operating expenses are BEFORE
WAIVERS as estimated in the table above and remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 87
3 Years $ 271
5 Years $ 471
10 Years $ 1,049
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Ohio tax exempt securities
maturing in 397 days or less. The Fund will invest its assets so that at least
80% of its annual interest income is exempt from federal regular income tax and
Ohio state income taxes. Interest from the Fund's investments may be subject to
AMT. The dollar-weighted average maturity of the Fund's portfolio will be 90
days or less. The Adviser actively manages the Fund's portfolio, seeking to
limit the credit risk taken by the Fund and select investments with enhanced
yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and Ohio income tax. It
may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Ohio issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
OHIO RISKS
Since the Fund invests primarily in issuers from Ohio, the Fund may be subject
to additional risks compared to funds that invest in multiple states. Ohio's
economy is relatively diversified across the manufacturing, agriculture and
services sectors. However, the manufacturing sector, in particular automobile
manufacturing related industries, is still a major employer within Ohio and
exposes the state to the economic dislocations which occur within cyclical
industries.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers three share classes: Institutional Shares, Institutional Service
Shares and Cash II Shares, each representing interests in a single portfolio of
securities. This prospectus relates only to Institutional Shares. Each share
class has different expenses, which affect their performance. Contact your
investment professional or call 1-800-341-7400 for more information concerning
the other classes.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-Ohio
taxpayers because it invests in Ohio municipal securities.
The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend.
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the Ohio taxes discussed above to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance since inception. Some of the information is presented on a per share
basis. Total returns represent the rate an investor would have earned (or lost)
on an investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03 0.03 0.03 0.02
LESS DISTRIBUTIONS:
Distributions from net investment income (0.03) (0.03) (0.03) (0.02)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 2 3.10% 3.43% 3.49% 2.22%
RATIOS TO AVERAGE NET ASSETS:
Expenses 3 0.86% 0.86% 0.85% 0.88% 4
Net investment income 3 2.60% 2.91% 2.92% 2.87% 4
Expenses (after waivers) 0.38% 0.38% 0.37% 0.37% 4
Net investment income (after waivers) 3.08% 3.39% 3.40% 3.38% 4
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $107,874 $131,395 $55,710 $72,680
</TABLE>
1 Reflects operations for the period from March 5, 1996 (date of initial public
investment) to October 31, 1996.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 During the period, certain fees were voluntarily waived. If such waivers had
not occurred, the ratios would have been as indicated.
4 Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
Ohio Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
Annual Report, Semi-Annual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Ohio Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N427
G00211-01-IS (1/00)
[Graphic]
Statement of Additional Information
OHIO MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
institutional shares
institutional service shares
cash ii shares
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Ohio Municipal Cash Trust (Fund),
dated January 31, 2000. This SAI incorporates by reference the Fund's Annual
Report. Obtain the prospectuses or the Annual Report without charge by calling
1-800-341-7400.
january 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
What Do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip314229659
Cusip 314229857
Cusip 314229840
1030105B (1/00)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on March 26, 1991,
will be reorganized as a portfolio of the Trust on February 1, 2000.
The Board of Trustees (Board) has established three classes of shares of the
Fund, known as Institutional Shares, Institutional Service Shares and Cash II
Shares (Shares). This SAI relates to all classes of Shares. The Fund's
investment adviser is Federated Investment Management Company (Adviser).
Effective March 31, 1999, Federated Management, former adviser to the Fund,
became Federated Investment Management Company (formerly, Federated Advisers).
SECURITIES IN WHICH THE FUND INVESTS
The Fund's principal securities are described in its prospectus. Additional
securities, and further information regarding the principal securities, are
outlined below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its
charter or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues
received by the issuer such as specific taxes, assessments, tolls or
fees. Bondholders may not collect from the municipality's general taxes
or revenues. For example, a municipality may issue bonds to build a
toll road, and pledge the tolls to repay the bonds. Therefore, a
shortfall in the tolls normally would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The
municipality would lend the proceeds from its bonds to the company
using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable
solely from the company's loan payments, not from any other
revenues of the municipality. Therefore, any default on the loan
normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to
the federal alternative minimum tax (AMT). The Fund may invest in
bonds subject to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end
a lease, without penalty, by not providing for the lease payments in
its annual budget. After the lease ends, the lessor can resell the
equipment or facility but may lose money on the sale. The Fund may
invest in securities supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities
at a price below the amount payable at maturity. The difference between
the purchase price and the amount paid at maturity represents interest
on the zero coupon security. Investors must wait until maturity to
receive interest and principal, which increases the interest rate risks
and credit risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of
credit, bond insurance and surety bonds. Credit enhancement also
includes arrangements where securities or other liquid assets secure
payment of a fixed income security. If a default occurs, these assets
may be sold and the proceeds paid to the security's holders. Either
form of credit enhancement reduces credit risks by providing another
source of payment for a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
Inter-fund Borrowing and Lending Arrangements
The Securities and Exchange Commission (SEC) has granted an exemption that
permits the Fund and all other funds advised by subsidiaries of Federated
Investors, Inc. (Federated funds) to lend and borrow money for certain
temporary purposes directly to and from other Federated funds.
Participation in this inter-fund lending program is voluntary for both
borrowing and lending funds, and an inter-fund loan is only made if it
benefits each participating fund. Federated administers the program
according to procedures approved by the Fund's Board, and the Board
monitors the operation of the program. Any inter-fund loan must comply with
certain conditions set out in the exemption, which are designed to assure
fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed"
trades. All inter-fund loans must be repaid in seven days or less. The
Fund's participation in this program must be consistent with its investment
policies and limitations, and must meet certain percentage tests.
Inter-fund loans may be made only when the rate of interest to be charged
is more attractive to the lending fund than market-competitive rates on
overnight repurchase agreements (the Repo Rate) and more attractive to the
borrowing fund than the rate of interest that would be charged by an
unaffiliated bank for short-term borrowings (the Bank Loan Rate), as
determined by the Board. The interest rate imposed on inter-fund loans is
the average of the Repo Rate and the Bank Loan Rate.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with
payment and delivery of the securities scheduled for a future time. During
the period between purchase and settlement, no payment is made by the Fund
to the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value
in determining the price of its shares. Settlement dates may be a month or
more after entering into these transactions so that the market values of
the securities bought may vary from the purchase prices. Therefore, delayed
delivery transactions create interest rate risks for the Fund. Delayed
delivery transactions also involve credit risks in the event of a
counterparty default.
Asset Coverage
In order to secure its obligations in connection with special
transactions, including delayed delivery transactions, the Fund will either
own the underlying assets or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has
other readily marketable assets to set aside, it cannot trade assets used
to secure such obligations without terminating the special transaction.
This may cause the Fund to miss favorable trading opportunities or to
realize losses on special transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government
of the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types
of corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If
the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund
is the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must
repurchase the underlying security at a higher price, regardless of the
market value of the security at the time of repurchase.
Investment Ratings
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's (S&P), MIG-1 or MIG-2
by Moody's Investors Service (Moody's), or F-1+, F-1 or F-2 by Fitch IBCA, 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 rating service can be treated as being in one of
the two highest short-term rating categories; currently, such securities must be
rated by two nationally recognized statistical rating organizations in one of
their two highest rating categories. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
Fundamental INVESTMENT Objective and Policy
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and the personal income taxes imposed by
the State of Ohio and Ohio municipalities consistent with stability of
principal.
The Fund invests in tax-exempt securities so that at least 80% of its annual
interest income is exempt from federal regular income tax and the personal
income taxes imposed by the State of Ohio and Ohio municipalities.
This investment objective and policy may not be changed by the Fund's Board
without shareholder approval.
<PAGE>
INVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
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 limitations 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.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
Securities Act of 1933.
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.
For purposes of the concentration limitation: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, the Fund
will not exclude foreign bank instruments from industry concentration limitation
tests so long as the policy of the SEC remains in effect. In addition,
investments in certain industrial development bonds funded by activities in a
single industry will be deemed to constitute investment in an industry, except
when held for temporary defensive purposes. The investment of more than 25% of
the value of the Fund's total assets in any one industry will constitute
"concentration."
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 SAI, in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7
(Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board will take any steps it consider appropriates (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.
WHAT DO SHARES COST?
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
RULE 12B-1 PLAN (cash ii shares)
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.
The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.
For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing-related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of the outstanding Institutional Shares: Key
Trust Co., Cleveland, Ohio owned approximately 7,225,685 Shares (5.24%); The
Provident Bank, Cincinnati, Ohio owned approximately 13,657,673 Shares (9.90%);
Mahco # 1114263 (Mahoning National Bank), Youngstown, Ohio owned approximately
20,257,744 Shares (14.69%); Key Trust Co., Cleveland, Ohio owned approximately
8,383,209 Shares (6.08%); Panabco (Park National Bank), Newark, Ohio owned
approximately 39,025,203 Shares (28.29%) and The Citizens Banking Co., Findlay,
Ohio owned approximately 19,825,629 Shares (14.37%).
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of the outstanding Institutional Service
Shares: Milards & Co., Oaks, Pennsylvania owned approximately 41,520,506 Shares
(49.87%); SNBSO & Co., Springfield, Ohio owned approximately 9,949,732 Shares
(11.95%); Delaware County Bank, Delaware, Ohio owned approximately 7,140,665
Shares (8.58%) and Hamilton Parker Co., Columbus, Ohio owned approximately
8,102,836 Shares (9.73%).
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of the outstanding Cash II Shares:
Parker/Hunter Inc., Pittsburgh, Pennsylvania owned approximately 7,236,532
Shares (11.07%); FirstMerit Bank, NA, Akron, Ohio owned approximately 30,655,468
Shares (46.88%) and James P and Maureen F Buchwald, Joint Tenants, Mount Vernon,
Ohio owned approximately 8,470,533 Shares (12.95%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
STATE TAXES
Under existing Ohio laws, distributions made by the Fund will not be subject to
Ohio individual income taxes to the extent that such distributions qualify as
exempt-interest dividends under the Internal Revenue Code, and represent (i)
interest from obligations of Ohio or its subdivisions which is exempt from
federal income tax; or (ii) interest or dividends from obligations issued by the
United States and its territories or possessions or by any authority, commission
or instrumentality of the United States which are exempt from state income tax
under federal laws. Conversely, to the extent that distributions made by the
Fund are derived from other types of obligations, such distributions will be
subject to Ohio individual income taxes.
Distributions made by the Fund will not be subject to Ohio corporation franchise
tax to the extent that such distributions qualify as exempt-interest dividends
under the Internal Revenue Code, and represent (i) interest from obligations of
Ohio or its subdivisions which is exempt from federal income tax; or (ii) net
interest income from obligations issued by the United States and its territories
or possessions or by any authority, commission or instrumentality of the United
States, which is included in federal taxable income and which is exempt from
state income tax under federal laws.
Exempt-interest dividends that represent interest from obligations held by the
Fund which are issued by Ohio or its political subdivisions will be exempt from
any Ohio municipal income tax (even if the municipality is permitted under Ohio
law to levy a tax on intangible income).
<PAGE>
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and certain positions held prior
to the past five years, total compensation received as a Trustee from the Trust
for its most recent fiscal year, and the total compensation received from the
Federated Fund Complex for the most recent calendar year. Effective February 1,
2000, the Trust will be comprised of 40 funds. The Federated Fund Complex is
comprised of 43 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.
As of January 12, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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Name
Birth Date Aggregate Total Compensation
Address Principal Occupations Compensation From Trust and Fund
Position With Trust for Past Five Years From Fund Complex
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of the $0 $0 for the Trust and 43
Birth Date: July 28, 1924 Federated Fund Complex; Chairman and Trustee, Federated other investment
Federated Investors Tower Investment Management Company; Chairman and Director, companies in the Fund
1001 Liberty Avenue Federated Investors, Inc., Federated Investment Complex
Pittsburgh, PA Counseling, and Federated Global Investment Management
CHAIRMAN AND TRUSTEE Corp.; Chairman, Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $314.28 $116,760.63 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's Trust
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries, and 43 other investment
Pittsburgh, PA Inc. (coated steel conduits/computer storage equipment); companies in the Fund
TRUSTEE formerly: Senior Partner, Ernst & Young LLP; Director, Complex
MED 3000 Group, Inc. (physician practice management);
Director, Member of Executive Committee, University of
Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $345.74 $128,455.37 for the Trust
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior and 43 other investment
Grubb & Ellis/Investment Vice President, John R. Wood and Associates, Inc., companies in the Fund
Properties Corporation Realtors; Partner or Trustee in private real estate Complex
3201 Tamiami Trail North ventures in Southwest Florida; formerly: President,
Naples, FL Naples Property Management, Inc. and Northgate Village
TRUSTEE Development Corporation.
Nicholas P. Constantakis ++ Director or Trustee of the Federated Fund Complex; $0 $73,191.21 for the
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering, Trust and
175 Woodshire Drive construction, operations and technical services); 37 other investment
Pittsburgh, PA formerly: Partner, Andersen Worldwide SC. companies
TRUSTEE in the Fund Complex
John F. Cunningham Director or Trustee of some of the Federated Fund $229.87 $93,190.48 for the Trust
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive and 37 other investment
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business companies in the Fund
Palm Beach, FL consulting); Trustee Associate, Boston College; Complex
TRUSTEE Director, Iperia Corp. (communications/software);
formerly: Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of the Federated $0 $0 for the Trust and 30
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds other investment
Federated Investors Tower in the Federated Fund Complex; President, Chief companies in the Fund
1001 Liberty Avenue Executive Officer and Director, Federated Investors, Complex
Pittsburgh, PA Inc.; President and Trustee, Federated Investment
PRESIDENT AND TRUSTEE Management Company; President and Trustee, Federated
Investment Counseling, President and Director,
Federated Global Investment Management Corp.;
President, Passport Research, Ltd.; Trustee,
Federated Shareholder Services Company;
Director, Federated Services Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $314.28 $116,760.63 for the Trust
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical and 43 other investment
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - companies in the Fund
Suite 1111 Downtown; Hematologist, Oncologist and Internist, Complex
Pittsburgh, PA University of Pittsburgh Medical Center; Member,
TRUSTEE National Board of Trustees, Leukemia Society of America.
Peter E. Madden Director or Trustee of the Federated Fund Complex; $294.46 $109,153.60 for the Trust
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts and 43 other investment
One Royal Palm Way General Court; President, State Street Bank and Trust companies in the Fund
100 Royal Palm Way Company and State Street Corporation. Complex
Palm Beach, FL
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation; Director, The Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $236.20 $102,573.91 for the
Birth Date: April 10, 1945 Complex; Executive Vice President, Legal and External Trust and 40 other
80 South Road Affairs, Dugan Valva Contess, Inc. (marketing, investment
Westhampton Beach, NY communications, technology and consulting).; formerly companies in the Fund
TRUSTEE Management Consultant Complex
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $337.28 $128,455.37 for the
S.J.D.# President, Law Professor, Duquesne University; Trust
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Michael and 43 other investment
President, Duquesne University Baker Corp. (engineering, construction, operations and companies in the Fund
Pittsburgh, PA technical services). Complex
TRUSTEE
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $314.28 $116,760.63 for the
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. Trust
4905 Bayard Street and 43 other investment
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum companies in the Fund
TRUSTEE Company of America; television producer; business owner. Complex
John S. Walsh Director or Trustee of some of the Federated Fund $229.87 $94,536.85 for the Trust
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. and 39 other investment
2007 Sherwood Drive (manufacturer of construction temporary heaters); companies in the Fund
Valparaiso, IN President and Director, Manufacturers Products, Inc. Complex
TRUSTEE (distributor of portable construction heaters);
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
<PAGE>
Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the Trust and 42
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice other investment
Federated Investors Tower President and Treasurer of some of the Funds in the companies in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
EXECUTIVE VICE PRESIDENT Management Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company.
John W. McGonigle Executive Vice President and Secretary of the Federated $0 $0 for the Trust and 43
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary and other investment
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated companies in the Fund
1001 Liberty Avenue Investment Management Company and Federated Investment Complex
Pittsburgh, PA Counseling; Director, Federated Global Investment
EXECUTIVE VICE PRESIDENT AND Management Corp., Federated Services Company and
SECRETARY Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President $0 $0 for the Trust and 43
Birth Date: June 17, 1954 - Funds Financial Services Division, Federated other investment
Federated Investors Tower Investors, Inc.; formerly: various management positions companies in the Fund
1001 Liberty Avenue within Funds Financial Services Division of Federated Complex
Pittsburgh, PA Investors, Inc.
TREASURER
Richard B. Fisher President or Vice President of some of the Funds in the $0 $0 for the Trust and 41
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of other investment
Federated Investors Tower the Funds in the Federated Fund Complex; Executive Vice companies in the Fund
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and Complex
Pittsburgh, PA Director, Federated Securities Corp.
VICE PRESIDENT
William D. Dawson, III Chief Investment Officer of this Fund and various other $0 $0 for the Trust and 42
Birth Date: March 3, 1949 Funds in the Federated Fund Complex; Executive Vice other investment
Federated Investors Tower President, Federated Investment Counseling, Federated companies in the Fund
1001 Liberty Avenue Global Investment Management Corp., Federated Investment Complex
Pittsburgh, PA Management Company and Passport Research, Ltd.;
CHIEF INVESTMENT OFFICER Registered Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors,
Inc.; formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company and
Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. $0 $0 for the Trust and 6
Birth Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been a other investment
Federated Investors Tower Senior Portfolio Manager and a Senior Vice President of companies in the Fund
1001 Liberty Avenue the Funds' Adviser since 1997. Ms. Cunningham served as Complex
Pittsburgh, PA a Portfolio Manager and a Vice President of the Adviser
VICE PRESIDENT from 1993 through 1996. Ms. Cunningham is a Chartered
Financial Analyst and received her M.B.A. in Finance
from Robert Morris College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $0 $0 for the Trust and 7
Birth Date: September 12, 1953 Ochson joined Federated in 1982 and has been a Senior other investment
Federated Investors Tower Portfolio Manager and a Senior Vice President of the companies in the Fund
1001 Liberty Avenue Funds' Adviser since 1996. From 1988 through 1995, Ms. Complex
Pittsburgh, PA Ochson served as a Portfolio Manager and a Vice
VICE PRESIDENT President of the Funds' Adviser. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the 1940 Act.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Mr. Constantakis became a member of the Board of Trustees on October 1, 1999.
He did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
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<CAPTION>
<S> <C>
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated Funds
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT auditors
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
<TABLE>
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FEES PAID BY THE FUND FOR SERVICES
For the Year Ended October 31 1999 1998 1997
Advisory Fee Earned $1,448,289 $1,795,830 $1,448,035
Advisory Fee Reduction $813,537 $1,034,602 $846,106
Brokerage Commissions $0 $0 $0
Administrative Fee $273,002 $338,546 $273,333
12b-1 Fee
Cash II Shares $334,876 -- --
Shareholder Services Fee
Institutional Shares -- -- --
Institutional Service Shares $195,091 -- --
Cash II Shares $334,876 -- --
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
Average Annual Total Returns and Yield
Total returns are given for the one-year, five-year and Start of Performance
periods ended October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the 7-day period
ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Start of Performance on
7-Day Period 1 Year March 5, 1996
Institutional Shares
Total Return -- 3.10% 3.35%
Yield 3.26% -- --
Effective Yield 3.32% -- --
Tax-Equivalent Yield 6.16% -- --
- --------------------------------------------------------------------------------------------------
Start of Performance on
7-Day Period 1 Year 5 Years April 22, 1991
Institutional Service
Shares
Total Return -- 2.90% 3.26% 3.13%
Yield 3.06% -- -- --
Effective Yield 3.11% -- -- --
Tax-Equivalent Yield 5.78% -- -- --
- -----------------------------------------------------------------------------------------------------------------
Start of Performance on
7-Day Period 1 Year 5 Years April 22, 1991
Cash II Shares
Total Return -- 2.59% 2.95% 2.82%
Yield 2.76% -- -- --
Effective Yield 2.80% -- -- --
Tax-Equivalent Yield 5.22% -- -- --
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
Yield, Effective Yield and Tax-Equivalent Yield
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result. The tax-equivalent yield
of Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to AMT and
state and/or local taxes.
TAX EQUIVALENCY TABLE
Taxable Yield Equivalent for 2000 - STATE OF OHIO
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%
Combined Federal and State
Tax Bracket: 19.457% 33.201% 37.900% 43.500% 47.100%
- ----------------------------------------------------------------------------------------------------------------------
Single Return $1-26,250 $26,251-63,550 $63,551-132,600 $132,601-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.24% 1.50% 1.61% 1.77% 1.89%
1.50% 1.86% 2.25% 2.42% 2.65% 2.84%
2.00% 2.48% 2.99% 3.22% 3.54% 3.78%
2.50% 3.10% 3.74% 4.03% 4.42% 4.73%
3.00% 3.72% 4.49% 4.83% 5.31% 5.67%
3.50% 4.35% 5.24% 5.64% 6.19% 6.62%
4.00% 4.97% 5.99% 6.44% 7.08% 7.56%
4.50% 5.59% 6.74% 7.25% 7.96% 8.51%
5.00% 6.21% 7.49% 8.05% 8.85% 9.45%
5.50% 6.83% 8.23% 8.86% 9.73% 10.40%
6.00% 7.45% 8.98% 9.66% 10.62% 11.34%
6.50% 8.07% 9.73% 10.47% 11.50% 12.29%
7.00% 8.69% 10.48% 11.27% 12.39% 13.23%
7.50% 9.31% 11.23% 12.08% 13.27% 14.18%
8.00% 9.93% 11.98% 12.88% 14.16% 15.12%
8.50% 10.55% 12.72% 13.69% 15.04% 16.07%
9.00% 11.17% 13.47% 14.49% 15.93% 17.01%
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.
<PAGE>
Taxable Yield Equivalent for 2000 - STATE OF OHIO
Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%
Combined Federal and State
Tax Bracket: 20.201% 34.900% 37.900% 43.500% 47.100%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $161,451-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.25% 1.54% 1.61% 1.77% 1.89%
1.50% 1.88% 2.30% 2.42% 2.65% 2.84%
2.00% 2.51% 3.07% 3.22% 3.54% 3.78%
2.50% 3.13% 3.84% 4.03% 4.42% 4.73%
3.00% 3.76% 4.61% 4.83% 5.31% 5.67%
3.50% 4.39% 5.38% 5.64% 6.19% 6.62%
4.00% 5.01% 6.14% 6.44% 7.08% 7.56%
4.50% 5.64% 6.91% 7.25% 7.96% 8.51%
5.00% 6.27% 7.68% 8.05% 8.85% 9.45%
5.50% 6.89% 8.45% 8.86% 9.73% 10.40%
6.00% 7.52% 9.22% 9.66% 10.62% 11.34%
6.50% 8.15% 9.98% 10.47% 11.50% 12.29%
7.00% 8.77% 10.75% 11.27% 12.39% 13.23%
7.50% 9.40% 11.52% 12.08% 13.27% 14.18%
8.00% 10.03% 12.29% 12.88% 14.16% 15.12%
8.50% 10.65% 13.06% 13.69% 15.04% 16.07%
9.00% 11.28% 13.82% 14.49% 15.93% 17.01%
</TABLE>
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
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.
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.
Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day effective
yield.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
Federated Funds overview
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion and $13.1 billion and
$115 million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
Federated Clients Overview
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,600 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities
Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
<PAGE>
INVESTMENT RATINGS
Standard & Poor's Short-Term Municipal Obligation Ratings
An 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 And Tender Option Bonds Ratings
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
Commercial Paper 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 rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
Moody's Investors Service Short-Term Municipal Obligation Ratings
Moody's Investors Service (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 And Tender Option Bonds Ratings
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
Commercial Paper 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 ibca, 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.
<PAGE>
ADDRESSES
ohio municipal cash trust
Institutional Shares
Institutional Service Shares
Cash II Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PROSPECTUS
Pennsylvania Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
CASH SERIES SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income taxes imposed by the Commonwealth of
Pennsylvania consistent with stability of principal by investing in a portfolio
of high-quality Pennsylvania tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 7
How to Redeem Shares 8
Account and Share Information 10
Who Manages the Fund? 11
Financial Information 11
</TABLE>
- ----------------------
| NOT FDIC INSURED |
| |
| MAY LOSE VALUE |
| |
| NO BANK GUARANTEE |
|--------------------|
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is to provide current income
exempt from federal regular income tax and the personal income taxes imposed by
the Commonwealth of Pennsylvania consistent with stability of principal. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the strategies and policies described in this
prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Pennsylvania tax exempt securities maturing in
397 days or less. The Fund will invest its assets so that at least 80% of its
annual interest income is exempt from federal regular income tax and
Pennsylvania dividend and interest income tax. Interest from the Fund's
investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
Risk/Return Bar Chart and Table
The Bar Chart and Performance Table below reflect historical performance data
for Cash Series Shares of Pennsylvania Municipal Cash Trust (the "Former Fund")
prior to its reorganization into the Fund, which is a newly created portfolio of
Money Market Obligations Trust (the "Trust"). On the date of the reorganization,
February 1, 2000, the Former Fund will be dissolved and its net assets
(inclusive of liabilities recorded on the Former Fund's records) will be
transferred to the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Cash Series Shares' of the Former Fund as of the
calendar year-end for each of nine years. The `y' axis reflects the "% Total
Return" beginning with "0%" and increasing in increments of1% up to 5%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's start of business through the calendar
year ended December 31, 1999. The light gray shaded chart features nine bars
distinct vertical bars, each shaded in charcoal, and each visually representing
by height the total return percentages for the calendar year stated directly at
its base. The calculated total return percentage for Cash Series Shares' for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1991 through 1999. The percentages noted are: 4.16%, 2.40%,
1.76%, 2.04%, 3.06%, 2.68%, 2.81%, 2.65% and 2.39%.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's Cash Series
Shares total returns on a calendar year-end basis.
The Former Fund's Cash Series Shares were sold without a sales charge (load).
The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Cash Series Shares
highest quarterly return was 1.14% (quarter ended March 31, 1991). Its lowest
quarterly return was 0.37% (quarter ended March 31, 1994).
Average Annual Total Return Table
The following table represents the Former Fund's Cash Series Shares Average
Annual Total Returns for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year 2.39%
5 Years 2.72%
Start of Performance/1/ 2.66%
</TABLE>
1 The Former Fund's Cash Series Shares start of performance date was December
31, 1990.
The Former Fund's Cash Series Shares 7-Day Net Yield as of December 31, 1999 was
3.63%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
PENNSYLVANIA MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Cash Series Shares of the Fund.
<TABLE>
<S>
<C>
Shareholder
Fees
Fees Paid Directly From Your
Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, asapplicable) None Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and other Distributions) (as a percentage of
offeringprice) None
Redemption Fee (as a percentage of amount redeemed, if
applicable) None
Exchange
Fee
None
Annual Fund Operating Expenses (Before Waivers and
Reductions)/1/
Expenses That are Deducted From Fund Assets (as a percentage of average net
assets)
Management
Fee/2/
0.50%
Distribution (12b-1)/3/
Fee 0.40%
Shareholder Services
Fee 0.25%
Other
Expenses
0.15%
Total Annual Fund Operating
Expenses/4/ 1.30%
</TABLE>
1 Although not contractually obligated to do so, the adviser and distributor
expect to waive and reduce certain amounts during the fiscal year ending
October 31, 2000. These are shown below along with the net expenses the Fund
expects to actually pay for the fiscal year ending October 31, 2000.
<TABLE>
<S>
<C>
Total Waivers of Fund
Expenses 0.25%
Total Actual Annual Fund Operating Expenses (after
waivers) 1.05%
</TABLE>
2 The adviser expects to voluntarily waive a portion of the management fee.
The adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.30% for the fiscal year ending October 31, 2000.
3 The distributor expects to voluntarily waive a portion of the distribution
(12b-1) fee for Cash Series Shares. The distributor can terminate this
anticipated voluntary waiver at any time. The distribution (12b-1) fee paid
by the Fund's Cash Series Shares (after the anticipated voluntary waiver) is
expected to be 0.35% for the fiscal year ending October 31, 2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of
the Former Fund as a portfolio of the Trust, the Total Annual Fund Operating
Expenses and Total Actual Annual Fund Operating Expenses (after waivers) for
the Former Fund's Cash Series Shares were 1.30% and 1.05%, respectively.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Cash Series Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Cash Series Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Cash Series Shares operating expenses are before
waivers and reductions as estimated in the table above and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<S> <C>
1 Year $ 132
3 Years $ 412
5 Years $ 713
10 Years $1,568
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Pennsylvania tax exempt
securities maturing in 397 days or less. The Fund will invest its assets so that
at least 80% of its annual interest income is exempt from federal regular income
tax and Pennsylvania dividend and interest income tax. Interest from the Fund's
investments may be subject to AMT. The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less. The Adviser actively manages the
Fund's portfolio, seeking to limit the credit risk taken by the Fund and to
select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors, such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal income tax and
Pennsylvania dividend and interest income tax. It may do this to minimize
potential losses and maintain liquidity to meet shareholder redemptions during
adverse market conditions. This may cause the Fund to receive and distribute
taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as
Standard & Poor's and Moody's Investors Service. These services assign ratings
to securities by assessing the likelihood of issuer default. Lower credit
ratings correspond to higher credit risk. If a security has not received a
rating, the Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the prices of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Pennsylvania issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
PENNSYLVANIA SECTOR RISKS
Since the Fund invests primarily in issuers from Pennsylvania, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Pennsylvania's economy has diversified away from the concentration in heavy
industry and manufacturing which existed prior to the downsizing of the steel
industry; in addition, it has improved its mixture of service and technology
based businesses. Despite the improvements in its employment base, Pennsylvania
is still subject to the cyclical impact which an econonmic downturn has on the
manufacturing sector.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share. The
Fund does not charge a front-end sales charge. NAV is determined at 12:00 noon
and 1:00 p.m. (Eastern time) and as of the end of regular trading (normally 4:00
p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $10,000 minimum
is reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers three share classes: Cash Series Shares, Institutional Shares
and Institutional Service Shares, each representing interests in a single
portfolio of securities. This prospectus relates only to Cash Series Shares.
Each share class has different expenses, which affect their performance. Contact
your investment professional or call 1-800-341-7400 for more information
concerning the other classes.
The Fund's Distributor, Federated Securities Corp., markets the Shares
described in this prospectus to retail customers of financial institutions or to
individuals directly or through investment professionals. The Fund may not be a
suitable investment for retirement plans or for non-Pennsylvania taxpayers
because it invests in Pennsylvania municipal securities.
When the Distributor receives marketing fees, it may pay some or all of them
to investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Cash Series Shares. Because these Shares pay
marketing fees on an ongoing basis, your investment cost may be higher over time
than other shares with different sales charges and marketing fees.
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at
1-800-341-7400 once you have completed the appropriate authorization form for
telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for same-
day payment of redemption proceeds, without that day's dividend, for redemption
requests received before 2:00 p.m. (Eastern time).
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is an
ACH member; or
. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the Pennsylvania taxes discussed above to the extent they
are derived from interest on obligations exempt from such taxes. Capital gains
and non-exempt dividends are taxable whether paid in cash or reinvested in the
Fund. Redemptions are taxable sales. Please consult your tax adviser regarding
your federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights-Cash Series Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended October 31 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Income From Investment Operations:
Net investment income 0.02 0.03 0.03
0.03 0.03
Less Distributions:
Distributions from net investment income (0.02) (0.03) (0.03)
(0.03) (0.03)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Total Return/1/ 2.32% 2.74% 2.77%
2.75% 3.02%
Ratios to Average Net Assets:
Expenses/2/ 1.30% 1.31% 1.32%
1.32% 1.33%
Net investment income/2/ 2.03% 2.44% 2.45%
2.45% 2.70%
Expenses (after waivers) 1.05% 1.05% 1.05%
1.05% 1.05%
Net investment income (after waivers) 2.28% 2.70% 2.72%
2.72% 2.98%
Supplemental Data
Net assets, end of period (000 omitted) $43,292 $47,940 $23,777
$19,825 $28,255
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in Fund's Annual
Report, dated October 31, 1999, which can be obtained free of charge.
P R O S P E C T U S
[LOGO OF FEDERATED INVESTORS]
World-Class Investment Manager(R)
Pennsylvania
Municipal Cash
Trust
A Portfolio of Money Market
Obligations Trust
CASH SERIES SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, Annual Report and
Semi-Annual Report to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report and the Semi-Annual Report and other information without
charge, and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected]. or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
[LOGO OF FEDERATED INVESTORS]
Pennsylvania Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N526
9101005 A-CS (1/00)
Federated is a registered mark
of Federated Investors, Inc.
2000 (C)Federated Investors, Inc.
PROSPECTUS
Pennsylvania Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income taxes imposed by the Commonwealth of
Pennsylvania consistent with stability of principal by investing in a portfolio
of high-quality Pennsylvania tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 4
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 7
How to Redeem Shares 8
Account and Share Information 10
Who Manages the Fund? 11
Financial Information 11
</TABLE>
- -------------------
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
- -------------------
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is to provide current income
exempt from federal regular income tax and the personal income taxes imposed by
the Commonwealth of Pennsylvania consistent with stability of principal. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the strategies and policies described in this
prospectus.
WHAT ARE THE FUND'S MAIN
INVESTMENT STRATEGIES?
The Fund invests in high-quality Pennsylvania tax exempt securities maturing in
397 days or less. The Fund will invest its assets so that at least 80% of its
annual interest income is exempt from federal regular income tax and
Pennsylvania dividend and interest income tax. Interest from the Fund's
investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF
INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Institutional Service Shares of the Former Fund as of
the calendar year-end for each of ten years.
The `y' axis reflects the "% Total Return" beginning with "0%" and increasing in
increments of 1% up to 6%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's start of business through the calendar
year ended December 31, 1999. The light gray shaded chart features ten distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for Institutional Service Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1990 through 1999. The percentages noted are: 5.68%, 4.36%,
2.81%, 2.16%, 2.45%, 3.48%, 3.09%, 3.22%, 3.06% and 2.80%.
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Service Shares of Pennsylvania Municipal Cash Trust (the
"Former Fund") prior to its reorganization into the Fund, which is a newly
created portfolio of Money Market Obligations Trust (the "Trust"). On the date
of the reorganization, February 1, 2000, the Former Fund will be dissolved and
it net assets (inclusive of liabilities recorded on the Former Fund's records)
will be transferred into the Fund.
[BAR CHART APPEARS HERE]
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Service Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Service Shares were sold without a sales charge
(load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Service
Shares highest quarterly return was 1.43% (quarter ended December 31, 1990). Its
lowest quarterly return was 0.47% (quarter ended March 31, 1994).
Average Annual Total Return Table
The following table represents the Former Fund's Institutional Service Shares
Average Annual Total Returns for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
Calendar Period Fund
- -----------------------------------------------------
<S> <C>
1 Year 2.80%
- -----------------------------------------------------
5 Years 3.13%
- -----------------------------------------------------
10 Years 3.31%
- -----------------------------------------------------
</TABLE>
The Former Fund's Institutional Service Shares 7-Day Net Yield as of December
31, 1999 was 4.03%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
PENNSYLVANIA MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Service Shares of the Fund.
<TABLE>
<S>
<C>
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, as applicable) None Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and other Distributions) (as a percentage of offering
price) None
Redemption Fee (as a percentage of amount redeemed, if
applicable) None
Exchange
Fee
None
Annual Fund Operating Expenses (Before Waivers)/1/
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management
Fee/2/
0.50%
Distribution (12b-1)
Fee None
Shareholder Services
Fee/3/ 0.25%
Other
Expenses
0.15%
Total Annual Fund Operating
Expenses/4/ 0.90%
</TABLE>
1 Although not contractually obligated to do so, the adviser and shareholder
services provider expect to waive certain amounts during the fiscal year
ending October 31, 2000. These are shown below along with the net expenses
the Fund expects to actually pay for the fiscal year ending October 31, 2000.
<TABLE>
<S> <C>
Total Waivers of Fund Expenses 0.25%
Total Actual Annual Fund Operating Expenses (after waivers) 0.65%
</TABLE>
2 The adviser expects to voluntarily waive a portion of the management fee. The
adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.30% for the fiscal year ending October 31, 2000.
3 The shareholder services provider expects to voluntarily waive a portion of
the shareholder services fee. The shareholder services provider can terminate
this anticipated voluntary waiver at any time. The shareholder services fee
paid by the Fund (after the anticipated voluntary waiver) is expected to be
0.20% for the fiscal year ending October 31, 2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of
the Former Fund as a portfolio of the Trust, the Total Annual Fund Operating
Expenses and Total Actual Annual Fund Operating Expenses (after waivers) for
the Former Fund's Institutional Service Shares were 0.90% and 0.65%,
respectively.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional
Service Shares for the time periods indicated and then redeem all of your Shares
at the end of those periods. The Example also assumes that your investment has a
5% return each year and that the Fund's Institutional Service Shares operating
expenses are before waivers as estimated in the table above and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
- -------------------------------------------------------
<S> <C>
1 Year $ 92
- -------------------------------------------------------
3 Years $ 287
- -------------------------------------------------------
5 Years $ 498
- -------------------------------------------------------
10 Years $1,108
- -------------------------------------------------------
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Pennsylvania tax exempt
securities maturing in 397 days or less. The Fund will invest its assets so that
at least 80% of its annual interest income is exempt from federal regular income
tax and Pennsylvania dividend and interest income tax. Interest from the Fund's
investments may be subject to AMT. The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less. The Adviser actively manages the
Fund's portfolio, seeking to limit the credit risk taken by the Fund and to
select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors, such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
Temporary Defensive Investments
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal income tax and
Pennsylvania dividend and interest income tax. It may do this to minimize
potential losses and maintain liquidity to meet shareholder redemptions during
adverse market conditions. This may cause the Fund to receive and distribute
taxable income to investors.
What are the Principal Securities in Which the
Fund Invests?
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
Variable Rate Demand Instruments
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
Municipal Notes
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
Investment 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
Credit Risks
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as
Standard & Poor's and Moody's Investors Service. These services assign ratings
to securities by assessing the likelihood of issuer default. Lower credit
ratings correspond to higher credit risk. If a security has not received a
rating, the Fund must rely entirely on the Adviser's credit assessment.
Interest Rate Risks
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the prices of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
Sector Risks
A substantial part of the Fund's portfolio may be comprised of securities issued
by Pennsylvania issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
Pennsylvania Sector Risks
Since the Fund invests primarily in issuers from Pennsylvania, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Pennsylvania's economy has diversified away from the concentration in heavy
industry and manufacturing which existed prior to the downsizing of the steel
industry; in addition, it has improved its mixture of service and technology
based businesses. Despite the improvements in its employment base, Pennsylvania
is still subject to the cyclical impact which an economic downturn has on the
manufacturing sector.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share. The
Fund does not charge a front- end sales charge. NAV is determined at 12:00 noon
and 1:00 p.m. (Eastern time) and as of the end of regular trading (normally 4:00
p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum
is reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers three share classes: Institutional Service Shares, Institutional
Shares and Cash Series Shares, each representing interests in a single portfolio
of securities. This prospectus relates only to Institutional Service Shares.
Each share class has different expenses, which affect their performance. Contact
your investment professional or call 1-800-341-7400 for more information
concerning the other classes.
The Fund's Distributor, Federated Securities Corp., markets the Shares
described in this prospectus to financial institutions acting in an agency or
fiduciary capacity or to individuals directly or through investment
professionals. The Fund may not be a suitable investment for retirement plans or
for non-Pennsylvania taxpayers because it invests in Pennsylvania municipal
securities.
The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 1:00
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for same-
day payment of redemption proceeds, without that day's dividend, for redemption
requests received before 2:00 p.m. (Eastern time).
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is an
ACH member; or
. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the Pennsylvania taxes discussed above to the extent they
are derived from interest on obligations exempt from such taxes. Capital gains
and non-exempt dividends are taxable whether paid in cash or reinvested in the
Fund. Redemptions are taxable sales. Please consult your tax adviser regarding
your federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights-Institutional Service Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended October 31 1999 1998 1997
1996 1995
<S> <C> <C> <C> <C>
<C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
$ 1.00
Income From Investment Operations:
Net investment income 0.03 0.03 0.03
0.03 0.03
Less Distributions:
Distributions from net investment income (0.03) (0.03) (0.03)
(0.03) (0.03)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
$ 1.00
Total Return/1/ 2.73% 3.15% 3.18%
3.16% 3.44%
Ratios to Average Net Assets:
Expenses/2/ 0.90% 0.91% 0.92%
0.92% 0.92%
Net investment income/2/ 2.43% 2.83% 2.87%
2.85% 3.11%
Expenses (after waivers) 0.65% 0.65% 0.65%
0.65% 0.65%
Net investment income (after waivers) 2.68% 3.09% 3.14%
3.12% 3.38%
Supplemental Data
Net assets, end of period (000 omitted) $253,339 $392,381 $264,634 $221,851
$276,407
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
Notes
Notes
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, Annual Report and
SemiAnnual Report to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report and the Semi-Annual Report and other information without
charge, and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected]. or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
[LOGO OF FEDERATED INVESTORS]
Pennsylvania Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N542
9101005A-SS (1/00)
Federated is a registered mark
of Federated Investors, Inc.
2000 (C)Federated Investors, Inc.
[RECYCLED PAPER LOGO]
[LOGO OF FEDERATED INVESTORS]
World-Class Investment Manager(R)
Pennsylvania
Municipal Cash
Trust
A Portfolio of Money Market
Obligations Trust
INSTITUTIONAL SERVICE SHARES
JANUARY 31, 2000
P R O S P E C T U S
PROSPECTUS
Pennsylvania Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income taxes imposed by the Commonwealth of
Pennsylvania consistent with stability of principal by investing in a portfolio
of high-quality Pennsylvania tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Contents
<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 4
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 7
How to Redeem Shares 8
Account and Share Information 9
Who Manages the Fund? 10
Financial Information 10
</TABLE>
- ---------------------
| |
| NOT FDIC INSURED |
| MAY LOOSE VALUE |
| NO BANK GUARANTEE |
| |
- ---------------------
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is to provide current income
exempt from federal regular income tax and the personal income taxes imposed by
the Commonwealth of Pennsylvania consistent with stability of principal. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the strategies and policies described in this
prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Pennsylvania tax exempt securities maturing in
397 days or less. The Fund will invest its assets so that at least 80% of its
annual interest income is exempt from federal regular income tax and
Pennsylvania dividend and interest income tax. Interest from the Fund's
investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
Risk/Return Bar Chart and Table
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Shares of Pennsylvania Municipal Cash Trust (the "Former
Fund") prior to its reorganization into the Fund, which is a newly created
portfolio of Money Market Obligations Trust (the "Trust"). On the date of the
reorganization, February 1, 2000, the Former Fund will be dissolved and it net
assets (inclusive of liabilities recorded on the Former Fund's records) will be
transferred to the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Institutional Shares of the Former Fund as of the
calendar year-end for each of four years.
The `y' axis reflects the "% Total Return" beginning with "0%" and increasing in
increments of 1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's start of business through the calendar
year ended December 31, 1999. The light gray shaded chart features four distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for Institutional Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1996 through 1999. The percentages noted are: 3.30%, 3.42%, 3.26%
and 3.01%.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Shares were sold without a sales charge (load).
The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Shares
highest quarterly return was 0.89% (quarter ended June 30, 1997). Its lowest
quarterly return was 0.66% (quarter ended March 31, 1999).
Average Annual Total Return Table
The following table represents the Former Fund's Institutional Shares Average
Annual Total Returns for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year 3.01%
Start of Performance/1/ 3.29%
</TABLE>
1 The Former Fund's Institutional Shares start of performance date was August
23, 1995.
The Former Fund's Institutional Shares 7-Day Net Yield as of December 31, 1999
was 4.23%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
PENNSYLVANIA MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the Fund.
<TABLE>
<S>
<C>
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, asapplicable) None Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and other Distributions) (as a percentage of
offeringprice) None
Redemption Fee (as a percentage of amount redeemed, if
applicable) None
Exchange
Fee
None
Annual Fund Operating Expenses (Before Waivers)/1/
Expenses That are Deducted From Fund Assets (as a percentage of average net
assets)
Management
Fee/2/
0.50%
Distribution (12b-1)
Fee None
Shareholder Services
Fee/3/ 0.25%
Other
Expenses
0.15%
Total Annual Fund Operating
Expenses/4/ 0.90%
- --------------------------------------------------------------------------------
</TABLE>
1 Although not contractually obligated to do so, the adviser and shareholder
services provider expect to waive certain amounts during the fiscal year
ending October 31, 2000. These are shown below along with the net expenses
the Fund expects to actually pay for the fiscal year ending October 31, 2000
Total Waivers of Fund Expenses 0.45%
Total Actual Annual Fund Operating Expenses (after waivers) 0.45%
2 The adviser expects to voluntarily waive a portion of the management fee. The
adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.30% for the fiscal year ending October 31, 2000.
3 The shareholder services provider expects to voluntarily waive the
shareholder services fee. The shareholder services provider can terminate
this anticipated voluntary waiver at any time. The shareholder services fee
paid by the Fund (after the anticipated voluntary waiver) is expected to be
0.00% for the fiscal year ending October 31, 2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of
the Former Fund as a portfolio of the Trust, the Total Annual Fund Operating
Expenses and Total Actual Annual Fund Operating Expenses (after waivers) for
the Former Fund's Institutional Shares were 0.90% and 0.45, respectively.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Institutional Shares operating expenses are before
waivers as estimated in the table above and remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year $ 92
3 Years $ 287
5 Years $ 498
10 Years $1,108
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Pennsylvania tax exempt
securities maturing in 397 days or less. The Fund will invest its assets so that
at least 80% of its annual interest income is exempt from federal regular income
tax and Pennsylvania dividend and interest income tax. Interest from the Fund's
investments may be subject to AMT. The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less. The Adviser actively manages the
Fund's portfolio, seeking to limit the credit risk taken by the Fund and to
select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal income tax and
Pennsylvania dividend and interest income tax. It may do this to minimize
potential losses and maintain liquidity to meet shareholder redemptions during
adverse market conditions. This may cause the Fund to receive and distribute
taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as
Standard & Poor's and Moody's Investors Service. These services assign ratings
to securities by assessing the likelihood of issuer default. Lower credit
ratings correspond to higher credit risk. If a security has not received a
rating, the Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the prices of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Pennsylvania issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
PENNSYLVANIA SECTOR RISKS
Since the Fund invests primarily in issuers from Pennsylvania, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Pennsylvania's economy has diversified away from the concentration in heavy
industry and manufacturing which existed prior to the downsizing of the steel
industry; in addition, it has improved its mixture of service and technology
based businesses. Despite the improvements in its employment base, Pennsylvania
is still subject to the cyclical impact which an economic downturn has on the
manufacturing sector. What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share. The
Fund does not charge a front- end sales charge. NAV is determined at 12:00 noon
and 1:00 p.m. (Eastern time) and as of the end of regular trading (normally 4:00
p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum
is reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers three share classes: Institutional Shares, Institutional Service
Shares and Cash Series Shares, each representing interests in a single portfolio
of securities. This prospectus relates only to Institutional Shares. Each share
class has different expenses, which affect their performance. Contact your
investment professional or call 1-800-341-7400 for more information concerning
the other classes.
The Fund's Distributor, Federated Securities Corp., markets the Shares
described in this prospectus to financial institutions acting in an agency or
fiduciary capacity or to individuals directly or through investment
professionals. The Fund may not be a suitable investment for retirement plans or
for non-Pennsylvania taxpayers because it invests in Pennsylvania municipal
securities.
The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend.
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened: . an electronic transfer to your account at a financial
institution that is an
ACH member; or
. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the Pennsylvania taxes discussed above to the extent they
are derived from interest on obligations exempt from such taxes. Capital gains
and non-exempt dividends are taxable whether paid in cash or reinvested in the
Fund. Redemptions are taxable sales. Please consult your tax adviser regarding
your federal, state and local tax liability. Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance since inception. Some of the information is presented on a per share
basis. Total returns represent the rate an investor would have earned (or lost)
on an investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights-Institutional Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<S> <C> <C> <C>
<C> <C>
Year Ended October31 1999 1998 1997
1996 1995/1/
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Income From Investment Operations:
Net investment income 0.03 0.03 0.03
0.03 0.01
Less Distributions:
Distributions from net investment income (0.03) (0.03) (0.03)
(0.03) (0.01)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Total Return/2/ 2.94% 3.36% 3.38%
3.37% 1.03%
Ratios to Average Net Assets:
Expenses/3/ 0.90% 0.91% 0.92%
0.92% 0.91%/4/
Net investment income/3/ 2.47% 2.85% 2.88%
2.80% 3.35%/4/
Expenses (after waivers) 0.45% 0.45% 0.45%
0.45% 0.45%/4/
Net investment income (after waivers) 2.92% 3.31% 3.35%
3.27% 3.81%/4/
Supplemental Data:
Net assets, end of period (000 omitted) $135,032 $64,281 $63,148
$37,076 $2,529
</TABLE>
1 Reflects operations for the period from August 23, 1995 (date of initial
public investment) to October 31, 1995.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
4 Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[LOGO OF FEDERATED INVESTORS]
WORLD-CLASS INVESTMENT MANAGER (R)
Pennsylvania
Municipal
Cash Trust
A Portfolio of Money Market
Obligations Trust
Institutional SHAREs
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, Annual Report and
SemiAnnual Report to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report and the Semi-Annual Report and other information without
charge, and make inquiries, call your investment professional or the Fund at 1-
800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
[LOGO OF FEDERATED INVESTORS]
Pennsylvania Municipal Cash Trust
Federated Investors Funds
5800 Corporate Dirve
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N534
G00214-01-IS (1/00)
Federated is a registered mark
of Federated Investors, Inc.
2000 (C)Federated Investors, Inc.
STATEMENT OF ADDITIONAL INFORMATION
Pennsylvania Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
CASH SERIES SHARES
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Pennsylvania Municipal Cash Trust
(Fund), dated January 31, 2000. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectuses or the Annual Report without charge by
calling 1-800-341-7400. JANUARY 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip 60934N526
Cusip 60934N542
Cusip 60934N534
9101005B (1/00)
How is the Fund Organized?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1998. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on November 1, 1989,
will be reorganized as a portfolio of the Trust on February 1, 2000.
The Board of Trustees (the Board) has established three classes of shares of the
Fund, known as Institutional Shares, Institutional Service Shares and Cash
Series Shares. This SAI relates to all classes of Shares. The Fund's investment
adviser is Federated Investment Management Company (Adviser). Effective March
31, 1999, Federated Management, former adviser to the Fund, became Federated
Investment Management Company (formerly, Federated Advisers).
Securities in Which the Fund Invests
The Fund's principal securities are described in its prospectus. Additional
securities, and further details regarding the principal securities, are outlined
below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its charter
or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues received by
the issuer such as specific taxes, assessments, tolls or fees. Bondholders
may not collect from the municipality's general taxes or revenues. For
example, a municipality may issue bonds to build a toll road, and pledge
the tolls to repay the bonds. Therefore, a shortfall in the tolls normally
would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new
factory to improve its local economy. The municipality would lend the
proceeds from its bonds to the company using the factory, and the company
would agree to make loan payments sufficient to repay the bonds. The
bonds would be payable solely from the company's loan payments, not from
any other revenues of the municipality. Therefore, any default on the
loan normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to the
federal alternative minimum tax (AMT). The Fund may invest in bonds
subject to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order
to comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end a
lease, without penalty, by not providing for the lease payments in its
annual budget. After the lease ends, the lessor can resell the equipment or
facility but may lose money on the sale. The Fund may invest in securities
supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final
maturity unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities at
a price below the amount payable at maturity. The difference between the
purchase price and the amount paid at maturity represents interest on the
zero coupon security. Investors must wait until maturity to receive
interest and principal, which increases the interest rate risks and credit
risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of credit,
bond insurance and surety bonds. Credit enhancement also includes
arrangements where securities or other liquid assets secure payment of a
fixed income security. If a default occurs, these assets may be sold and
the proceeds paid to the security's holders. Either form of credit
enhancement reduces credit risks by providing another source of payment for
a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
Inter-fund Borrowing and Lending Arrangements
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. (Federated funds) to lend
and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary
for both borrowing and lending funds, and an inter-fund loan is only made if
it benefits each participating fund. Federated administers the program
according to procedures approved by the Board, and the Board monitors the
operation of the program. Any inter-fund loan must comply with certain
conditions set out in the exemption, which are designed to assure fairness and
protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may
be made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term
borrowings (the Bank Loan Rate), as determined by the Board. The interest rate
imposed on inter-fund loans is the average of the Repo Rate and the Bank Loan
Rate.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment
and delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into
these transactions so that the market values of the securities bought may vary
from the purchase prices. Therefore, delayed delivery transactions create
interest rate risks for the Fund. Delayed delivery transactions also involve
credit risks in the event of a counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the
underlying assets or set aside readily marketable securities with a value that
equals or exceeds the Fund's obligations. Unless the Fund has other readily
marketable assets to set aside, it cannot trade assets used to secure such
obligations without terminating the special transaction. This may cause the
Fund to miss favorable trading opportunities or to realize losses on special
transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government of
the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and
use the proceeds (or bank loans) to repay maturing paper. If the issuer
cannot continue to obtain liquidity in this fashion, its commercial paper
may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from
a dealer or bank and agrees to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price, reflecting
the Fund's return on the transaction. This return is unrelated to the interest
rate on the underlying security. The Fund will enter into repurchase
agreements only with banks and other recognized financial institutions, such
as securities dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is
the seller (rather than the buyer) of the securities, and agrees to repurchase
them at an agreed upon time and price. A reverse repurchase agreement may be
viewed as a type of borrowing by the Fund. Reverse repurchase agreements are
subject to credit risks. In addition, reverse repurchase agreements create
leverage risks because the Fund must repurchase the underlying security at a
higher price, regardless of the market value of the security at the time of
repurchase.
INVESTMENT RATINGS
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's ("S&P"), MIG-1 or MIG-
2 by Moody's Investors Service ("Moody's"), or F-1+, F-1 or F-2 by Fitch IBCA,
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 rating service can be treated as being
in one of the two highest short-term rating categories; currently, such
securities must be rated by two nationally recognized statistical rating
organizations in one of their two highest rating categories. See "Regulatory
Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICY
The Fund's investment objective is to provide current income exempt from federal
regular income tax and the personal income taxes imposed by the Commonwealth of
Pennsylvania consistent with stability of principal.
The Fund invests in tax-exempt securities so that at least 80% of its annual
interest income is exempt from federal regular income tax and Pennsylvania
dividend and interest income tax. This investment objective and policy may
not be changed by the Board without shareholder approval.
INVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the
Pennsylvania Fund may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities. Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
federal securities laws.
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. For purposes of the concentration limitation: (a) utility
companies will be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (b) financial service companies will be classified according to the
end users of their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; and (c)
asset-backed securities will be classified according to the underlying assets
securing such securities. To conform to the current view of the SEC staff that
only domestic bank instruments may be excluded from industry concentration
limitations, as a matter of non-fundamental policy, the Fund will not exceed
foreign bank instruments from industry concentration limitation tests so long as
the policy of the SEC remains in effect. In addition, investments in certain
industrial development bonds funded by activities in a single industry will be
deemed to constitute investment in an industry, except when held for temporary
defensive purposes. The investment of more than 25% of the value of the Fund's
total assets in any one industry will constitute "concentration."
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 SAI, in order to comply with applicable
laws and regulations, including the provisions of and regulations under the 1940
Act. In particular, the Fund will comply with the various requirements of Rule
2a-7 (the Rule), which regulates money market mutual funds. The Fund will
determine the effective maturity of its investments according to the Rule. The
Fund may change these operational policies to reflect changes in the laws and
regulations without the approval of its shareholders. DETERMINING MARKET
VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board will take any steps it considers 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. What Do Shares Cost?
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
RULE 12B-1 PLAN (CASH SERIES SHARES)
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.
The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.
For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing-related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
Account and Share Information
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote. As of January 12, 2000, the following
shareholders owned of record, beneficially, or both, 5% or more of outstanding
Institutional Service Shares: First Union National Bank Trust Accounts,
Charlotte, NC, owned approximately 104,336,680 shares (28.96%); Keystone
Financial Inc., Altoona, PA, owned approximately 52,704,284 shares (14.63%); The
Fulton Company, Lancaster, PA, owned approximately 32,367,816 shares (8.98%);
Plitt & Co., Baltimore, MD, owned approximately 30,570,702 shares (8.49%);
Mellon Bank Capital Markets, Pittsburgh, PA, owned approximately 22,573,254
shares (6.27%); and Nabob Co., Wyomissing, PA, owned approximately 19,407,642
shares (5.39%).
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Institutional Shares;
Commonwealth of Pennsylvania, Harrisburg, PA, owned approximately 51,200,050
shares (39.05%); Univest & Company, Souderton, PA, owned approximately
13,465,255 shares (10.27%); and The Chase Manhattan Bank NA, New York, NY, owned
approximately 9,907,784 shares (7.56%).
As of January 12, 2000, the following shareholder owned of record, beneficially,
or both, 5% or more of outstanding Cash Series Shares: Parker/Hunter Inc.,
Pittsburgh, PA, owned approximately 23,539,303 shares (46.62%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
STATE TAXES
Under existing Pennsylvania laws, distributions made by the Fund derived from
interest on obligations free from state taxation in Pennsylvania are not subject
to Pennsylvania personal income taxes. Distributions made by the Fund will be
subject to Pennsylvania personal income taxes to the extent that they are
derived from gain realized by the Fund from the sale or exchange of otherwise
tax-exempt obligations.
Who Manages and Provides Services to the Fund?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
54 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January 12, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name
Birth Date Aggregate
Total Compensation
Address Principal Occupations Compensation From
Trust and Fund
Position With Trust for Past Five Years From
Fund Complex
John F. Donahue*#+ Chief Executive Officer and Director or $ 0 $0 for the Trust and 54
Birth Date: July 28, 1924 Trustee of the Federated Fund Complex; other investment
Federated Investors Tower Chairman and Trustee, Federated Investment companies in the Fund
1001 Liberty Avenue Management Company; Chairman and Director, Complex
Pittsburgh, PA Federated Investors, Inc., Federated
CHAIRMAN AND TRUSTEE Investment Counseling and Federated Global
Investment Management Corp.; Chairman,
Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund $352.28 $116,760.63 for the
Birth Date: February 3, 1934 Complex; Director, Member of Executive Trust
15 Old Timber Trail Committee, Children's Hospital of and 43 other
Pittsburgh, PA Pittsburgh; Director, Robroy Industries, investment companies
TRUSTEE Inc. (coated steel conduits/computer storage in the Fund Complex
equipment); formerly: Senior Partner, Ernst
& Young LLP; Director, MED 3000 Group, Inc.
(physician practice management); Director,
Member of Executive Committee, University of
Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund $387.58 $128,455.37 for the
Birth Date: June 23, 1937 Complex; President, Investment Properties Trust
Grubb & Ellis/Investment Properties Corporation; Senior Vice President, John R. and 43 other investment
Corporation Wood and Associates, Inc., Realtors; Partner companies in the Fund
3201 Tamiami Trail North or Trustee in private real estate ventures Complex
Naples, FL in Southwest Florida; formerly: President,
TRUSTEE Naples Property Management, Inc. and
Northgate Village Development Corporation.
Nicholas P. Constantakis++ Director or Trustee of the Federated Fund $ 0 $73,191.21 for the
Birth Date: September 3, 1939 Complex; Director, Michael Baker Corporation Trust and
175 Woodshire Drive (engineering, construction, operations and 37 other investment
Pittsburgh, PA technical services); formerly: Partner, companies
TRUSTEE Andersen Worldwide SC. in the Fund Complex
John F. Cunningham Director or Trustee of some of the Federated $264.54 $93,190.48 for the
Birth Date: March 5, 1943 Fund Complex; Chairman, President and Chief Trust and 37
353 El Brillo Way Executive Officer, Cunningham & Co., Inc. other investment
Palm Beach, FL (strategic business consulting); Trustee companies in the Fund
TRUSTEE Associate, Boston College; Director, Iperia Complex
Corp (communications/software); formerly:
Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board
and Chief Executive Officer, Computer
Consoles, Inc.; President and Chief
Operating Officer, Wang Laboratories;
Director, First National Bank of Boston;
Director, Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of the $ 0 $0 for the Trust and 30
Birth Date: April 11, 1949 Federated Fund Complex; Director or Trustee other investment
Federated Investors Tower of some of the Funds in the Federated Fund companies in the Fund
1001 Liberty Avenue Complex; President, Chief Executive Officer Complex
Pittsburgh, PA and Director, Federated Investors, Inc.;
PRESIDENT AND TRUSTEE President and Trustee, Federated Investment
Management Company and Federated Investment
Counseling; President and Director,
Federated Global Investment Management
Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services
Company; Director, Federated Services
Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund $352.28 $116,760.63 for the
Birth Date: October 11, 1932 Complex; Professor of Medicine, University Trust
3471 Fifth Avenue of Pittsburgh; Medical Director, University and 43 other
Suite 1111 of Pittsburgh Medical Center - Downtown; investment companies
Pittsburgh, PA Hematologist, Oncologist and Internist, in the Fund Complex
TRUSTEE University of Pittsburgh Medical Center;
Member, National Board of Trustees, Leukemia
Society of America.
Peter E. Madden Director or Trustee of the Federated Fund $323.49 $109,153.91 for the
Birth Date: March 16, 1942 Complex; formerly: Representative, Trust
One Royal Palm Way Commonwealth of Massachusetts General Court; and 43 other
100 Royal Palm Way President, State Street Bank and Trust investment companies
Palm Beach, FL Company and State Street Corporation. in the Fund Complex
TRUSTEE Previous Positions: Director, VISA USA and
VISA International; Chairman and Director,
Massachusetts Bankers Association;
Director, Depository Trust Corporation;
Director, The Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated $273.40 $102,573.91 for the
Birth Date: April 10, 1945 Fund Complex; Executive Vice President, Trust and 40
80 South Road Legal and External Affairs, Dugan Valva other investment
Westhampton Beach, NY Contess, Inc. (marketing, communications, companies in the Fund
TRUSTEE technology and consulting); formerly Complex
Management Consultant.
Previous Positions: Chief Executive
Officer, PBTC International Bank; Partner,
Arthur Young & Company (now Ernst & Young
LLP); Chief Financial Officer of Retail
Banking Sector, Chase Manhattan Bank;
Senior Vice President, Marine Midland
Bank; Vice President, Citibank; Assistant
Professor of Banking and Finance, Frank G.
Zarb School of Business, Hofstra
University.
John E. Murray, Jr., J.D., S.J.D.# Director or Trustee of the Federated Fund $378.79 $128,455.37 for the
Birth Date: December 20, 1932 Complex; President, Law Professor, Duquesne Trust
President, Duquesne University University; Consulting Partner, Mollica & and 43 other
Pittsburgh, PA Murray; Director, Michael Baker Corp. investment companies
TRUSTEE (engineering, construction, operations and in the Fund Complex
technical services).
Previous Positions: Dean and Professor of
Law, University of Pittsburgh School of Law;
Dean and Professor of Law, Villanova
University School of Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund $352.28 $116,760.63 for the
Birth Date: June 21, 1935 Complex; Public Trust
4905 Bayard Street Relations/Marketing/Conference Planning. and 43 other
Pittsburgh, PA Previous Positions: National Spokesperson, investment companies
TRUSTEE Aluminum Company of America; television in the Fund Complex
producer; business owner.
John S. Walsh Director or Trustee of some of the Federated $264.54 $94,536.85 for the
Birth Date: November 28, 1957 Fund Complex; President and Director, Heat Trust and 39
2007 Sherwood Drive Wagon, Inc. (manufacturer of construction other investment
Valparaiso, IN temporary heaters); President and Director, companies in the Fund
TRUSTEE Manufacturers Products, Inc. (distributor of Complex
portable construction heaters); President,
Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director,
Walsh & Kelly, Inc. (heavy highway
contractor); formerly: Vice President, Walsh
& Kelly, Inc.
Edward C. Gonzales Trustee or Director of some of the Funds in $ 0 $0 for the Trust and 42
Birth Date: October 22, 1930 the Federated Fund Complex; President, other investment
Federated Investors Tower Executive Vice President and Treasurer of company in the
1001 Liberty Avenue some of the Funds in the Federated Fund Fund Complex
Pittsburgh, PA Complex; Vice Chairman, Federated Investors,
EXECUTIVE VICE PRESIDENT Inc.; Vice President, Federated Investment
Management Company, Federated Investment
Counseling, Federated Global Investment
Management Corp. and Passport Research,
Ltd.; Executive Vice President and Director,
Federated Securities Corp.; Trustee,
Federated Shareholder Services Company.
John W. McGonigle Executive Vice President and Secretary of $ 0 $0 for the Trust and 43
Birth Date: October 26, 1938 the Federated Fund Complex; Executive Vice other investment
Federated Investors Tower President, Secretary, and Director, companies in the Fund
1001 Liberty Avenue Federated Investors, Inc.; Trustee, Complex
Pittsburgh, PA Federated Investment Management Company and
EXECUTIVE VICE PRESIDENT AND Federated Investment Counseling; Director,
SECRETARY Federated Global Investment Management
Corp., Federated Services Company and
Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; $ 0 $0 for the Trust and 43
Birth Date: June 17, 1954 Vice President - Funds Financial Services other investment
Federated Investors Tower Division, Federated Investors, Inc.; companies in the Fund
1001 Liberty Avenue formerly: various management positions Complex
Pittsburgh, PA within Funds Financial Services Division of
TREASURER Federated Investors, Inc.
Richard B. Fisher President or Vice President of some of the $ 0 $0 for the Trust and 41
Birth Date: May 17, 1923 Funds in the Federated Fund Complex; other investment
Federated Investors Tower Director or Trustee of some of the Funds in companies in the Fund
1001 Liberty Avenue the Federated Fund Complex; Executive Vice Complex
Pittsburgh, PA President, Federated Investors, Inc.;
VICE PRESIDENT Chairman and Director, Federated Securities
Corp.
William D. Dawson, III Chief Investment Officer of this Fund and $ 0 $0 for the Trust and 42
Birth Date: March 3, 1949 various other Funds in the Federated Fund other investment
Federated Investors Tower Complex; Executive Vice President, Federated companies in the Fund
1001 Liberty Avenue Investment Counseling, Federated Global Complex
Pittsburgh, PA Investment Management Corp., Federated
CHIEF INVESTMENT OFFICER Investment Management Company and Passport
Research, Ltd.; Registered Representative,
Federated Securities Corp.; Portfolio
Manager, Federated Administrative
Services; Vice President, Federated
Investors, Inc.; formerly: Executive Vice
President and Senior Vice President,
Federated Investment Counseling
Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company
and Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of $ 0 $0 for the Trust and 6
Birth Date: September 15, 1959 the Trust. Ms. Cunningham joined Federated other investment
Federated Investors Tower in 1981 and has been a Senior Portfolio companies in the Fund
1001 Liberty Avenue Manager and a Senior Vice President of the Complex
Pittsburgh, PA Funds' Adviser since 1997. Ms. Cunningham
VICE PRESIDENT served as a Portfolio Manager and a Vice
President of the Adviser from 1993 through
1996. Ms. Cun-
ningham is a Chartered Financial Analyst and
received her M.B.A. in Finance from Robert
Morris College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the $ 0 $0 for the Trust and 7
Birth Date: September 12, 1953 Trust. Ms. Ochson joined Federated in 1982 other investment
Federated Investors Tower and has been a Senior Portfolio Manager and companies in the Fund
1001 Liberty Avenue a Senior Vice President of the Funds' Complex
Pittsburgh, PA Adviser since 1996. From 1988 through 1995,
VICE PRESIDENT Ms. Ochson served as a Portfolio Manager and
a Vice President of the Funds' Adviser. Ms.
Ochson is a Chartered Financial Analyst and
received her M.B.A. in Finance from the
University of Pittsburgh.
</TABLE>
* An asterisk denotes Trustee who is deemed to be an interested person as
defined in the 1940 Act.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Nicholas P. Constantakis became a member of the Board on October 1, 1999. He
did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
Maximum Administrative Fee Average Aggregate Daily Net Assets of the
Federated Funds
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FEES PAID BY THE FUND FOR SERVICES
For the Year Ended October 31 1999 1998 1997
Advisory Fee Earned $2,330,962 $2,086,146 $1,666,725
Advisory Fee Reduction $ 936,982 891,201 737,288
Brokerage Commissions 0 0 0
Administrative Fee $ 351,545 314,620 251,689
12b-1 Fee
Cash Series Shares $ 170,916 157,236 --
Shareholder Services Fee
Institutional Shares $ 0 --- --
Institutional Service Shares $ 625,841 --- --
Cash Series Shares $ 122,083 --- --
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year and Start of Performance
periods ended October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the seven-day
period ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
7-Day Period 1 Year 5 Years Start of Performance on
Institutional Shares
Total Return 2.94% NA 3.28%
Yield 3.08%
Effective Yield 3.13%
Tax-Equivalent Yield 5.35%
7-Day Period 1 Year 5 Years Start of Performance on
November 1, 1989
Institutional Service Shares
Total Return 2.73% 3.13% 3.36%
Yield 2.88%
Effective Yield 2.92%
Tax-Equivalent Yield 5.00%
7-Day Period 1 Year 5 Years Start of Performance on
December 31, 1990
Cash Series Shares
Total Return 2.32% 2.72% 2.66%
Yield 2.48%
Effective Yield 2.51%
Tax-Equivalent Yield 4.31%
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD, EFFECTIVE YIELD AND TAX-EQUIVALENT YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized base-
period return by: adding one to the base-period return, raising the sum to the
365/7th power; and subtracting one from the result. The tax-equivalent yield of
Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to the federal
alternative minimum tax and state and/or local taxes.
Taxable Yield
Equivalent for 2000 - STATE OF PENNSYLVANIA
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Tax Bracket:
Federal 15.00% 28.00% 31.00%
36.00% 39.60%
Combined Federal and State: 17.800% 30.800% 33.800%
38.800% 42.400%
- -----------------------------------------------------------------------------------------------------
Joint Return $1-43,850 $43,851-105, 950 $105, 951-161,450 $161,451-288,350
Over 288,350
Single Return $1-26,250 $ 26,251-63,550 $ 63,551-132,600 $132,601-288,350
Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.22% 1.45% 1.51%
1.63% 1.74%
1.50% 1.82% 2.17% 2.27%
2.45% 2.60%
2.00% 2.43% 2.89% 3.02%
3.27% 3.47%
2.50% 3.04% 3.61% 3.78%
4.08% 4.34%
3.00% 3.65% 4.34% 4.53%
4.90% 5.21%
3.50% 4.26% 5.06% 5.29%
5.72% 6.08%
4.00% 4.87% 5.78% 6.04%
6.54% 6.94%
4.50% 5.47% 6.50% 6.80%
7.35% 7.81%
5.00% 6.08% 7.23% 7.55%
8.17% 8.68%
5.50% 6.69% 7.95% 8.31%
8.99% 9.55%
6.00% 7.30% 8.67% 9.06%
9.80% 10.42%
6.50% 7.91% 9.39% 9.82%
10.62% 11.28%
7.00% 8.525 10.12% 10.57%
11.44% 12.15%
7.50% 9.12% 10.84% 11.33%
12.25% 13.02%
8.00% 9.73% 11.56% 12.08%
13.07% 13.89%
8.50% 10.34% 12.28% 12.84%
13.89% 14.76%
9.00% 10.95% 13.01% 13.605
14.71% 15.63%
</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.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
. references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
. charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
. discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
. information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
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.
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.
Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999 Federated managed 53 equity funds totaling approximately $18.3
billion in assets across growth, value, equity income, international, index and
sector (i.e. utility) styles. Federated's value-oriented management style
combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion. Government Funds In the government
sector, as of December 31, 1999, Federated managed 9 mortgage backed, 11
government/agency and 16 government money market mutual funds, with assets
approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges. Money Market Funds In the money market sector,
Federated 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, 1999, Federated
managed more than $83.0 billion in assets across 54 money market funds,
including 16 government, 13 prime and 24 municipal and 1 euro- denominated, with
assets approximating $34.1 billion, $35.7 billion and $13.1 billion and $115
million, respectively. The Chief Investment Officers responsible for
oversight of the various investment sectors within Federated are: U.S. equity
and high yield - J. Thomas Madden; U.S. fixed income -William D. Dawson, III;
and global equities and fixed income - Henry A. Frantzen. The Chief Investment
Officers are Executive Vice Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
Financial Information
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
Investment Ratings
STANDARD & POOR'S SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
LONG-TERM DEBT RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
MOODY'S INVESTORS SERVICE SHORT-TERM MUNICIPAL OBLIGATION RATINGS Moody's
Investors Service (Moody's) short-term ratings are designated Moody's Investment
Grade (MIG or VMIG). (See below.) The purpose of the MIG or VMIG ratings is to
provide investors with a simple system by which the relative investment
qualities of short-term obligations may be evaluated.
MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
LONG-TERM DEBT RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
FITCH IBCA, 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.
Addresses
PENNSYLVANIA MUNICIPAL CASH TRUST
Institutional Shares
Institutional Service Shares
Cash Series Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
41
PROSPECTUS
Tennessee Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income tax imposed by the State of Tennessee
consistent with stability of principal and liquidity by investing in a portfolio
of high-quality Tennessee tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 7
How is the Fund Sold? 7
How to Purchase Shares 8
How to Redeem Shares 9
Account and Share Information 11
Who Manages the Fund? 12
Financial Information 13
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Tennessee Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value of $1.00 per share. The Fund's investment
objective is to provide current income exempt from federal regular income tax
and the personal income tax imposed by the State of Tennessee consistent with
stability of principal and liquidity. While there is no assurance that the Fund
will achieve its investment objective, it endeavors to do so by following the
strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Tennessee tax exempt securities maturing in 397
days or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax and the personal
income tax imposed by the State of Tennessee. Interest from the Fund's
investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Service Shares of Tennessee Municipal Cash Trust (the "Former
Fund") prior to its reorganization into the Fund, which is a newly created
portfolio of Money Market Obligations Trust (the "Trust"). On the date of the
reorganization, February 1, 2000, the Former Fund will be dissolved and its net
assets (inclusive of liabilities recorded on the Former Fund's records) will be
transferred into the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Institutional Service Shares of the Former Fund as of
the calendar year-end for each of three years.
The `y' axis reflects the "% Total Return" beginning with "0%" and increasing in
increments of 1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's start of business through the calendar
year ended December 31, 1999. The light gray shaded chart features three
distinct vertical bars, each shaded in charcoal, and each visually representing
by height the total
return percentages for the calendar year stated directly at its base. The
calculated total return percentage for Institutional Service Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1997 through 1999. The percentages noted are: 3.24%, 3.09% and
2.89%
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Service Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Service Shares were not sold subject to a sales
charge (load). The total returns displayed above are based upon the asset value.
Within the period shown in the Chart, the Former Fund's Institutional Service
Shares highest quarterly return was 0.84% (quarter ended June 30, 1997). Its
lowest quarterly return was 0.62% (quarter ended March 31, 1999).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Institutional Service
Shares Average Annual Total Returns for the calendar periods ended
December 31, 1999.
<TABLE>
<CAPTION>
CALENDAR PERIOD FUND
<S> <C>
1 Year 2.89%
Start of Performance 1 3.11%
</TABLE>
1 The Former Fund's Institutional Service Shares start of performance date was
May 22, 1996.
The Former Fund's Institutional Service Shares 7-Day Net Yield as of December
31, 1999 was 4.07%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
TENNESSEE MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Service Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions) (as a
percentage of offering
price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (Before Waivers and Reimbursements) 1 Expenses
That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 2 0.50%
Distribution (12b-1) Fee None
Shareholder Services Fee 0.25%
Other Expenses 3 0.50%
Total Annual Fund
Operating Expenses 4 1.25%
1 Although not contractually obligated to do so, the adviser expects to waive
and/or reimburse certain amounts during the fiscal year ending October 31, 2000.
These are shown below along with the net expenses the Fund expects to actually
pay for the fiscal year ending October 31, 2000.
Total Waiver and
Reimbursement of Fund
Expenses 0.65%
Total Actual Annual Fund
Operating Expenses (after
waivers and
reimbursements) 0.60%
2 The adviser expects to voluntarily waive the management fee. The adviser can
terminate this anticipated voluntary waiver at any time. The management fee paid
by the Fund (after the anticipated voluntary waiver) is expected to be 0.00% for
the fiscal year ending October 31, 2000.
3 The adviser expects to voluntarily reimburse certain operating expenses of the
Fund. The adviser can terminate this anticipated voluntary reimbursement at any
time. Other operating expenses paid by the Fund (after the anticipated voluntary
reimbursement) are expected to be 0.35% for the fiscal year ending October 31,
2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of
Tennessee Municipal Cash Trust, the Former Fund, as a portfolio of Money Market
Obligations Trust, the Total Annual Fund Operating Expenses and Total Actual
Annual Fund Operating Expenses (after waivers/reimbursements) for the Former
Fund's Institutional Service Shares were 1.25% and 0.60%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Service
Shares for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's Institutional Service Shares operating
expenses are BEFORE WAIVERS AND REIMBURSEMENTS as estimated in the table above
and remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
<TABLE>
<CAPTION>
<S> <C>
1 Year $ 127
3 Years $ 397
5 Years $ 686
10 Years $ 1,511
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Tennessee tax exempt securities
maturing in 397 days or less. The Fund will invest its assets so that at least
80% of its annual interest income is exempt from federal regular income tax and
Tennessee state income taxes. Interest from the Fund's investments may be
subject to AMT. The dollar-weighted average maturity of the Fund's portfolio
will be 90 days or less. The Adviser actively manages the Fund's portfolio,
seeking to limit the credit risk taken by the Fund and select investments with
enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and Tennessee income tax.
It may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSRO or be of comparable quality to
securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Tennessee issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
TENNESSEE SECTOR RISKS
Since the Fund invests primarily in issuers from Tennessee, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
The State's economy depends on auto and truck productions leaving the state
susceptible to the cycles of the auto industry.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $10,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $10,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Shares and Institutional
Service Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Service Shares. Each share class
has different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-Tennessee
taxpayers because it invests in Tennessee municipal securities.
The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend.
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from Tennessee state personal income tax to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance since inception. Some of the information is presented on a per share
basis. Total returns represent the rate an investor would have earned (or lost)
on an investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.03 0.03 0.03 0.01
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.03) (0.03) (0.03) (0.01)
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 2 2.81% 3.17% 3.21% 1.48%
RATIOS TO AVERAGE NET
ASSETS:
Expenses 3 1.25% 1.33% 1.46% 1.72% 4
Net investment income 3 2.09% 2.36% 2.27% 1.93% 4
Expenses (after waivers
and reimbursements) 0.60% 0.60% 0.60% 0.39% 4
Net investment income
(after waivers and
reimbursements) 2.74% 3.09% 3.13% 3.26% 4
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $ 22,679 $ 32,593 $ 24,624 $ 29,824
</TABLE>
1 Reflects operations for the period from May 22, 1996 (date of initial public
investment) to October 31, 1996.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 During the period, certain fees were voluntarily waived and reimbursed. If
such voluntary waivers and reimbursements had not occurred, the ratios would
have been as indicated.
4 Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
Tennessee Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and it's investments is contained in the Fund's SAI and Annual and
Semi-Annual Report to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
Annual Report, Semi-Annual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Tennessee Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N443
G01682-02 (1/00)
[Graphic]
PROSPECTUS
Tennessee Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the personal income tax imposed by the State of Tennessee
consistent with stability of principal and liquidity by investing in a portfolio
of high-quality Tennessee tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 7
How is the Fund Sold? 7
How to Purchase Shares 8
How to Redeem Shares 9
Account and Share Information 11
Who Manages the Fund? 12
Financial Information 12
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Tennessee Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value of $1.00 per share. The Fund's investment
objective is to provide current income exempt from federal regular income tax
and the personal income tax imposed by the State of Tennessee consistent with
stability of principal and liquidity. While there is no assurance that the Fund
will achieve its investment objective, it endeavors to do so by following the
strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Tennessee tax exempt securities maturing in 397
days or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax and the personal
income tax imposed by the State of Tennessee. Interest from the Fund's
investments may be subject to the federal alternative minimum tax for
individuals and corporations (AMT). The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Institutional Shares of the Former Fund as of the
calendar year-end for each of three years.
The `y' axis reflects the "% Total Return" beginning with "0%" and increasing in
increments of 1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's start of business through the calendar
year ended December 31, 1999. The light gray shaded chart features three
distinct vertical bars, each shaded in charcoal, and each visually representing
by height the total
return percentages for the calendar year stated directly at its base. The
calculated total return percentage for Institutional Shares for each calendar
year is stated directly at the top of each respective bar, for the calendar
years 1997 through 1999. The percentages noted are: 3.50%, 3.35% and 3.14%
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Shares of Tennessee Municipal Cash Trust (the "Former Fund")
prior to its reorganization into the Fund, which is a newly created portfolio of
Money Market Obligations Trust (the "Trust"). On the date of the reorganization,
February 1, 2000, the Former Fund was dissolved and its net assets (inclusive of
liabilities recorded on the Former Fund's records) were transferred into the
Fund.
[Graphic]
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Shares were not sold subject to a sales charge
(load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Shares
highest quarterly return was 0.91% (quarter ended June 30, 1997). Its lowest
quarterly return was 0.69% (quarter ended March 31, 1999).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Institutional Shares Average
Annual Total Returns for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
CALENDAR PERIOD FUND
<S> <C>
1 Year 3.14%
Start of Performance 1 3.37%
</TABLE>
1 The Former Fund's Institutional Shares start of performance date was May 22,
1996.
The Former Fund's Institutional Shares 7-Day Net Yield as of December 31, 1999
was 4.32%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
TENNESSEE MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions) (as a
percentage of offering
price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES (Before Waivers and Reimbursements) 1 Expenses
That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 2 0.50%
Distribution (12b-1) Fee None
Shareholder Services Fee 3 0.25%
Other Expenses 4 0.50%
Total Annual Fund
Operating Expenses 5 1.25%
1 Although not contractually obligated to do so, the adviser and shareholder
services provider expect to waive and/or reimburse certain amounts during the
fiscal year ending October 31, 2000. These are shown below along with the net
expenses the Fund expects to actually pay for the fiscal year ending October 31,
2000.
Total Waiver and
Reimbursement of Fund
Expenses 0.90%
Total Actual Annual Fund
Operating Expenses (after
waivers and
reimbursements) 0.35%
2 The adviser expects to voluntarily waive the management fee. The adviser can
terminate this anticipated voluntary waiver at any time. The management fee paid
by the Fund (after the anticipated voluntary waiver) is expected to be 0.00% for
the fiscal year ending October 31, 2000.
3 The shareholder services provider expects to voluntarily waive the shareholder
services fee. The shareholder services provider can terminate this anticipated
voluntary waiver at any time. The shareholder services fee paid by the Fund's
Institutional Shares (after the anticipated voluntary waiver) is expected to be
0.00% for the fiscal year ending October 31, 2000.
4 The adviser expects to voluntarily reimburse certain operating expenses of the
Fund. The adviser can terminate this anticipated voluntary reimbursement at any
time. Other operating expenses paid by the Fund (after the anticipated voluntary
reimbursement) are expected to be 0.35% for the fiscal year ending October 31,
2000.
5 For the fiscal year ended October 31, 1999, prior to the reorganization of
Tennessee Municipal Cash Trust, the Former Fund, as a portfolio of Money Market
Obligations Trust, the Total Annual Fund Operating Expenses and Total Actual
Annual Fund Operating Expenses (after waivers/reimbursements) for the Former
Fund's Institutional Shares were 1.25% and 0.35%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Institutional Shares operating expenses are BEFORE
WAIVERS AND REIMBURSEMENTS as estimated in the table above and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 Year $ 127
3 Years $ 397
5 Years $ 686
10 Years $ 1,511
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality Tennessee tax exempt securities
maturing in 397 days or less. The Fund will invest its assets so that at least
80% of its annual interest income is exempt from federal regular income tax and
Tennessee state income taxes. Interest from the Fund's investments may be
subject to AMT. The dollar-weighted average maturity of the Fund's portfolio
will be 90 days or less. The Adviser actively manages the Fund's portfolio,
seeking to limit the credit risk taken by the Fund and select investments with
enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and Tennessee income tax.
It may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSRO or be of comparable quality to
securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Tennessee issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
TENNESSEE SECTOR RISKS
Since the Fund invests primarily in issuers from Tennessee, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
The State's economy depends on auto and truck productions leaving the state
susceptible to the cycles of the auto industry.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Shares and Institutional
Service Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Shares. Each share class has
different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-Tennessee
taxpayers because it invests in Tennessee municipal securities.
The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time) your redemption will be wired to you
the following business day. You will receive that day's dividend. Under limited
circumstances, arrangements may be made with the Distributor for same-day
payment of redemption proceeds, without that day's dividend, for redemption
requests received before 2:00 p.m. (Eastern time).
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from Tennessee state personal income tax to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion
in assets as of December 31, 1999. Federated was established in 1955 and is one
of the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance since inception. Some of the information is presented on a per share
basis. Total returns represent the rate an investor would have earned (or lost)
on an investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.03 0.03 0.03 0.01
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.03) (0.03) (0.03) (0.01)
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 2 3.07% 3.42% 3.47% 1.59%
RATIOS TO AVERAGE NET
ASSETS:
Expenses 3 1.25% 1.33% 1.46% 1.72% 4
Net investment income 3 2.11% 2.37% 2.29% 1.95% 4
Expenses (after waivers
and reimbursements) 0.35% 0.35% 0.35% 0.10% 4
Net investment income
(after waivers and
reimbursements) 3.01% 3.35% 3.40% 3.57% 4
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $ 34,850 $ 39,193 $ 23,048 $ 17,824
</TABLE>
1 Reflects operations for the period from May 22, 1996 (date of initial public
investment) to October 31, 1996.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 During the period, certain fees were voluntarily waived and reimbursed. If
such voluntary waivers and reimbursements had not occurred, the ratios would
have been as indicated.
4 Computed on an annualized basis.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
PROSPECTUS
Tennessee Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Annual and
Semi-Annual Report to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
Annual Report, Semi-Annual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Tennessee Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N435
G01682-01 (1/00)
[Graphic]
Statement of Additional Information
TENNESSEE MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
institutional shares
institutional service shares
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Tennessee Municipal Cash Trust
(Fund), dated January 31, 2000. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectuses or the Annual Report without charge by
calling 1-800-341-7400.
january 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
What Do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip 60934N443
Cusip 60934N435
G01682-03 (1/00)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on May 14, 1996, will
be reorganized as a portfolio of the Trust on February 1, 2000.
The Board of Trustees (Board) has established two classes of shares of the Fund,
known as Institutional Shares and Institutional Service Shares (Shares). This
SAI relates to both classes of Shares. The Fund's investment adviser is
Federated Investment Management Company (Adviser). Effective March 31, 1999,
Federated Management, former adviser to the Fund, became Federated Investment
Management Company (formerly, Federated Advisers).
SECURITIES IN WHICH THE FUND INVESTS
The Fund's principal securities are described in its prospectus. Additional
securities, and further details regarding the principal securities, are outlined
below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its
charter or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues
received by the issuer such as specific taxes, assessments, tolls or
fees. Bondholders may not collect from the municipality's general taxes
or revenues. For example, a municipality may issue bonds to build a
toll road, and pledge the tolls to repay the bonds. Therefore, a
shortfall in the tolls normally would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The
municipality would lend the proceeds from its bonds to the company
using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable
solely from the company's loan payments, not from any other
revenues of the municipality. Therefore, any default on the loan
normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to
the federal alternative minimum tax (AMT). The Fund may invest in
bonds subject to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end
a lease, without penalty, by not providing for the lease payments in
its annual budget. After the lease ends, the lessor can resell the
equipment or facility but may lose money on the sale. The Fund may
invest in securities supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities
at a price below the amount payable at maturity. The difference between
the purchase price and the amount paid at maturity represents interest
on the zero coupon security. Investors must wait until maturity to
receive interest and principal, which increases the interest rate risks
and credit risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of
credit, bond insurance and surety bonds. Credit enhancement also
includes arrangements where securities or other liquid assets secure
payment of a fixed income security. If a default occurs, these assets
may be sold and the proceeds paid to the security's holders. Either
form of credit enhancement reduces credit risks by providing another
source of payment for a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
Inter-fund Borrowing and Lending Arrangements
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. (Federated funds) to
lend and borrow money for certain temporary purposes directly to and from
other Federated funds. Participation in this inter-fund lending program is
voluntary for both borrowing and lending funds, and an inter-fund loan is
only made if it benefits each participating fund. Federated administers the
program according to procedures approved by the Fund's Board of Trustees
(Board), and the Board monitors the operation of the program. Any
inter-fund loan must comply with certain conditions set out in the
exemption, which are designed to assure fairness and protect all
participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed"
trades. All inter-fund loans must be repaid in seven days or less. The
Fund's participation in this program must be consistent with its investment
policies and limitations, and must meet certain percentage tests.
Inter-fund loans may be made only when the rate of interest to be charged
is more attractive to the lending fund than market-competitive rates on
overnight repurchase agreements (the Repo Rate) and more attractive to the
borrowing fund than the rate of interest that would be charged by an
unaffiliated bank for short-term borrowings (the Bank Loan Rate), as
determined by the Board. The interest rate imposed on inter-fund loans is
the average of the Repo Rate and the Bank Loan Rate.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with
payment and delivery of the securities scheduled for a future time. During
the period between purchase and settlement, no payment is made by the Fund
to the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value
in determining the price of its shares. Settlement dates may be a month or
more after entering into these transactions so that the market values of
the securities bought may vary from the purchase prices. Therefore, delayed
delivery transactions create interest rate risks for the Fund. Delayed
delivery transactions also involve credit risks in the event of a
counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the
underlying assets or set aside readily marketable securities with a value
that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to
secure such obligations without terminating the special transaction. This
may cause the Fund to miss favorable trading opportunities or to realize
losses on special transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government
of the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types
of corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If
the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund
is the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must
repurchase the underlying security at a higher price, regardless of the
market value of the security at the time of repurchase.
Investment Ratings
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's (S&P), MIG-1 or MIG-2
by Moody's Investors Service (Moody's), or F-1+, F-1 or F-2 by Fitch IBCA, 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 rating service can be treated as being in one of
the two highest short-term rating categories; currently, such securities must be
rated by two nationally recognized statistical rating organizations in one of
their two highest rating categories. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
Fundamental INVESTMENT Objective and Policy
The investment objective of the Fund is to provide current income exempt from
federal regular income tax and the personal income tax imposed by the State of
Tennessee consistent with stability of principal and liquidity.
The Fund invests in tax-exempt securities so that at least 80% of its annual
interest income will be exempt from federal regular income tax and the personal
income tax imposed by the State of Tennessee.
This investment objective and policy may not be changed by the Board without
shareholder approval.
INVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
<PAGE>
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
Securities Act of 1933.
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.
For purposes of the concentration limitation: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities.
To conform to the current view of the SEC staff that only domestic bank
instruments may be excluded from industry concentration limitations, the Fund
will not exclude foreign bank instruments from industry concentration limitation
tests so long as the policy of the SEC remains in effect. In addition,
investments in certain industrial development bonds funded by activities in a
single industry will be deemed to constitute investment in an industry, except
when held for temporary defensive purposes. The investment of more than 25% of
the value of the Fund's total assets in any one industry will constitute
"concentration."
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 SAI, in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7
(Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board will take any steps it considers 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.
WHAT DO SHARES COST?
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 21, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of the Fund's outstanding Institutional
Shares: Trust Co. of Knoxville, TN, owned approximately 12,465,166 shares
(34.33%); Sharp Market & Company, Knoxville, TN, owned approximately 7,209,575
shares (19.86%); James A. Massey, Collierville, TN, owned approximately
6,657,319 shares (18.34%); MISCO Bank of Mississippi, Jackson, MS, owned
approximately 4,227,781 shares (11.65%); and David J. McDaniel and Barbara
McDaniel, Brentwood, TN, owned approximately 1,832,225 shares (5.05%).
As of January 21, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of the Fund's outstanding Institutional
Service Shares: Linda Stone Kaplan, Memphis, TN, owned approximately 2,639,272
shares (13.50%); Derril Reeves and Margaret Reeves, Brentwood, TN, owned
approximately 1,027,735 shares (5.26 %); Okeena & Co, Dyersburg, TN, owned
approximately 1,658,656 shares (8.48%); and Commercial Bank & Trust, Paris, TN,
owned approximately 1,360,452 shares (6.96%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
STATE TAXES
Under existing Tennessee law, distributions made by the Fund will not be subject
to Tennessee personal income taxes to the extent that such distributions qualify
as "exempt-interest dividends" under the Internal Revenue Code, and represent
(i) interest on obligations of the state of Tennessee or its political
subdivisions; or (ii) interest on certain obligations of the United States, or
any agency or instrumentality thereof. To the extent that distributions by the
Fund are derived from distributions on other types of obligations, such
distributions will be subject to Tennessee personal income taxes.
Distributions made by the Fund will be subject to the excise taxes imposed on
corporations.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and certain positions held prior
to the past five years, total compensation received as a Trustee from the Trust
for its most recent fiscal year, and the total compensation received from the
Federated Fund Complex for the most recent calendar year. Effective February 1,
2000, the Trust will be comprised of 40 funds. The Federated Fund Complex is
comprised of 54 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.
As of January 12, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding
Shares.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
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Name
Birth Date Aggregate Total Compensation
Address Principal Occupations Compensation From Trust and Fund
Position With Trust for Past Five Years From Fund Complex
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of the $0 $0 for the Trust and 43
Birth Date: July 28, 1924 Federated Fund Complex; Chairman and Trustee, Federated other investment
Federated Investors Tower Investment Management Company; Chairman and Director, companies in the Fund
1001 Liberty Avenue Federated Investors, Inc., Federated Investment Complex
Pittsburgh, PA Counseling and Federated Global Investment Management
CHAIRMAN AND TRUSTEE Corp.; Chairman, Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $101.94 $116,760.63 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's Trust
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries, and 43 other investment
Pittsburgh, PA Inc. (coated steel conduits/computer storage equipment); companies in the Fund
TRUSTEE formerly: Senior Partner, Ernst & Young LLP; Director, Complex
MED 3000 Group, Inc. (physician practice management);
Director, Member of Executive Committee, University of
Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $112.15 $128,455.37 for the Trust
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior and 43 other investment
Grubb & Ellis/Investment Vice President, John R. Wood and Associates, Inc., companies in the Fund
Properties Corporation Realtors; Partner or Trustee in private real estate Complex
3201 Tamiami Trail North ventures in Southwest Florida; formerly: President,
Naples, FL Naples Property Management, Inc. and Northgate Village
TRUSTEE Development Corporation.
Nicholas P. Constantakis++ Director or Trustee of the Federated Fund Complex; $0 $73,191.21 for the
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering, Trust and
175 Woodshire Drive construction, operations and technical services); 37 other investment
Pittsburgh, PA formerly: Partner, Andersen Worldwide SC. companies
TRUSTEE in the Fund Complex
John F. Cunningham Director or Trustee of some of the Federated Fund $77.78 $93,190.48 for the Trust
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive and 37
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business other investment
Palm Beach, FL consulting); Trustee Associate, Boston College; companies in the Fund
TRUSTEE Director, Iperia Corp. (communications/software); Complex
formerly: Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of the Federated $0 $0 for the Trust and 30
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds other investment
Federated Investors Tower in the Federated Fund Complex; President, Chief companies in the Fund
1001 Liberty Avenue Executive Officer and Director, Federated Investors, Complex
Pittsburgh, PA Inc.; President and Trustee, Federated Investment
PRESIDENT AND TRUSTEE Management Company and Federated Investment Counseling;
President and Director, Federated Global
Investment Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder
Services Company; Director, Federated Services
Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $101.94 $116,760.63 for the Trust
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical and 43 other investment
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - companies in the Fund
Suite 1111 Downtown; Hematologist, Oncologist and Internist, Complex
Pittsburgh, PA University of Pittsburgh Medical Center; Member,
TRUSTEE National Board of Trustees, Leukemia Society of America.
Peter E. Madden Director or Trustee of the Federated Fund Complex; $92.41 $109,153.60 for the Trust
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts and 43 other investment
One Royal Palm Way General Court; President, State Street Bank and Trust companies in the Fund
100 Royal Palm Way Company and State Street Corporation. Complex
Palm Beach, FL
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation; Director, The Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $80.31 $102,573.91 for the
Birth Date: April 10, 1945 Complex; Executive Vice President, Legal and External Trust and 40
80 South Road Affairs, Dugan Valva Contess, Inc. (marketing, other investment
Westhampton Beach, NY communications, technology and consulting); formerly companies in the Fund
TRUSTEE Management Consultant. Complex
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $109.73 $128,455.37 for the
S.J.D.# President, Law Professor, Duquesne University; Trust
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Michael and 43 other investment
President, Duquesne University Baker Corp. (engineering, construction, operations and companies in the Fund
Pittsburgh, PA technical services). Complex
TRUSTEE
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $101.94 $116,760.63 for the
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. Trust
4905 Bayard Street and 43 other investment
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum companies in the Fund
TRUSTEE Company of America; television producer; business owner. Complex
John S. Walsh Director or Trustee of some of the Federated Fund $77.78 $94,536.85 for the
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. Trust and 39
2007 Sherwood Drive (manufacturer of construction temporary heaters); other investment
Valparaiso, IN President and Director, Manufacturers Products, Inc. companies in the Fund
TRUSTEE (distributor of portable construction heaters); Complex
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the Trust and 42
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice other investment
Federated Investors Tower President and Treasurer of some of the Funds in the company in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
EXECUTIVE VICE PRESIDENT Management Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company.
John W. McGonigle Executive Vice President and Secretary of the Federated $0 $0 for the Trust and 43
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary and other investment
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated companies in the Fund
1001 Liberty Avenue Investment Management Company and Federated Investment Complex
Pittsburgh, PA Counseling; Director, Federated Global Investment
EXECUTIVE VICE PRESIDENT AND Management Corp., Federated Services Company and
SECRETARY Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President $0 $0 for the Trust and 43
Birth Date: June 17, 1954 - Funds Financial Services Division, Federated other investment
Federated Investors Tower Investors, Inc.; formerly: various management positions companies in the Fund
1001 Liberty Avenue within Funds Financial Services Division of Federated Complex
Pittsburgh, PA Investors, Inc.
TREASURER
Richard B. Fisher President or Vice President of some of the Funds in the $0 $0 for the Trust and 41
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of other investment
Federated Investors Tower the Funds in the Federated Fund Complex; Executive Vice companies in the Fund
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and Complex
Pittsburgh, PA Director, Federated Securities Corp.
VICE PRESIDENT
William D. Dawson, III Chief Investment Officer of this Fund and various other $0 $0 for the Trust and 42
Birth Date: March 3, 1949 Funds in the Federated Fund Complex; Executive Vice other investment
Federated Investors Tower President, Federated Investment Counseling, Federated companies in the Fund
1001 Liberty Avenue Global Investment Management Corp., Federated Investment Complex
Pittsburgh, PA Management Company and Passport Research, Ltd.;
CHIEF INVESTMENT OFFICER Registered Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors,
Inc.; formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company and
Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. $0 $0 for the Trust and 6
Birth Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been a other investment
Federated Investors Tower Senior Portfolio Manager and a Senior Vice President of companies in the Fund
1001 Liberty Avenue the Funds' Adviser since 1997. Ms. Cunningham served as Complex
Pittsburgh, PA a Portfolio Manager and a Vice President of the Adviser
VICE PRESIDENT from 1993 through 1996. Ms. Cunnin gham is a Chartered
Financial Analyst and received her M.B.A. in Finance
from Robert Morris College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $0 $0 for the Trust and 7
Birth Date: September 12, 1953 Ochson joined Federated in 1982 and has been a Senior other investment
Federated Investors Tower Portfolio Manager and a Senior Vice President of the companies in the Fund
1001 Liberty Avenue Funds' Adviser since 1996. From 1988 through 1995, Ms. Complex
Pittsburgh, PA Ochson served as a Portfolio Manager and a Vice
VICE PRESIDENT President of the Funds' Adviser. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the 1940 Act.
</TABLE>
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Nicholas P. Constantakis became a member of the Board on October 1, 1999.
He did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
Maximum Administrative Fee Average Aggregate Daily Net Assets of
the Federated Funds
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT auditors
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the Year Ended October 31 1999 1998 1997
Advisory Fee Earned $338,749 $274,883 $221,951
Advisory Fee Reduction $338,749 $274,883 $221,951
Brokerage Commissions $0 $0 $0
Administrative Fee $155,000 $155,001 $154,970
Shareholder Services Fee
Institutional Shares $0 -- --
Institutional Service Shares $67,992 -- --
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for shareholder services fees, which are borne only by the applicable
class of Shares.
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
Average Annual Total Returns and Yield
Total returns are given for the one-year and Start of Performance periods ended
October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the 7-day period
ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Start of Performance on
7-Day Period 1 Year May 22, 1996
Institutional Shares
Total Return -- 3.07% 3.36%
Yield 3.27% -- --
Effective Yield 3.32% -- --
Tax-Equivalent Yield 6.01% -- --
- --------------------------------------------------------------------------------------------------
Start of Performance on
7-Day Period 1 Year May 22, 1996
Institutional Service
Shares
Total Return -- 2.81% 3.10%
Yield 3.02% -- --
Effective Yield 3.07% -- --
Tax-Equivalent Yield 5.55% -- --
- --------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
Yield, Effective Yield and Tax-Equivalent Yield
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result. The tax-equivalent yield
of Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to AMT and
state and/or local taxes.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Taxable Yield Equivalent for 2000 - STATE OF TENNESSEE
Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%
Combined Federal and State 21.000% 34.000% 37.000% 42.000% 45.600%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $161,451-288,350 Over 288,350
Single Return $1-26,250 $26,251-63,550 $63,551-132,600 $132,601-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.27% 1.52% 1.59% 1.72% 1.84%
1.50% 1.90% 2.27% 2.38% 2.59% 2.76%
2.00% 2.53% 3.03% 3.17% 3.45% 3.68%
2.50% 3.16% 3.79% 3.97% 4.31% 4.60%
3.00% 3.80% 4.55% 4.76% 5.17% 5.51%
3.50% 4.43% 5.30% 5.56% 6.03% 6.43%
4.00% 5.06% 6.06% 6.35% 6.90% 7.35%
4.50% 5.70% 6.82% 7.14% 7.76% 8.27%
5.00% 6.33% 7.58% 7.94% 8.62% 9.19%
5.50% 6.96% 8.33% 8.73% 9.48% 10.11%
6.00% 7.59% 9.09% 9.52% 10.34% 11.03%
6.50% 8.23% 9.85% 10.32% 11.21% 11.95%
7.00% 8.86% 10.61% 11.11% 12.07% 12.87%
7.50% 9.49% 11.36% 11.90% 12.93% 13.79%
8.00% 10.13% 12.12% 12.70% 13.79% 14.71%
8.50% 10.76% 12.88% 13.49% 14.66% 15.63%
9.00% 11.39% 13.64% 14.29% 15.52% 16.54%
</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.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
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.
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.
Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day effective
yield.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
Federated Funds overview
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999 Federated managed 53 equity funds totaling approximately $18.3
billion in assets across growth, value, equity income, international, index and
sector (i.e. utility) styles. Federated's value-oriented management style
combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion and $13.1 billion and
$115 million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
Federated Clients Overview
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities
Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
<PAGE>
INVESTMENT RATINGS
Standard & Poor's Short-Term Municipal Obligation Ratings
An 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 And Tender Option Bonds Ratings
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
Commercial Paper 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 rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
Moody's Investors Service Short-Term Municipal Obligation Ratings
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 And Tender Option Bonds 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 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 ibca, 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.
<PAGE>
162
ADDRESSES
tennessee municipal cash trust
Institutional Shares
Institutional Service Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PROSPECTUS
Virginia Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the income tax imposed by the Commonwealth of Virginia
consistent with stability of principal by investing in a portfolio of
high-quality Virginia tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 7
How is the Fund Sold? 7
How to Purchase Shares 8
How to Redeem Shares 9
Account and Share Information 12
Who Manages the Fund? 13
Financial Information 13
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Virginia Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value of $1.00 per share. The Fund's investment
objective is to provide current income exempt from federal regular income tax
and the income tax imposed by the Commonwealth of Virginia consistent with
stability of principal. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Virginia tax exempt securities maturing in 397
days or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular and Virginia state income tax or
so that at least 80% of its net assets is invested in obligations, the interest
income from which is exempt from federal regular and Virginia state income tax.
Interest from the Fund's investments may be subject to the federal alternative
minimum tax for individuals and corporations (AMT). The dollar-weighted average
maturity of the Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Service Shares of Virginia Municipal Cash Trust (the "Former
Fund") prior to its reorganization into the Fund, which is a newly created
portfolio of Money Market Obligations Trust (the "Trust"). On the date of the
reorganization, February 1, 2000, the Former Fund will be dissolved and its net
assets (inclusive of liabilities recorded on the Former Fund's records) will be
transferred to the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Institutional Service Shares of the Former Fund as of
the calendar year-end for each of six years.
The `y' axis reflects the "% Total Return" beginning with "0%" and increasing in
increments of 1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's start of business through the calendar
year ended December 31, 1999. The light gray shaded chart features six distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for Institutional Service Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1994 through 1999. The percentages noted are: 2.60%, 3.49%,
3.07%, 3.21%, 3.02%. and 2.83%.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Service Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Service Shares were not sold subject to a sales
charge (load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Service
Shares highest quarterly return was 0.90% (quarter ended June 30, 1995). Its
lowest quarterly return was 0.55% (quarter ended March 31, 1994).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Institutional Service Shares
Average Annual Total Returns for the calendar periods ended December 31, 1999.
CALENDAR PERIOD FUND
1 Year 2.83%
5 Years 3.12%
Start of Performance 1 3.01%
1 The Former Fund's Institutional Service Shares start of performance date was
September 16, 1993.
The Former Fund's Institutional Service Shares 7-Day Net Yield as of December
31, 1999 was 4.02%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
VIRGINIA MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Service Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions) (as a
percentage of
offering price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING
EXPENSES (Before Waivers)
1
Expenses That are Deducted
From Fund Assets (as a
percentage of average net
assets)
Management Fee 2 0.40%
Distribution (12b-1) Fee None
Shareholder Services Fee 3 0.25%
Other Expenses 0.19%
Total Annual Fund
Operating Expenses 4 0.84%
1 Although not contractually obligated to do so, the adviser and shareholder
services provider expect to waive certain amounts during the fiscal year ending
October 31, 2000. These are shown below along with the net expenses the Fund
expects to actually pay for the fiscal year ending October 31, 2000.
Total Waivers of Fund
Expenses 0.20%
Total Actual Annual Fund
Operating Expenses (after
waivers) 0.64%
2 The adviser expects to voluntarily waive a portion of the management fee. The
adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.30% for the fiscal year ending October 31, 2000.
3 The shareholder services provider expects to voluntarily waive a portion of the
shareholder services fee. The shareholder service provider can terminate this
anticipated voluntary waiver at any time. The shareholder services fee paid by
the Fund's Institutional Service Shares (after the anticipated voluntary waiver)
is expected to be 0.15% for the fiscal year ending October 31, 2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of the
Former Fund as a portfolio of the Trust, the Total Annual Fund Operating Expenses
and Total Actual Annual Fund Operating Expenses (after waivers) for the Former
Fund's Institutional Service Shares were 0.84% and 0.64%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Service
Shares for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's Institutional Service Shares operating
expenses are BEFORE WAIVERS as estimated in the table above and remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 Year $ 86
3 Years $ 268
5 Years $ 466
10 Years $ 1,037
What are the Fund's Investment Strategies?
The Fund invests its assets in a portfolio of high-quality Virginia tax exempt
securities maturing in 397 days or less. The Fund will invest its assets so that
at least 80% of its annual interest income is exempt from federal regular and
Virginia state income tax or so that at least 80% of its net assets is invested
in obligations, the interest from which is exempt from federal regular and
Virginia state income tax. Interest from the Fund's investments may be subject
to AMT. The dollar-weighted average maturity of the Fund's portfolio will be 90
days or less. The Adviser actively manages the Fund's portfolio, seeking to
limit the credit risk taken by the Fund and to select investments with enhanced
yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and Virginia income tax.
It may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the prices of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Virginia issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
VIRGINIA SECTOR RISKS
Since the Fund invests primarily in issuers from Virginia, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Virginia's economy is strongly tied to government and defense-related industries
and was adversely impacted by federal government downsizing. However, to counter
the government and defense declines, the Commonwealth has actively and
successfully pursued economic diversification; focusing particularly on high
technology, trade and tourism.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Service Shares and
Institutional Shares each representing interests in a single portfolio of
securities. This prospectus relates only to Institutional Service Shares. Each
share class has different expenses, which affect their performance. Contact your
investment professional or call 1-800-341-7400 for more information concerning
the other class.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-Virginia
taxpayers because it invests in Virginia municipal securities.
The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend. Under
limited circumstances, arrangements may be made with the Distributor for
same-day payment of redemption proceeds, without that day's dividend, for
redemption requests received before 2:00 p.m. (Eastern time).
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.
CHECKWRITING
You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.
DEBIT CARD
You may request a debit card account that allows you to redeem Shares. There is
an annual fee for this service that the Fund will automatically deduct from your
account.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the Virginia taxes discussed above to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03 0.03 0.03 0.03 0.03
LESS DISTRIBUTIONS:
Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03)
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN 1 2.75% 3.11% 3.17% 3.14% 3.46%
RATIOS TO AVERAGE NET ASSETS:
Expenses 2 0.84% 0.85% 0.86% 0.89% 0.91%
Net investment income 2 2.51% 2.85% 2.89% 2.80% 3.06%
Expenses (after waivers) 0.64% 0.64% 0.63% 0.59% 0.59%
Net investment income (after waivers) 2.71% 3.06% 3.12% 3.10% 3.38%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $245,710 $247,149 $198,838 $177,575 $127,083
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
Virginia Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, Annual Report and
Semi-Annual Report to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report and the Semi-Annual Report and other information without
charge, and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Virginia Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N245
3080501A-SS (1/00)
[Graphic]
PROSPECTUS
Virginia Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
A money market mutual fund seeking to provide current income exempt from federal
regular income tax and the income tax imposed by the Commonwealth of Virginia
consistent with stability of principal by investing in a portfolio of
high-quality Virginia tax exempt securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
JANUARY 31, 2000
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 7
How is the Fund Sold? 7
How to Purchase Shares 8
How to Redeem Shares 9
Account and Share Information 11
Who Manages the Fund? 12
Financial Information 13
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
Virginia Municipal Cash Trust (Fund) is a money market fund that seeks to
maintain a stable net asset value of $1.00 per share. The Fund's investment
objective is to provide current income exempt from federal regular income tax
and the income tax imposed by the Commonwealth of Virginia consistent with
stability of principal. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in high-quality Virginia tax exempt securities maturing in 397
days or less. The Fund will invest its assets so that at least 80% of its annual
interest income is exempt from federal regular and Virginia state income tax or
so that at least 80% of its net assets is invested in obligations, the interest
income from which is exempt from federal regular and Virginia state income tax.
Interest from the Fund's investments may be subject to the federal alternative
minimum tax for individuals and corporations (AMT). The dollar-weighted average
maturity of the Fund's portfolio will be 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value (NAV), it is
possible to lose money by investing in the Fund. 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. The Shares offered by this prospectus are not
deposits or obligations of any bank, are not endorsed or guaranteed by any bank
and are not insured or guaranteed by the U.S. government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The Bar Chart and Performance Table below reflect historical performance data
for Institutional Shares of Virginia Municipal Cash Trust (the "Former Fund")
prior to its reorganization into the Fund, which is a newly created portfolio of
Money Market Obligations Trust (the "Trust"). On the date of the reorganization,
February 1, 2000, the Former Fund will be dissolved and its net assets
(inclusive of liabilities recorded on the Former Fund's records) will be
transferred to the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Institutional Shares of the Former Fund as of the
calendar year-end for each of six years.
The `y' axis reflects the "% Total Return" beginning with "0%" and increasing in
increments of1% up to 4%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Former Fund's start of business through the calendar
year ended December 31, 1999. The light gray shaded chart features six distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for Institutional Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1994 through 1999. The percentages noted are: 2.73%, 3.59%,
3.17%, 3.36%, 3.18%. and 2.98%.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's
Institutional Shares total returns on a calendar year-end basis.
The Former Fund's Institutional Shares were not sold subject to a sales charge
(load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's Institutional Shares
highest quarterly return was 0.93% (quarter ended June 30, 1995). Its lowest
quarterly return was 0.57% (quarter ended March 31, 1994).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Former Fund's Institutional Shares Average
Annual Total Returns for the calendar periods ended December 31, 1999.
CALENDAR PERIOD FUND
1 Year 2.98%
5 Years 3.26%
Start of Performance 1 3.14%
1 The Former Fund's Institutional Shares start of performance date was September
16, 1993.
The Former Fund's Institutional Shares 7-Day Net Yield as of December 31, 1999,
was 4.17%.
You may call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.
What are the Fund's Fees and Expenses?
VIRGINIA MUNICIPAL CASH TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the Fund.
<TABLE>
<CAPTION>
SHAREHOLDER FEES
<S> <C>
Fees Paid Directly From
Your Investment
Maximum Sales Charge
(Load) Imposed on
Purchases (as a percentage
of offering price) None
Maximum Deferred Sales
Charge (Load) (as a
percentage of original
purchase price or
redemption proceeds,
as applicable) None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends (and
other Distributions) (as a
percentage of
offering price) None
Redemption Fee (as a
percentage of amount
redeemed, if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING
EXPENSES (Before Waivers)
1
Expenses That are Deducted
From Fund Assets (as a
percentage of average net
assets)
Management Fee 2 0.40%
Distribution (12b-1) Fee None
Shareholder Services Fee 3 0.25%
Other Expenses 0.19%
Total Annual Fund
Operating Expenses 4 0.84%
1 Although not contractually obligated to do so, the adviser and shareholder
services provider expect to waive certain amounts during the fiscal year ending
October 31, 2000. These are shown below along with the net expenses the Fund
expects to actually pay for the fiscal year ending October 31, 2000.
Total Waivers of Fund
Expenses 0.35%
Total Actual Annual Fund
Operating Expenses (after
waivers) 0.49%
2 The adviser expects to voluntarily waive a portion of the management fee. The
adviser can terminate this anticipated voluntary waiver at any time. The
management fee paid by the Fund (after the anticipated voluntary waiver) is
expected to be 0.30% for the fiscal year ending October 31, 2000.
3 The shareholder services provider expects to voluntarily waive the shareholder
services fee. The shareholder services provider can terminate this anticipated
voluntary waiver at any time. The shareholder services fee paid by the Fund's
Institutional Shares (after the anticipated voluntary waiver) is expected to be
0.00% for the fiscal year ending October 31, 2000.
4 For the fiscal year ended October 31, 1999, prior to the reorganization of the
Former Fund as a portfolio of the Trust, the Total Annual Fund Operating Expenses
and Total Actual Annual Fund Operating Expenses (after waivers) for the Former
Fund's Institutional Shares were 0.84% and 0.49%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Institutional Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Institutional Shares operating expenses are BEFORE
WAIVERS as estimated in the table above and remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
1 Year $ 86
3 Years $ 268
5 Years $ 466
10 Years $ 1,037
What are the Fund's Investment Strategies?
The Fund invests its assets in a portfolio of high-quality Virginia tax exempt
securities maturing in 397 days or less. The Fund will invest its assets so that
at least 80% of its annual interest income is exempt from federal regular and
Virginia state income tax or so that at least 80% of its net assets is invested
in obligations, the interest from which is exempt from federal regular and
Virginia state income tax. Interest from the Fund's investments may be subject
to AMT. The dollar-weighted average maturity of the Fund's portfolio will be 90
days or less. The Adviser actively manages the Fund's portfolio, seeking to
limit the credit risk taken by the Fund and to select investments with enhanced
yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve Board's monetary policy. The Adviser
structures the portfolio by investing primarily in variable rate demand
instruments and municipal notes. The Adviser generally shortens the portfolio's
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. This strategy seeks to enhance the returns from
favorable interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal and Virginia income tax.
It may do this to minimize potential losses and maintain liquidity to meet
shareholder redemptions during adverse market conditions. This may cause the
Fund to receive and distribute taxable income to investors.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal income taxes. Fixed income securities pay interest, dividends
or distributions at a specified rate. The rate may be fixed or adjusted
periodically. The issuer must also repay the principal amount of the security,
normally within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
MUNICIPAL NOTES
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as Standard
& Poor's and Moody's Investors Service. These services assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the prices of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by Virginia issuers or credit enhanced by banks or companies with similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political or other developments which generally affect these entities.
VIRGINIA SECTOR RISKS
Since the Fund invests primarily in issuers from Virginia, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Virginia's economy is strongly tied to government and defense-related industries
and was adversely impacted by federal government downsizing. However, to counter
the government and defense declines, the Commonwealth has actively and
successfully pursued economic diversification; focusing particularly on high
technology, trade and tourism.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The Fund cannot
guarantee that its NAV will always remain at $1.00 per Share. The Fund does not
charge a front-end sales charge.
NAV is determined at 12:00 noon and 1:00 p.m. (Eastern time) and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund offers two share classes: Institutional Shares and Institutional
Service Shares each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Shares. Each share class has
different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to financial institutions acting in an agency or fiduciary
capacity or to individuals directly or through investment professionals. The
Fund may not be a suitable investment for retirement plans or for non-Virginia
taxpayers because it invests in Virginia municipal securities.
The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
* Establish an account with the investment professional; and
* Submit your purchase order to the investment professional before 1:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
* Establish your account with the Fund by submitting a completed New
Account Form; and
* Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
BY WIRE
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
BY CHECK
Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).
Orders by mail are considered received when payment by check is converted into
federal funds (normally the business day after the check is received) and Shares
begin earning dividends the next day.
BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
* through an investment professional if you purchased Shares through an
investment professional; or
* directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
BY TELEPHONE
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time), your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time), your redemption will be wired to
you the following business day. You will receive that day's dividend.
BY MAIL
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
* Fund Name and Share Class, account number and account registration;
* amount to be redeemed; and
* signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
SIGNATURE GUARANTEES
Signatures must be guaranteed if:
* your redemption will be sent to an address other than the address of
record;
* your redemption will be sent to an address of record that was changed
within the last 30 days; or
* a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
* an electronic transfer to your account at a financial institution that is
an ACH member; or
* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
* to allow your purchase to clear;
* during periods of market volatility; or
* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
ADDITIONAL CONDITIONS
TELEPHONE TRANSACTIONS
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
SHARE CERTIFICATES
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes, although the Fund's dividends
will be exempt from the Virginia taxes discussed above to the extent they are
derived from interest on obligations exempt from such taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.
ADVISORY FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.03 0.03 0.03 0.03 0.04
LESS DISTRIBUTIONS:
Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.04)
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN 1 2.90% 3.26% 3.31% 3.24% 3.56%
RATIOS TO AVERAGE NET ASSETS:
Expenses 2 0.84% 0.85% 0.85% 0.89% 0.91%
Net investment income 2 2.52% 2.87% 2.90% 2.79% 3.08%
Expenses (after waivers) 0.49% 0.49% 0.49% 0.49% 0.49%
Net investment income (after waivers) 2.87% 3.23% 3.26% 3.19% 3.50%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $34,562 $24,559 $24,382 $26,302 $22,642
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
Further information about the Fund's performance is contained in the Fund's
Annual Report, dated October 31, 1999, which can be obtained free of charge.
[Graphic]
Federated
World-Class Investment Manager
Virginia Municipal Cash Trust
A Portfolio of Money Market Obligations Trust
INSTITUTIONAL SHARES
PROSPECTUS
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, Annual Report and
Semi-Annual Report to shareholders as they become available. The Annual Report
discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year. To obtain the SAI,
the Annual Report and the Semi-Annual Report and other information without
charge, and make inquiries, call your investment professional or the Fund at
1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.
[Graphic]
Federated
Virginia Municipal Cash Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N252
3080501A-IS (1/00)
[Graphic]
Statement of Additional Information
VIRGINIA MUNICIPAL CASH TRUST
A Portfolio of Money Market Obligations Trust
Institutional Shares
institutional Service Shares
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Virginia Municipal Cash Trust
(Fund), dated January 31, 2000. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectuses or the Annual Report without charge by
calling 1-800-341-7400.
january 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses
Cusip 60934N252
Cusip 60934N245
3080501B (1/00)
<PAGE>
HOW IS THE FUND ORGANIZED?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1998. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on August 30, 1993,
will be reorganized as a portfolio of the Trust on February 1, 2000.
The Board of Trustees (the Board) has established two classes of shares of the
Fund, known as Institutional Shares and Institutional Service Shares. This SAI
relates to all classes of Shares. The Fund's investment adviser is Federated
Investment Management Company (Adviser). Effective March 31, 1999, Federated
Management, former adviser to the Fund, became Federated Investment Management
Company (formerly, Federated Advisers).
SECURITIES IN WHICH THE FUND INVESTS
The Fund's principal securities are described in its prospectus. Additional
securities, and further details regarding the principal securities, are outlined
below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
invests.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is
not subject to federal regular income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax exempt
securities. The market categorizes tax exempt securities by their source of
repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its
charter or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues
received by the issuer such as specific taxes, assessments, tolls or
fees. Bondholders may not collect from the municipality's general taxes
or revenues. For example, a municipality may issue bonds to build a
toll road, and pledge the tolls to repay the bonds. Therefore, a
shortfall in the tolls normally would result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The
municipality would lend the proceeds from its bonds to the company
using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable
solely from the company's loan payments, not from any other
revenues of the municipality. Therefore, any default on the loan
normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to
the federal alternative minimum tax (AMT). The Fund may invest in
bonds subject to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically
subject to annual appropriation. In other words, a municipality may end
a lease, without penalty, by not providing for the lease payments in
its annual budget. After the lease ends, the lessor can resell the
equipment or facility but may lose money on the sale. The Fund may
invest in securities supported by individual leases or pools of leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest
(referred to as a coupon payment). Investors buy zero coupon securities
at a price below the amount payable at maturity. The difference between
the purchase price and the amount paid at maturity represents interest
on the zero coupon security. Investors must wait until maturity to
receive interest and principal, which increases the interest rate risks
and credit risks of a zero coupon security.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of
credit, bond insurance and surety bonds. Credit enhancement also
includes arrangements where securities or other liquid assets secure
payment of a fixed income security. If a default occurs, these assets
may be sold and the proceeds paid to the security's holders. Either
form of credit enhancement reduces credit risks by providing another
source of payment for a fixed income security.
Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
Special Transactions
Inter-fund Borrowing and Lending Arrangements
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. (Federated funds) to
lend and borrow money for certain temporary purposes directly to and from
other Federated funds. Participation in this inter-fund lending program is
voluntary for both borrowing and lending funds, and an inter-fund loan is
only made if it benefits each participating fund. Federated administers the
program according to procedures approved by the Fund's Board of Trustees
(Board), and the Board monitors the operation of the program. Any
inter-fund loan must comply with certain conditions set out in the
exemption, which are designed to assure fairness and protect all
participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed"
trades. All inter-fund loans must be repaid in seven days or less. The
Fund's participation in this program must be consistent with its investment
policies and limitations, and must meet certain percentage tests.
Inter-fund loans may be made only when the rate of interest to be charged
is more attractive to the lending fund than market-competitive rates on
overnight repurchase agreements (the Repo Rate) and more attractive to the
borrowing fund than the rate of interest that would be charged by an
unaffiliated bank for short-term borrowings (the Bank Loan Rate), as
determined by the Board. The interest rate imposed on inter-fund loans is
the average of the Repo Rate and the Bank Loan Rate.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with
payment and delivery of the securities scheduled for a future time. During
the period between purchase and settlement, no payment is made by the Fund
to the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value
in determining the price of its shares. Settlement dates may be a month or
more after entering into these transactions so that the market values of
the securities bought may vary from the purchase prices. Therefore, delayed
delivery transactions create interest rate risks for the Fund. Delayed
delivery transactions also involve credit risks in the event of a
counterparty default.
Asset Coverage
In order to secure its obligations in connection with special transactions,
including delayed delivery transactions, the Fund will either own the
underlying assets or set aside readily marketable securities with a value
that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to
secure such obligations without terminating the special transaction. This
may cause the Fund to miss favorable trading opportunities or to realize
losses on special transactions.
Temporary Defensive Investments
The Fund may make temporary defensive investments in the following taxable
securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government
of the United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types
of corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or bank loans) to repay maturing paper. If
the issuer cannot continue to obtain liquidity in this fashion, its
commercial paper may default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund
is the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must
repurchase the underlying security at a higher price, regardless of the
market value of the security at the time of repurchase.
Investment Ratings
Securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's ("S&P"), MIG-1 or
MIG-2 by Moody's Investors Service ("Moody's"), or F-1+, F-1 or F-2 by Fitch
IBCA, 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 rating service can be
treated as being in one of the two highest short-term rating categories;
currently, such securities must be rated by two nationally recognized
statistical rating organizations in one of their two highest rating categories.
See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
Fundamental INVESTMENT Objective and Policy
The Fund's investment objective is to provide current income exempt from federal
regular income tax and the income tax imposed by the Commonwealth of Virginia
consistent with stability of principal.
The Fund invests in tax-exempt securities so that at least 80% of its annual
interest income is exempt from federal regular and Virginia state income tax or
so that at least 80% of its net assets is invested in obligations, the interest
income from which is exempt from federal regular and Virginia state income tax.
This investment objective and policy may not be changed by the Board without
shareholder approval.
INVESTMENT LIMITATIONS
Concentration of Investments
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940 (1940
Act).
Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions on resale under the
Securities Act of 1933.
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.
For purposes of the concentration limitation: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities. To conform to the current view of the SEC staff that only domestic
bank instruments may be excluded from industry concentration limitations, as a
matter of non-fundamental policy, the Fund will not exceed foreign bank
instruments from industry concentration limitation tests so long as the policy
of the SEC remains in effect. In addition, investments in certain industrial
development bonds funded by activities in a single industry will be deemed to
constitute investment in an industry, except when held for temporary defensive
purposes. The investment of more than 25% of the value of the Fund's total
assets in any one industry will constitute "concentration."
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 SAI, in order to comply with applicable laws and
regulations, including the provisions of and regulations under the 1940 Act. In
particular, the Fund will comply with the various requirements of Rule 2a-7 (the
Rule), which regulates money market mutual funds. The Fund will determine the
effective maturity of its investments according to the Rule. The Fund may change
these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board 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.
WHAT DO SHARES COST?
The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.
HOW IS THE FUND SOLD?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a
continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
SUBACCOUNTING SERVICES
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
REDEMPTION IN KIND
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Institutional Shares: Bear
Stearns Securities Corp., Brooklyn, NY, owned approximately 16,806,593 shares
(30.06%); Comfort & Co., Newport News, VA, owned approximately 9,384,190 shares
(16.78%); EAMCO, Riggs Bank NA, Washington, DC, owned approximately 7,295,934
shares (13.05%); and VATCO, The Trust Company of Virginia, Richmond, VA, owned
approximately 6,688,399 shares (11.96%).
As of January 12, 2000, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Institutional Service Shares:
Scott & Stringfellow Inc., Richmond, VA, owned approximately 53,321,770 shares
(21.77%); First Union Securities Inc., Charlotte, NC, owned approximately
42,480, 865 shares (17.34%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
state TAXes
Under existing Virginia laws, distributions made by the Fund will not be subject
to Virginia income taxes to the extent that such distributions qualify as
exempt-interest dividends under the Internal Revenue Code, and represent (i)
interest or gain from obligations issued by or on behalf of the Commonwealth of
Virginia or any political subdivision thereof; or (ii) interest or gain from
obligations issued by a territory or possession of the United States or any
political subdivision thereof which federal law exempts from state income taxes.
Conversely, to the extent that distributions made by the Fund are attributable
to other types of obligations, such distributions will be subject to Virginia
income taxes.
WHO MANAGES AND PROVIDES SERVICES TO THE FUND?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
54 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
<PAGE>
As of January 12, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.
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Name
Birth Date Aggregate Total Compensation
Address Principal Occupations Compensation From Trust and Fund
Position With Trust for Past Five Years From Fund Complex
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of the $0 $0 for the Trust and 43
Birth Date: July 28, 1924 Federated Fund Complex; Chairman and Trustee, Federated other investment
Federated Investors Tower Investment Management Company; Chairman and Director, companies in the Fund
1001 Liberty Avenue Federated Investment Counseling and Federated Global Complex
Pittsburgh, PA Investment Management Corp.; Chairman, Passport
CHAIRMAN AND TRUSTEE Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $228.73 $116,760.63 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's Trust
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries, and 43 other investment
Pittsburgh, PA Inc. (coated steel conduits/computer storage equipment); companies in the Fund
TRUSTEE formerly: Senior Partner, Ernst & Young LLP; Director, Complex
MED 3000 Group, Inc. (physician practice management);
Director, Member of Executive Committee, University of
Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $251.64 $128,455.37 for the Trust
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior and 43 other investment
Grubb & Ellis/Investment Vice President, John R. Wood and Associates, Inc., companies in the Fund
Properties Corporation Realtors; Partner or Trustee in private real estate Complex
3201 Tamiami Trail North ventures in Southwest Florida; formerly: President,
Naples, FL Naples Property Management, Inc. and Northgate Village
TRUSTEE Development Corporation.
Nicholas P. Constantakis++ Director or Trustee of the Federated Fund Complex; $0 $73,191.21 for the
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering, Trust and
175 Woodshire Drive construction, operations and technical services); 37 other investment
Pittsburgh, PA formerly: Partner, Andersen Worldwide SC. companies
TRUSTEE in the Fund Complex
John F. Cunningham Director or Trustee of some of the Federated Fund $174.37 $93,190.48 for the
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive Trust and 37
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business other investment
Palm Beach, FL consulting); Trustee Associate, Boston College; companies in the Fund
TRUSTEE Director, Iperia Corp (communications/software); Complex
formerly: Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of the Federated $0 $0 for the Trust and 30
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds other investment
Federated Investors Tower in the Federated Fund Complex; President, Chief companies in the Fund
1001 Liberty Avenue Executive Officer and Director, Federated Investors, Complex
Pittsburgh, PA Inc.; President and Trustee, Federated Investment
PRESIDENT AND TRUSTEE Management Company and Federated Investment Counseling;
President and Director, Federated Global
Investment Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder
Services Company; Director, Federated Services
Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $228.73 $116,760.63 for the Trust
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Medical and 43 other investment
3471 Fifth Avenue Director, University of Pittsburgh Medical Center - companies in the Fund
Suite 1111 Downtown; Hematologist, Oncologist and Internist, Complex
Pittsburgh, PA University of Pittsburgh Medical Center; Member,
TRUSTEE National Board of Trustees, Leukemia Society of America.
Peter E. Madden Director or Trustee of the Federated Fund Complex; $209.05 $109,153.60 for the Trust
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Massachusetts and 43 other investment
One Royal Palm Way General Court; President, State Street Bank and Trust companies in the Fund
100 Royal Palm Way Company and State Street Corporation. Complex
Palm Beach, FL
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation; Director, The Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $180.43 $102,573.91 for the
Birth Date: April 10, 1945 Complex; Executive Vice President, Legal and External Trust and 40
80 South Road Affairs, Dugan Valva Contess, Inc. (marketing, other investment
Westhampton Beach, NY communications, technology and consulting); formerly companies in the Fund
TRUSTEE Management Consultant. Complex
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $246.20 $128,455.37 for the
S.J.D.# President, Law Professor, Duquesne University; Trust
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Michael and 43 other investment
President, Duquesne University Baker Corp. (engineering, construction, operations and companies in the Fund
Pittsburgh, PA technical services). Complex
TRUSTEE
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $228.73 $116,760.63 for the
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. Trust
4905 Bayard Street and 43 other investment
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum companies in the Fund
TRUSTEE Company of America; television producer; business owner. Complex
John S. Walsh Director or Trustee of some of the Federated Fund $174.37 $94,536.85 for the
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. Trust and 39
2007 Sherwood Drive (manufacturer of construction temporary heaters); other investment
Valparaiso, IN President and Director, Manufacturers Products, Inc. companies in the Fund
TRUSTEE (distributor of portable construction heaters); Complex
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the Trust and 42
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice other investment
Federated Investors Tower President and Treasurer of some of the Funds in the company in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
EXECUTIVE VICE PRESIDENT Management Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company.
John W. McGonigle Executive Vice President and Secretary of the Federated $0 $0 for the Trust and 43
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary, and other investment
Federated Investors Tower Director, Federated Investors, Inc.; Trustee, Federated companies in the Fund
1001 Liberty Avenue Investment Management Company and Federated Investment Complex
Pittsburgh, PA Counseling; Director, Federated Global Investment
EXECUTIVE VICE PRESIDENT AND Management Corp., Federated Services Company and
SECRETARY Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President $0 $0 for the Trust and 43
Birth Date: June 17, 1954 - Funds Financial Services Division, Federated other investment
Federated Investors Tower Investors, Inc.; formerly: various management positions companies in the Fund
1001 Liberty Avenue within Funds Financial Services Division of Federated Complex
Pittsburgh, PA Investors, Inc.
TREASURER
Richard B. Fisher President or Vice President of some of the Funds in the $0 $0 for the Trust and 41
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of other investment
Federated Investors Tower the Funds in the Federated Fund Complex; Executive Vice companies in the Fund
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and Complex
Pittsburgh, PA Director, Federated Securities Corp.
VICE PRESIDENT
William D. Dawson, III Chief Investment Officer of this Fund and various other $0 $0 for the Trust and 42
Birth Date: March 3, 1949 Funds in the Federated Fund Complex; Executive Vice other investment
Federated Investors Tower President, Federated Investment Counseling, Federated companies in the Fund
1001 Liberty Avenue Global Investment Management Corp., Federated Investment Complex
Pittsburgh, PA Management Company and Passport Research, Ltd.;
CHIEF INVESTMENT OFFICER Registered Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors,
Inc.; formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company and
Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. $0 $0 for the Trust and 6
Birth Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been a other investment
Federated Investors Tower Senior Portfolio Manager and a Senior Vice President of companies in the Fund
1001 Liberty Avenue the Funds' Adviser since 1997. Ms. Cunningham served as Complex
Pittsburgh, PA a Portfolio Manager and a Vice President of the Adviser
VICE PRESIDENT from 1993 through 1996. Ms. Cun-
ningham is a Chartered Financial Analyst and received
her M.B.A. in Finance from Robert Morris College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $0 $0 for the Trust and 7
Birth Date: September 12, 1953 Ochson joined Federated in 1982 and has been a Senior other investment
Federated Investors Tower Portfolio Manager and a Senior Vice President of the companies in the Fund
1001 Liberty Avenue Funds' Adviser since 1996. From 1988 through 1995, Ms. Complex
Pittsburgh, PA Ochson served as a Portfolio Manager and a Vice
VICE PRESIDENT President of the Funds' Adviser. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
</TABLE>
* An asterisk denotes Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Nicholas P. Constantakis became a member of the Board on October 1, 1999. He
did not receive any fees as of the fiscal year end of the Fund.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated
Funds 0.150 of 1% on the first $250 million 0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million 0.075 of 1% on assets in excess of $750
million The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT auditors
The independent auditor for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FEES PAID BY THE FUND FOR SERVICES
For the Year Ended October 31 1999 1998 1997
Advisory Fee Earned $1,157,907 $1,032,025 $881,787
Advisory Fee Reduction $280,826 284,795 246,296
Brokerage Commissions $0 0 0
Administrative Fee $218,266 194,556 166,299
Shareholder Services Fee
Institutional Shares $83,622 0 --
Institutional Service Shares $639,676 331,239 --
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for shareholder services fees, which are borne only by the applicable
class of Shares.
For the fiscal years ended October 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 2000.
HOW DOES THE FUND MEASURE PERFORMANCE?
The Fund may advertise Share performance by using the SEC's standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
Average Annual Total Returns and Yield
Total returns are given for the one-year, five-year and Start of Performance
periods ended October 31, 1999.
Yield, Effective Yield and Tax-Equivalent Yield are given for the seven-day
period ended October 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
7-Day Period 1 Year 5 Years Start of Performance on
September 16, 1993
Institutional Shares
Total Return 2.90% 3.25% 3.13%
Yield 3.05%
Effective Yield 3.10%
Tax-Equivalent Yield 5.57%
<PAGE>
7-Day Period 1 Year 5 Years Start of Performance on
September 16, 1993
Institutional Service
Shares
Total Return 2.75% 3.12% 3.00%
Yield 2.90%
Effective Yield 2.94%
Tax-Equivalent Yield 5.30%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
Yield, Effective Yield and Tax-Equivalent Yield
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result. The tax-equivalent yield
of Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
<PAGE>
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to the federal
alternative minimum tax and state and/or local taxes.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Taxable Yield Equivalent for 2000 - STATE OF VIRGINIA
Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%
Combined Federal and State 20.750% 33.750% 36.750% 41.750% 45.2350%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $161,451-288,350 Over 288,350
Single Return $1-26,250 $26,251-63,550 $63,551-132,600 $132,601-288,350 Over 288,350
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.26% 1.51% 1.58% 1.72% 1.83%
1.50% 1.89% 2.26% 2.37% 2.58% 2.74%
2.00% 2.52% 3.02% 3.16% 3.43% 3.66%
2.50% 3.15% 3.77% 3.95% 4.29% 4.57%
3.00% 3.79% 4.53% 4.74% 5.15% 5.49%
3.50% 4.42% 5.28% 5.53% 6.01% 6.40%
4.00% 5.05% 6.04% 6.32% 6.87% 7.32%
4.50% 5.68% 6.79% 7.11% 7.73% 8.23%
5.00% 6.31% 7.55% 7.91% 8.58% 9.15%
5.50% 6.94% 8.30% 8.70% 9.44% 10.06%
6.00% 7.57% 9.06% 9.49% 10.30% 10.98%
6.50% 8.20% 9.81% 10.28% 11.16% 11.89%
7.00% 8.83% 10.57% 11.07% 12.02% 12.81%
7.50% 9.46% 11.32% 11.86% 12.88% 13.72%
8.00% 10.09% 12.08% 12.65% 13.73% 14.64%
8.50% 10.73% 12.83% 13.44% 14.59% 15.55%
9.00% 11.36% 13.58% 14.23% 15.45% 16.47%
</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.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
<PAGE>
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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.
WHO IS FEDERATED INVESTORS, INC.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
Federated Funds overview
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Fund may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999 Federated managed 53 equity funds totaling approximately $18.3
billion in assets across growth, value, equity income, international, index and
sector (i.e. utility) styles. Federated's value-oriented management style
combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion and $13.1 billion and
$115 million, respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
Federated Clients Overview
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
FINANCIAL INFORMATION
The Financial Statements for the Fund for the fiscal year ended October 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of the
Fund dated October 31, 1999.
<PAGE>
INVESTMENT RATINGS
Standard & Poor's Short-Term Municipal Obligation Ratings
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
Commercial Paper (CP) Ratings
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
Long-Term Debt Ratings
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
Moody's Investors Service, Short-Term Municipal Obligation Ratings
Moody's Investors Service (Moody's) short-term ratings are designated Moody's
Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or VMIG
ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
Commercial Paper (CP) Ratings
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Long-Term Debt Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
Fitch IBCA, 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.
<PAGE>
ADDRESSES
virginia Municipal cash trust
Institutional Shares
Institutional Service Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
PROSPECTUS
Money Market Management
A Portfolio of Money Market Obligations Trust
A money market mutual fund seeking current income consistent with stability of
principal by investing primarily in a portfolio of short-term, high-quality
fixed income securities issued by banks, corporations and the U.S. government.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Contents
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 4
What are the Specific Risks of Investing in the Fund? 5
What do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 7
How to Redeem and Exchange Shares 9
Account and Share Information 11
Who Manages the Fund? 11
Last Meeting of Shareholders 12
Financial Information 12
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is current income consistent
with stability of principal. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN
INVESTMENT STRATEGIES?
The Fund invests primarily in a portfolio of short- term, high-quality fixed
income securities issued by banks, corporations and the U.S. government. The
Fund will have a dollar-weighted average portfolio maturity of 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund.
The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other government agency.
Risk/Return Bar Chart and Table
The Bar Chart and Performance Table below reflect historical performance data
for Shares of Money Market Management, Inc. (the "Former Fund") prior to its
reorganization into the Fund, which is a newly created portfolio of Money Market
Obligations Trust (the "Trust"). On the date of the reorganization, February 1,
2000, the Former Fund will be dissolved and its net assets (inclusive of
liabilities recorded on the Former Fund's records) will be transferred to the
Fund. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Money Market Management as of the
calendar year-end for each of ten years. The `y' axis reflects the "% Total
Return" beginning with "0%" and increasing in increments of 1% up to 8%. The `x'
axis represents calculation periods (for the last ten calendar years of the Fund
beginning with the earliest year) through the calendar year ended 1999. The
light gray shaded chart features ten distinct vertical bars, each shaded in
charcoal, and each visually representing by height the total return percentages
for the calendar year stated directly at its base. The calculated total return
percentage for the Fund for each calendar year is stated directly at the top of
each respective bar, for the calendar years 1990 through 1999. The percentages
noted are: 7.65%, 5.43%, 2.86%, 2.19%, 3.31%, 5.13%, 4.56%, 4.69%, 4.64% and
4.23% respectively. Historically, the Former Fund has maintained a constant
$1.00 net asset value per share. The bar chart shows the variability of the
Former Fund's total returns on a calendar year-end basis.
The Former Fund's Shares were sold without a sales charge (load). The total
returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's highest quarterly return
was 1.89% (quarter ended June 30, 1990). Its lowest quarterly return was 0.53%
(quarter ended June 30, 1993).
Average Annual Total Return
The following table represents the Former Fund's Average Annual Total Returns
for the calendar periods ended December 31, 1999.
Calendar Period Fund
1 Year 4.23%
5 Years 4.65%
10 Years 4.46%
The Former Fund's 7-Day Net Yield as of December 31, 1999 was 4.59%. You may
call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
returns. What are the Fund's Fees and Expenses?
MONEY MARKET MANAGEMENT
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, as applicable) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other
Distributions) (as a percentage of offering price). None
Redemption Fee (as a percentage of amount redeemed, if applicable)
None
Exchange
Fee
None
Annual Fund Operating Expenses (Before Waivers)/1/
Expenses That are Deducted From Fund Assets (as a percentage of average net
assets)
Management
Fee/2/
0.50%
Distribution (12b-1)
Fee None
Shareholder Services
Fee/3/ 0.25%
Other
Expenses
0.54%
Total Annual Fund Operating
Expenses/4/ 1.29%
1 Although not contractually obligated to do so, the adviser and shareholder
services provider expect to waive certain amounts during the fiscal year
ending December 31, 2000. These are shown below along with the net expenses
the Fund expects to actually pay for the fiscal year ending December 31,
2000.
Total Waivers of Fund
Expenses 0.18%
Total Actual Annual Fund Operating Expenses (after
waivers) 1.11%
2 The adviser expects to voluntarily waive a portion of the management fee.
The adviser can terminate this anticipated voluntary waiver at any time.
The management fee paid by the Fund (after the anticipated voluntary
waiver) is expected to be 0.45% for the fiscal year ending December 31,
2000.
3 The shareholder services provider expects to voluntarily reduce its fee.
The shareholder services provider can terminate this voluntary reduction at
any time. The shareholder services fee paid by the Fund (after the
anticipated voluntary reduction) is expected to be 0.12% for the fiscal
year ending December 31, 2000.
4 For the fiscal year ended December 31, 1999, prior to the reorganization of
the Former Fund as a portfolio of the Trust, the Total Annual Fund
Operating Expenses and Total Actual Annual Fund Operating Expenses were
1.29% and 1.11%, respectively.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Shares for the time
periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Shares operating expenses are before waivers and reductions
as shown above and remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 Year $ 131
3 Years $ 409
5 Years $ 708
10 Years $ 1,556
What are the Fund's Investment Strategies?
The Fund invests primarily in a portfolio of short-term, high-quality fixed
income securities, issued by banks, corporations and the U.S. government,
maturing in 397 days or less. The Fund will have a dollar-weighted average
portfolio maturity of 90 days or less. The Fund's investment adviser (Adviser)
actively manages the Fund's portfolio, seeking to limit the credit risk taken by
the Fund and to select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook. The Adviser formulates its interest rate outlook by analyzing a variety
of factors such as current and expected U.S. economic growth; current and
expected interest rates and inflation; and the Federal Reserve's monetary
policy. The Adviser structures the portfolio by investing primarily in variable
rate demand instruments and commercial paper. The Adviser generally shortens the
portfolio's maturity when it expects interest rates to rise and extends the
maturity when it expects interest rates to fall. This strategy seeks to enhance
the returns from favorable interest rate changes and reduce the effect of
unfavorable changes. What are the Principal Securities in Which the Fund
Invests?
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. The
following describes the types of fixed income securities in which the Fund may
invest.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default.
DEMAND INSTRUMENTS
Demand instruments are corporate debt securities that the issuer must repay upon
demand. Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The Fund treats
demand instruments as short-term securities, even though their stated maturity
may extend beyond one year.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Yankee instruments are denominated in U.S. dollars and
issued by U.S. branches of foreign banks. Eurodollar instruments are denominated
in U.S. dollars and issued by non- U.S. branches of U.S. or foreign banks.
Asset Backed Securities
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed income
assets (including other fixed income securities) may be used to create an asset
backed security. Asset backed securities may take the form of commercial paper,
notes or pass through certificates. Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
Repurchase agreements are subject to credit risks.
Investment Ratings
The securities in which the Fund invests will be rated in one of the two highest
short-term rating categories by one or more NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as
Standard & Poor's and Moody's Investors Services. These NRSROs assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely upon the Adviser's credit assessment.
Credit risk includes the possibility that a party to a transaction involving
the Fund will fail to meet its obligations. This could cause the Fund to lose
the benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities. SECTOR RISKS A substantial portion
of the Fund's portfolio may be comprised of securities credit enhanced by banks
or companies with similar characteristics. As a result, the Fund will be more
susceptible to any economic, business, political or other developments which
generally affect these entities. What do Shares Cost?
You can purchase, redeem or exchange Shares any day the New York Stock Exchange
(NYSE) is open. The Fund attempts to stabilize the net asset value (NAV) of its
Shares at $1.00 by valuing the portfolio securities using the amortized cost
method. The Fund cannot guarantee that its NAV will always remain at $1.00 per
Share. The Fund does not charge a front-end sales charge. NAV is determined at
12:00 noon (Eastern time) and as of the end of regular trading (normally 4:00
p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $1,500. The
required minimum subsequent investment amount is $100. The minimum initial and
subsequent investment amounts for retirement plans are $250 and $100,
respectively.
An institutional investor's minimum investment is calculated by combining all
accounts it maintains with the Fund. Accounts established through investment
professionals may be subject to a smaller minimum investment amount. Keep in
mind that investment professionals may charge you fees for their services in
connection with your Share transactions.
SALES CHARGE WHEN YOU REDEEM
Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC).
A CDSC will be imposed only in certain instances in which the Fund Shares
being redeemed were acquired in exchange for Class F Shares of certain Federated
Funds. (See "Exchange Privileges"). If Fund Shares were acquired in exchange for
Class F Shares of certain Federated Funds, a redemption of Fund Shares within
four years of the initial Class F Share purchase will be subject to a CDSC of
1%.
You will not be charged a CDSC when redeeming Shares:
. purchased with reinvested dividends or capital gains;
. purchased within 120 days of redeeming Shares of an equal or lesser amount;
. that you exchanged into the same class of another Federated Fund if the shares
were held for the applicable CDSC holding period (other than a money market
fund);
. purchased through investment professionals who did not receive advanced
sales payments;
. if, after you purchase Shares, you become disabled as defined by the IRS;
. if the Fund redeems your Shares and closes your account for not meeting the
minimum balance requirement;
. if your redemption is a required retirement plan distribution; or
. upon the death of the last surviving shareholder of the account.
To keep the sales charge as low as possible, the Fund redeems your Shares in
this order:
. Shares that are not subject to a CDSC; and
. Shares held the longest (to determine the number of years your Shares have
been held, include the time you held shares of other Federated Funds that have
been exchanged for Shares of this Fund).
The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.
How is the Fund Sold?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to investors with temporary cash balances and investors with
cash reserves, or to individuals, directly or through investment professionals.
The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional, directly from the
Fund, or through an exchange from the Class F Shares of certain Federated Funds.
The Fund reserves the right to reject any request to purchase or exchange
Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 3:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds). Orders by mail are considered received when payment
by check is converted into federal funds (normally the business day after the
check is received) and Shares begin earning dividends the next day.
BY INVEST-BY-PHONE
Once you establish an account, you may use the Fund's Invest-By-Phone privilege
for future Share purchases if you have an account with a bank that is an
Automated Clearinghouse member. To apply, call the Fund for an authorization
form. You may use Invest-By-Phone to purchase Shares approximately two weeks
from the date you file the form with Federated Shareholder Services Company.
BY DIRECT DEPOSIT
You may complete an application with Federated Shareholder Services Company to
have your Social Security, Railroad Retirement, VA Compensation or Pension,
Civil Service Retirement and certain other retirement payments invested directly
into the Fund. The application must be filed with Federated Shareholder Services
Company before direct deposit may begin. Allow 60 to 90 days for the application
to be processed.
THROUGH AN EXCHANGE
You may purchase Shares through an exchange from the Class F Shares of certain
Federated Funds. You must meet the minimum initial investment requirement for
purchasing Shares and both accounts must have identical registrations.
BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.
BY AUTOMATED CLEARINGHOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
RETIREMENT INVESTMENTS
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.
How to Redeem and Exchange Shares
You should redeem or exchange Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time).
Investment professionals are responsible for promptly submitting redemption
requests and providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem or exchange Shares by calling the Fund at 1-800-341-7400 once you
have completed the appropriate authorization form for telephone transactions.
If you call before 3:00 p.m. (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 3:00 p.m. (Eastern time) your redemption will be wired to
you the following business day. You will receive that day's dividend.
By Mail
You may redeem or exchange Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed or exchanged;
. signatures of all shareholders exactly as registered; and
. if exchanging, the Fund Name and Share Class, account number and account
registration into which you are exchanging.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days;
. a redemption is payable to someone other than the shareholder(s) of record;
or
. if exchanging (transferring) into another fund with a different shareholder
registration.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union, broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is an
ACH member; or
. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
REDEMPTIONS FROM RETIREMENT ACCOUNTS
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.
EXCHANGE PRIVILEGE
You may exchange Shares of the Fund into Class F Shares of certain Federated
Funds. To do this, you must:
. ensure that the account registrations are identical;
. meet any minimum initial investment requirements; and
. receive a prospectus for the fund into which you wish to exchange.
An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.
The Fund may modify or terminate the exchange privilege at any time. The
Fund's management or investment adviser may determine from the amount, frequency
and pattern of exchanges that a shareholder is engaged in excessive trading that
is detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Federated Funds.
SYSTEMATIC WITHDRAWAL/ EXCHANGE PROGRAM
You may automatically redeem or exchange Shares in a minimum amount of $100 on a
regular basis. Complete the appropriate section of the New Account Form or an
Account Service Options Form or contact your investment professional or the
Fund. Your account value must meet the minimum initial investment amount at the
time the program is established. This program may reduce, and eventually
deplete, your account. Payments should not be considered yield or income.
CHECKWRITING
You may request a checking account to redeem your Fund Shares. Your account will
continue to receive the daily dividend declared on the Shares to be redeemed
until the check is presented for payment.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming or exchanging
Shares represented by certificates previously issued by the Fund, you must
return the certificates with your written redemption or exchange request. For
your protection, send your certificates by registered or certified mail, but do
not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions or exchanges cause the account balance to
fall below the minimum initial investment amount. Before an account is closed,
you will be notified and allowed 30 days to purchase additional Shares to meet
the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be primarily dividends. Redemptions and
exchanges are taxable sales. Please consult your tax adviser regarding your
federal, state, and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which total approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers. ADVISORY FEES
The Adviser receives an annual investment advisory fee based on the Fund's
average net assets as shown in the chart below. The Adviser may voluntarily
waive a portion of its fee or reimburse the Fund for certain operating expenses.
Average Daily Net Assets Advisory Fees as
Percentage of Average
Daily Net Assets
First $500 million 0.500 of 1%
Second $500 million 0.475 of 1%
Third $500 million 0.450 of 1%
Fourth $500 million 0.425 of 1%
Over $2 billion 0.400 of 1%
Last Meeting of Shareholders
A Special Meeting for the shareholders of the Former Fund was held on November
30, 1999. On September 21, 1999, the record date for shareholders voting at the
meeting, there were 78,873,312 total outstanding shares. The following items
were considered by shareholders and the results of their voting were as follows:
1. Election of Trustees:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Against Abstentions and Broker Withheld Authority
Names For Non-Votes To Vote
John F. Cunningham 48,904,275 1,398,805
Charles F. Mansfield, Jr. 48,904,787 1,398,293
John S. Walsh 48,893,775 1,409,305
</TABLE>
2. To approve an amendment to, and a restatement of, the Former Fund's Articles
of Incorporation to permit the Board to liquidate assets of the Former Fund, its
series or classes, and distribute the proceeds of such assets to holders of such
shares representing such interests, without seeking shareholder approval to the
extent permitted under Maryland law.
For Against Abstain Broker Non-Votes
41,914,728 2,858,617 2,062,426 3,467,309
3. To approve a proposed Agreement and Plan of Reorganization between the Former
Fund and Money Market Obligations Trust, on behalf of its series, Money Market
Management (the "New Fund"), whereby the New Fund would acquire all of the
assets of the Former Fund in exchange for shares of the New Fund to be
distributed pro rata by the Former Fund to its shareholders in complete
liquidation and termination of the Former Fund.
For Against Abstain Broker Non-Votes
42,598,173 2,021,292 2,216,306 3,467,309
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Former Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Deloitte & Touche LLP, whose report,
along with the Former Fund's audited financial statements, is included in the
Annual Report.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Year Ended December 31 1998 1997 1996 1995
1994
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
Income From Investment Operations:
Net investment income 0.05 0.05 0.05 0.05 0.03
Less Distributions:
Distributions from net investment income (0.05) (0.05) (0.05) (0.05) (0.03)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
Total Return/1/ 4.64% 4.69% 4.56% 5.13% 3.31%
Ratios to Average Net Assets:
Expenses 1.11% 1.10% 1.06% 1.08% 1.14%
Net investment income 4.54% 4.58% 4.46% 4.99% 3.27%
Expenses waiver/reimbursement/2/ 0.18% 0.15% 0.13% 0.15% 0.00%
Supplemental Data:
Net assets, end of period (000 omitted) $83,460 $81,309 $87,381 $101,390 $114,588
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
Further information about the Fund's performance is contained in the Former
Fund's Prospectus, dated February 28, 1999.
NOTES
[LOGO OF FEDERATED]
Money Market Management
A Portfolio of Money Market Obligations Trust
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is contained in the Former Fund's SAI and Semi- Annual Report
to shareholders as it becomes available. To obtain the SAI, the Semi-Annual
Report and other information without charge, and make inquiries, call your
investment professional or the Fund at 1-800-341-7400. You can obtain
information about the Fund (including the SAI) by writing to or visiting the
Public Reference Room in Washington, DC. You may also access fund information
from the EDGAR Database on the SEC's Internet site at http://www.sec.gov. You
can purchase copies of this information by contacting the SEC by email at
[email protected]. or by writing to the SEC's Public Reference Section,
Washington, DC 20549-0102. Call 1-202-942-8090 for information on the Public
Reference Room's operations and copying fees.
[LOGO OF FEDERATED AND ADDRESS]
Investment Company Act File No. 811-2430
Cusip 60934N211
8012811A (1/00)
Federated is a registered mark
of Federated Investors, Inc.
2000 (c) Federated Investors, Inc.
STATEMENT OF ADDITIONAL INFORMATION
Money Market Management
A Portfolio of Money Market Obligations Trust
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Money
Market Management (Fund), dated January 31, 2000. Obtain the prospectus without
charge by calling 1-800-341-7400.
JANUARY 31, 2000
CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Exchanging Securities for Shares
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Addresses
Cusip 60934N211
80128113 (1/00)
How is the Fund Organized?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund was established under the laws of the State
of Maryland on October 30, 1973. The Fund was reorganized as a Massachusetts
business trust on June 29, 1982, and then re-established as a Maryland
corporation under Articles of Incorporation dated August 19, 1992. The Fund will
be reorganized as a portfolio of the Trust on February 1, 2000. The Fund's
investment adviser is Federated Investment Management Company (Adviser).
Securities in Which the Fund Invests
The Fund's principal securities are described in the prospectus. Additional
securities, and further details regarding the principal securities, are set
forth below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
may invest.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government of the
United States. U.S. Treasury securities are generally regarded as having the
lowest credit risks.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies. The credit risks of corporate debt securities vary widely among
issuers.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and
use the proceeds (or bank loans) to repay maturing paper. If the issuer
cannot continue to obtain liquidity in this fashion, its commercial paper
may default.
Demand Instruments
Demand instruments are corporate debt securities that the issuer must repay
upon demand. Other demand instruments require a third party, such as a
dealer or bank, to repurchase the security for its face value upon demand.
The Fund treats demand instruments as short-term securities, even though
their stated maturity may extend beyond one year.
Municipal Securities
Municipal securities are issued by states, counties, cities and other political
subdivisions and authorities. Although many municipal securities are exempt from
federal income tax, the Fund may invest in taxable municipal securities.
Asset Backed Securities
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed income
assets (including other fixed income securities) may be used to create an asset
backed security. Asset backed securities may take the form of commercial paper,
notes, or pass through certificates. Asset backed securities have prepayment
risks.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate and credit risks of a zero coupon security.
Bank Instruments
Bank instruments are unsecured interest-bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Yankee instruments are denominated in U.S dollars and
issued by U.S. branches of foreign banks. Eurodollar instruments are denominated
in U.S. dollars and issued by non-U.S. branches of U.S. or foreign banks.
Insurance Contracts
Insurance contracts include guaranteed investment contracts, funding agreements
and annuities. The Fund treats these contracts as fixed income securities.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement also includes arrangements where
securities or other liquid assets secure payment of a fixed income security. If
a default occurs, these assets may be sold and the proceeds paid to the
security's holders. Either form of credit enhancement reduces credit risks by
providing another source of payment for a fixed income security.
Foreign Securities
Foreign securities are securities of issuers based outside the United States.
The Fund considers an issuer to be based outside the United States if:
. it is organized under the laws of, or has a principal office located in,
another country;
. the principal trading market for its securities is in another country; or
. it (or its subsidiaries) derived in its most current fiscal year at least 50%
of its total assets, capitalization, gross revenue or profit from goods
produced, services performed, or sales made in another country.
Along with the risks normally associated with domestic securities of the same
type, foreign securities are subject to risks of foreign investing.
SPECIAL TRANSACTIONS
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
Inter-fund Borrowing and Lending Arrangements
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. (Federated funds) to lend
and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary
for both borrowing and lending funds, and an inter-fund loan is only made if it
benefits each participating fund. Federated administers the program according to
procedures approved by the Fund's Board of Trustees (Board), and the Board
monitors the operation of the program. Any inter-fund loan must comply with
certain conditions set out in the exemption, which are designed to assure
fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may be
made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the Bank Loan Rate), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate.
Securities Lending
The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.
The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.
Loans are subject to termination at the option of the Fund or the borrower. The
Fund will not have the right to vote on securities while they are on loan, but
it will terminate a loan in anticipation of any important vote. The Fund may pay
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.
Asset Coverage
In order to secure its obligations in connection with special transactions, the
Fund will either own the underlying assets or set aside readily marketable
securities with a value that equals or exceeds the Fund's obligations. Unless
the Fund has other readily marketable assets to set aside, it cannot trade
assets used to secure such obligations without terminating a special
transaction. This may cause the Fund to miss favorable trading opportunities or
to realize losses on special transactions.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
INVESTMENT RATINGS
A nationally recognized statistical ratings organization's two highest rating
categories are determined without regard for sub-categories and gradations. For
example, securities rated A-1+, A-1 or A-2 by Standard & Poor's, Prime-1, or
Prime-2 by Moody's Investors Services (Moody's), or F-1 (+ or -) or F-2 (+ or -)
by Fitch IBCA, Inc. are all considered rated in one of the two highest
short-term rating categories. The Fund will follow applicable regulations in
determining whether a security rated by more than one nationally recognized
statistical ratings organization can be treated as being in one of the two
highest short-term rating categories; currently, such securities must be rated
by two nationally recognized statistical ratings organizations in one of their
two highest rating categories. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Fixed income securities generally compensate for greater credit risk by paying
interest at a higher rate. The difference between the yield of a security and
the yield of a U.S. Treasury security with a comparable maturity (the spread)
measures the additional interest paid for risk. Spreads may increase generally
in response to adverse economic or market conditions. A security's spread may
also increase if the security's rating is lowered, or the security is perceived
to have an increased credit risk. An increase in the spread will cause the price
of the security to decline.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Risks of Foreign Investing
Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable than those of the United States. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors.
Prepayment Risks
Unlike traditional fixed income securities, which pay a fixed rate of interest
until maturity (when the entire principal amount is due), payments on asset
backed securities include both interest and a partial payment of principal.
Partial payment of principal may be comprised of scheduled principal payments as
well as unscheduled payments from voluntary prepayment, refinancing, or
foreclosure of the underlying loans. If the Fund receives unscheduled
prepayments, it may have to reinvest the proceeds in other fixed income
securities with lower interest rates, higher credit risks or other less
favorable characteristics.
FUNDAMENTAL INVESTMENT OBJECTIVE
The Fund's investment objective is to achieve current income consistent with
stability of principal. The investment objective may not be changed by the Board
without shareholder approval.
INVESTMENT LIMITATIONS
Diversification
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the U.S. or its
agencies or instrumentalities and repurchase agreements collateralized by such
U.S. government securities; and securities of other investment companies) if, as
a result, more than 5% of the value of its total assets would be invested in
securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.
Borrowing Money and Issuing Senior Securities
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Underwriting Securities
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Lending
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
Concentration
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry. In addition, investments in bank instruments,
and investments in certain industrial development bonds funded by activities in
a single industry, will be deemed to constitute investment in an industry,
except when held for temporary defensive purposes. The investment of more than
25% of the value of the Fund's total assets in any one industry will constitute
concentration.
The above limitations cannot be changed by the Board unless authorized by the
"vote of a majority of its outstanding voting securities," as defined by the
Investment Company Act of 1940. The following limitations, however, may be
changed by the Board without shareholder approval. Shareholders will be notified
before any material change in these limitations becomes effective.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Pledging Assets
The Fund will not mortgage, pledge or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restrictions or resale under
Federal securities laws.
For purposes of the diversification limitation, 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.
For purposes of the concentration limitation, (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities. To conform to the current view of the SEC that only domestic bank
instruments may be excluded from industry concentration limitations, the Fund
will not exclude foreign bank instruments from industry concentration limits as
long as the policy of the SEC remains in effect.
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 (the Rule), which regulates money
market mutual funds. The Fund will determine the effective maturity of its
investments according to the Rule. The Fund may change these operational
policies to reflect changes in the laws and regulations without the approval of
its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board will take any steps it considers 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.
What do Shares Cost?
REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE
These reductions or eliminations are offered because: no sales commissions have
been advanced to the investment professional selling Shares; the shareholder has
already paid a Contingent Deferred Sales Charge (CDSC); or nominal sales efforts
are associated with the original purchase of Shares.
Upon notification to the Distributor or the Fund's transfer agent, no CDSC will
be imposed on redemptions:
. following the death or post-purchase disability, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, of the last surviving
shareholder;
. representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age
of 70 1/2;
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
Exchanging Securities for Shares
You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Fund will value your
securities in the same manner as it values its assets. This exchange is treated
as a sale of your securities for federal tax purposes.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
Account and Share Information
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 12, 2000, there were no shareholders who owned of record,
beneficially, or both, 5% or more of outstanding Shares.
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
Who Manages and Provides Services to the Fund?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
43 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January 12, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding shares.
<TABLE>
<CAPTION>
Name
Total
Birth Date Aggregate
Compensation
Address Principal Occupations Compensation
From Trust and
Position With Trust for Past Five Years From Fund
Fund Complex
<S> <C> <C>
<C>
John F. Donahue*#+ Chief Executive Officer and Director or $0
$0 for the
Birth Date: July 28, 1924 Trustee of the Federated Fund Complex;
Trust and 43
Federated Investors Tower Chairman and Trustee, Federated Investment
other investment
1001 Liberty Avenue Management Company; Chairman and Director,
companies in the
Pittsburgh, PA Federated Investors, Inc., Federated
Fund Complex
CHAIRMAN AND TRUSTEE Investment Counseling and Federated Global
Investment Management Corp.; Chairman,
Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund $1,050.59
$116,760.63 for
Birth Date: February 3, 1934 Complex; Director, Member of Executive
the Trust
15 Old Timber Trail Committee, Children's Hospital of
and 43 other
Pittsburgh, PA Pittsburgh; Director, Robroy Industries,
investment
TRUSTEE Inc. (coated steel conduits/computer
companies in
storage equipment); formerly: Senior
the Fund Complex
Partner, Ernst & Young LLP; Director, MED
3000 Group, Inc. (physician practice
management); Director, Member of Executive
Committee, University of Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund $1,155.81
$128,455.37 for
Birth Date: June 23, 1937 Complex; President, Investment Properties
the Trust
Grubb & Ellis/Investment Corporation; Senior Vice President, John
and 43 other
Properties Corporation R. Wood and Associates, Inc., Realtors;
investment
3201 Tamiami Trail North Partner or Trustee in private real estate
companies in the
Naples, FL ventures in Southwest Florida; formerly:
Fund Complex
TRUSTEE President, Naples Property Management,
Inc. and Northgate Village Development
Corporation.
Nicholas P. Constantakis Director or Trustee of the Federated Fund $1,050.59
$73,191.21 for
Birth Date: September 3, 1939 Complex; Director, Michael Baker
the Trust
175 Woodshire Drive Corporation (engineering, construction,
and 37 other
Pittsburgh, PA operations and technical services);
investment
TRUSTEE formerly: Partner, Andersen Worldwide SC.
companies in the
Fund Complex
John F. Cunningham Director or Trustee of some of the $1,050.59
$93,190.48 for
Birth Date: March 5, 1943 Federated Fund Complex; Chairman,
the Trust
353 El Brillo Way President and Chief Executive Officer,
and 37 other
Palm Beach, FL Cunningham & Co., Inc. (strategic business
investment
TRUSTEE consulting); Trustee Associate, Boston
companies in the
College; Director, Iperia Corp.
Fund Complex
(communications/software); formerly:
Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board
and Chief Executive Officer, Computer
Consoles, Inc.; President and Chief
Operating Officer, Wang Laboratories;
Director, First National Bank of Boston;
Director, Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of $0
$0 for the Trust
Birth Date: April 11, 1949 the Federated Fund Complex; Director or
and 30 other
Federated Investors Tower Trustee of some of the Funds in the
investment
1001 Liberty Avenue Federated Fund Complex; President, Chief
companies in the
Pittsburgh, PA Executive Officer and Director, Federated
Fund Complex
PRESIDENT AND TRUSTEE Investors, Inc.; President and Trustee,
Federated Investment Management Company
and Federated Investment Counseling;
President and Director, Federated Global
Investment Management Corp.; President,
Passport Research, Ltd.; Trustee,
Federated Shareholder Services Company;
Director, Federated Services Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund $1,050.59
$116,760.63 for
Birth Date: October 11, 1932 Complex; Professor of Medicine, University
the Trust
3471 Fifth Avenue of Pittsburgh; Medical Director,
and 43 other
Suite 1111 University of Pittsburgh Medical Center -
investment
Pittsburgh, PA Downtown; Hematologist, Oncologist and
companies in the
TRUSTEE Internist, University of Pittsburgh
Fund Complex
Medical Center; Member, National Board of
Trustees, Leukemia Society of America.
Peter E. Madden Director or Trustee of the Federated Fund $983.04
$109,153.60 for
Birth Date: March 16, 1942 Complex; formerly: Representative,
the Trust
One Royal Palm Way Commonwealth of Massachusetts General
and 43 other
100 Royal Palm Way Court; President, State Street Bank and
investment
Palm Beach, FL Trust Company and State Street Corporation.
companies in the
TRUSTEE Previous Positions: Director, VISA USA and
Fund Complex
VISA International; Chairman and Director,
Massachusetts Bankers Association;
Director, Depository Trust Corporation;
Director, The Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the $1,103.25
$102,573.91 for
Birth Date: April 10, 1945 Federated Fund Complex; Executive Vice
the Trust
80 South Road President, Legal and External Affairs,
and 40 other
Westhampton Beach, NY Dugan Valve Contess, Inc. (marketing,
investment
TRUSTEE communications, technology and
companies in the
consulting); formerly Management
Fund Complex
Consultant.
Previous Positions: Chief Executive
Officer, PBTC International Bank; Partner,
Arthur Young & Company (now Ernst & Young
LLP); Chief Financial Officer of Retail
Banking Sector, Chase Manhattan Bank;
Senior Vice President, Marine Midland
Bank; Vice President, Citibank; Assistant
Professor of Banking and Finance, Frank G.
Zarb School of Business, Hofstra
University.
John E. Murray, Jr., J.D., S.J.D.# Director or Trustee of the Federated Fund $1,155.81
$128,455.37 for
Birth Date: December 20, 1932 Complex; President, Law Professor,
the Trust
President, Duquesne University Duquesne University; Consulting Partner,
and 43 other
Pittsburgh, PA Mollica & Murray; Director, Michael Baker
investment
TRUSTEE Corp. (engineering, construction,
companies in the
operations and technical services).
Fund Complex
Previous Positions: Dean and Professor of
Law, University of Pittsburgh School of
Law; Dean and Professor of Law, Villanova
University School of Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund $1,050.59
$116,760.63 for
Birth Date: June 21, 1935 Complex; Public Relations/Marketing/Conference
the Trust
4905 Bayard Street Planning. Previous Positions: National
and 43 other
Pittsburgh, PA Spokesperson, Aluminum Company of America;
investment
TRUSTEE television producer; business owner.
companies in the
Fund Complex
John S. Walsh Director or Trustee of some of the $1,050.59
$94,536.85 for
Birth Date: November 28, 1957 Federated Fund Complex; President and
the Trust
2007 Sherwood Drive Director, Heat Wagon, Inc. (manufacturer
and 39 other
Valparaiso, IN of construction temporary heaters);
investment
TRUSTEE President and Director, Manufacturers
companies in the
Products, Inc. (distributor of portable
Fund Complex
construction heaters); President, Portable
Heater Parts, a division of Manufacturers
Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly:
Vice President, Walsh & Kelly, Inc.
Edward C. Gonzales Trustee or Director of some of the Funds $0
$0 for the
Birth Date: October 22, 1930 in the Federated Fund Complex; President,
Trust and 42
Federated Investors Tower Executive Vice President and Treasurer of
other investment
1001 Liberty Avenue some of the Funds in the Federated Fund
company in the
Pittsburgh, PA Complex; Vice Chairman, Federated
Fund Complex
EXECUTIVE VICE PRESIDENT Investors, Inc.; Vice President, Federated
Investment Management Company, Federated
Investment Counseling, Federated Global
Investment Management Corp. and Passport
Research, Ltd.; Executive Vice President
and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services
Company.
John W. McGonigle Executive Vice President and Secretary of $0
$0 for the
Birth Date: October 26, 1938 the Federated Fund Complex; Executive Vice
Trust and 43
Federated Investors Tower President, Secretary and Director,
other investment
1001 Liberty Avenue Federated Investors, Inc.; Trustee,
companies in the
Pittsburgh, PA Federated Investment Management Company
Fund Complex
EXECUTIVE VICE PRESIDENT AND and Federated Investment Counseling;
SECRETARY Director, Federated Global Investment
Management Corp., Federated Services
Company and Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; $0
$0 for the
Birth Date: June 17, 1954 Vice President - Funds Financial Services
Trust and 43
Federated Investors Tower Division, Federated Investors, Inc.;
other investment
1001 Liberty Avenue formerly: various management positions
companies in the
Pittsburgh, PA within Funds Financial Services Division
Fund Complex
TREASURER of Federated Investors, Inc.
Richard B. Fisher President or Vice President of some of the $0
$0 for the
Birth Date: May 17, 1923 Funds in the Federated Fund Complex;
Trust and 41
Federated Investors Tower Director or Trustee of some of the Funds
other investment
1001 Liberty Avenue in the Federated Fund Complex; Executive
companies in the
Pittsburgh, PA Vice President, Federated Investors, Inc.;
Fund Complex
VICE PRESIDENT Chairman and Director, Federated
Securities Corp.
William D. Dawson, III Chief Investment Officer of this Fund and $0
$0 for the
Birth Date: March 3, 1949 various other Funds in the Federated Fund
Trust and 42
Federated Investors Tower Complex; Executive Vice President,
other investment
1001 Liberty Avenue Federated Investment Counseling, Federated
companies in the
Pittsburgh, PA Global Investment Management Corp.,
Fund Complex
CHIEF INVESTMENT OFFICER Federated Investment Management Company
and Passport Research, Ltd.; Registered
Representative, Federated Securities
Corp.; Portfolio Manager, Federated
Administrative Services; Vice President,
Federated Investors, Inc.; formerly:
Executive Vice President and Senior Vice
President, Federated Investment Counseling
Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Investment Management Company
and Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of $0
$0 for the
Birth Date: September 15, 1959 the Trust. Ms. Cunningham joined
Trust and 6
Federated Investors Tower Federated in 1981 and has been a Senior
other investment
1001 Liberty Avenue Portfolio Manager and a Senior Vice
companies in the
Pittsburgh, PA President of the Fund's Adviser since
Fund Complex
VICE PRESIDENT 1997. Ms. Cunningham served as a Portfolio
Manager and a Vice President of the Fund's
Adviser from 1993 through 1996. Ms.
Cunningham is a Chartered Financial
Analyst and received her M.B.A. in Finance
from Robert Morris College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the $0
$0 for the
Birth Date: September 12, 1953 Trust. Ms. Ochson joined Federated in
Trust and 7
Federated Investors Tower 1982 and has been a Senior Portfolio
other investment
1001 Liberty Avenue Manager and a Senior Vice President of the
companies in the
Pittsburgh, PA Fund's Adviser since 1996. From 1988
Fund Complex
VICE PRESIDENT through 1995, Ms. Ochson served as a
Portfolio Manager and a Vice President of
the Fund's Adviser. Ms. Ochson is a
Chartered Financial Analyst and received
her M.B.A. in Finance from the University
of Pittsburgh.
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President and Trustee
of the Corporation.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund. The Adviser is a wholly owned subsidiary of Federated. The Adviser shall
not be liable to the Trust or any Fund shareholder 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.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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 may select brokers and dealers
based on whether they also offer research services (as described below). In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling Shares of the Fund
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual Funds as specified below:
<TABLE>
<CAPTION>
Maximum Average Aggregate Daily
Administrative Fee Net Assets of the Federated Funds
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio. Federated Services Company may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditor for the Fund, Deloitte & Touche LLP, plans and performs
its audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
For the Year Ended December 31 1999 1998 1997
<S> <C> <C> <C>
Advisory Fee Earned $413,312 $413,312 $433,191
Advisory Fee Reduction $ 42,698 $ 42,698 $ 14,375
Brokerage Commissions $ 0 $ 0 $ 0
Administrative Fee $125,000 $125,000 $125,002
Shareholder Services Fee $ 98,937 $ 98,937 N/A
</TABLE>
For the fiscal years ended December 31, 1999, 1998 and 1997, fees paid by the
Fund for services are prior to the Fund's reorganization as a portfolio of the
Trust on February 1, 1999.
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
Share performance reflects the effect of non-recurring charges, such as maximum
sales charges, which, if excluded, would increase the total return and yield.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year and ten-year periods ended
December 31, 1999.
Yield and Effective Yield given for the 7-day period ended December 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 1999.
<TABLE>
<CAPTION>
7-Day Period 1 Year 5 Years 10 Years
<S> <C> <C> <C> <C>
Total Return 4.23% 4.65% 4.46%
Yield 4.59%
Effective Yield 4.70%
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD AND EFFECTIVE YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized base-
period return by: adding one to the base-period return, raising the sum to the
365/7th power; and subtracting one from the result.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
. references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
. charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
. discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
. information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
. 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.
. 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.
. Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
. Bank Rate Monitor(C) National Index, Miami Beach, Florida, published weekly,
is an average of the interest rates of personal money market deposit accounts
at ten of the largest banks and thrifts in each of the five largest Standard
Metropolitan Statistical Areas. If more than one rate is offered, the lowest
rate is used. Account minimums and compounding methods may vary.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion, $13.1 billion and 115
million respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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 advisers. The
marketing effort to these institutional clients is headed by John B. Fisher,
President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
Financial Information
The Financial Statements for the Former Fund for the fiscal year ended December
31, 1999, are for prior to the Fund's reorganization as a portfolio of the Trust
on February 1, 1999.
Addresses
MONEY MARKET MANAGEMENT
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
PROSPECTUS
Money Market Trust
A Portfolio of Money Market Obligations Trust
A money market mutual fund seeking stability of principal and current income
consistent with stability of principal by investing primarily in a portfolio of
short-term, high-quality fixed income securities issued by banks, corporations
and the U.S. government.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Contents
<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the
Fund Invests? 4
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 7
How to Redeem Shares 8
Account and Share Information 9
Who Manages the Fund? 10
Last Meeting of Shareholders 11
Financial Information 11
</TABLE>
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is stability of principal
and current income consistent with stability of principal. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests primarily in a portfolio of short- term, high-quality fixed
income securities issued by banks, corporations and the U.S. government. The
Fund will have a dollar-weighted average portfolio maturity of 90 days or
less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund.
The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board or any other government agency.
Risk/Return Bar Chart and Table
The Bar Chart and Performance Table below reflect historical performance data
for Shares of Money Market Trust (the "Former Fund") prior to its reorganization
into the Fund, which is a newly created portfolio of Money Market Obligations
Trust (the "Trust"). On the date of the reorganization, February 1, 2000, the
Former Fund will be dissolved and its net assets (inclusive of liabilities
recorded on the Former Fund's records) will be transferred to the Fund.
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Money Market Trust as of the calendar year-end for each
of ten years. The `y' axis reflects the "% Total Return" beginning with "0%" and
increasing in increments of 2% up to 10%. The `x' axis represents calculation
periods (for the last ten calendar years of the Fund beginning with the earliest
year) through the calendar year ended 1999. The light gray shaded chart features
ten distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Fund for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1990 through 1999. The percentages noted are: 8.10%, 5.95%,
3.58%, 2.88%, 4.00%, 5.74%, 5.13%, 5.29%, 5.25% and 4.89% respectively.
Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's total
returns on a calendar year-end basis.
The Former Fund's shares were sold without a sales charge (load). The total
returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Former Fund's highest quarterly return
was 1.99% (quarter ended June 30, 1990). Its lowest quarterly return was 0.70%
(quarter ended June 30, 1993).
Average Annual Total Return Table
The following table represents the Former Fund's Average Annual Total Returns
for the calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year 4.89%
5 Years 5.26%
10 Years 5.07%
</TABLE>
The Former Fund's 7-Day Net Yield as of December 31, 1999 was 5.18%. You may
call the Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
returns.
What are the Fund's Fees and Expenses?
Money market trust
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
<TABLE>
<S> <C>
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption None
proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) None
(as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
Annual Fund Operating Expenses (Before Waivers)1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 0.40%
Distribution (12b-1) Fee None
Shareholder Services Fee 0.25%
Other Expenses 0.17%
Total Annual Fund Operating Expenses 0.82%
Total Waivers of Fund Expenses (contractual) 0.36%
Total Actual Annual Fund Operating Expenses (after waivers)2 0.46%
- ------------------------------------------------------------------------------------------------------------------------------------
1 Pursuant to the investment advisory contract, the adviser and shareholder
services provider will waive a portion of their fees. Shareholders must
approve any change to the contractual waiver.
2 Total Actual Annual Fund Operating Expenses represent the net expenses the
Fund expects to actually pay for the fiscal year ending July 31, 2000. For
the fiscal year ended July 31, 1999, prior to the reorganization of the
Former Fund as a portfolio of the Trust, the Total Annual Fund Operating
Expenses and Total Actual Annual Fund Operating Expenses were 0.82% and
0.46%, respectively.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Shares for the time
periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Shares operating expenses as shown in the table remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<S> <C>
1 Year $ 47
3 Years $ 148
5 Years $ 258
10 Years $ 579
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests primarily in a portfolio of short- term, high-quality fixed
income securities, issued by banks, corporations and the U.S. government,
maturing in 397 days or less. The Fund will have a dollar-weighted average
portfolio maturity of 90 days or less. The Fund's investment adviser (Adviser)
actively manages the Fund's portfolio, seeking to limit the credit risk taken by
the Fund and to select investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook. The Adviser formulates its interest rate outlook by analyzing a variety
of factors such as current and expected U.S. economic growth; current and
expected interest rates and inflation; and the Federal Reserve's monetary
policy. The Adviser structures the portfolio by investing primarily in variable
rate demand instruments and commercial paper. The Adviser generally shortens the
portfolio's maturity when it expects interest rates to rise and extends the
maturity when it expects interest rates to fall. This strategy seeks to enhance
the returns from favorable interest rate changes and reduce the effect of
unfavorable changes.
What are the Principal Securities in Which the Fund Invests?
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. The
following describes the types of fixed income securities in which the Fund may
invest.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default.
DEMAND INSTRUMENTS
Demand instruments are corporate debt securities that the issuer must repay upon
demand. Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The Fund treats
demand instruments as short-term securities, even though their stated maturity
may extend beyond one year.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Yankee instruments are denominated in U.S. dollars and
issued by U.S. branches of foreign banks. Eurodollar instruments are denominated
in U.S. dollars and issued by non- U.S. branches of U.S. or foreign banks.
Asset Backed Securities
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed income
assets (including other fixed income securities) may be used to create an asset
backed security. Asset backed securities may take the form of commercial paper,
notes or pass through certificates.
Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
Repurchase agreements are subject to credit risks.
Investment Ratings
The securities in which the Fund invests will be rated in the highest short-term
rating category by one or more NRSROs or be of comparable quality to securities
having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as
Standard & Poor's and Moody's Investors Services. These NRSROs assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely on the Adviser's credit assessment.
Credit risk includes the possibility that a party to a transaction involving
the Fund will fail to meet its obligations. This could cause the Fund to lose
the benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as demand
for particular fixed income securities, may cause the price of certain fixed
income securities to fall while the prices of other securities rise or remain
unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities issued
by finance companies or companies with similar characteristics. In addition, a
substantial part of the Fund's portfolio may be comprised of securities credit
enhanced by banks or companies with similar characteristics. As a result, the
Fund will be more susceptible to any economic, business, political or other
developments which generally affect these entities.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share. The
Fund does not charge a front- end sales charge. NAV is determined at 12:00 noon
and 3:00 p.m. (Eastern time) and as of the end of regular trading (normally 4:00
p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum
is reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to entities holding Shares in an agency or fiduciary
capacity, financial institutions, financial intermediaries and institutional
investors, or to individuals, directly or through investment professionals.
The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 3:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds). Orders by mail are considered received when payment
by check is converted into federal funds (normally the business day after the
check is received) and Shares begin earning dividends the next day.
BY AUTOMATIC INVESTMENTS
You may establish an account with your financial institution to automatically
purchase Shares on pre-determined dates or when your bank account reaches a
certain level. Under this program, participating financial institutions are
responsible for prompt transmission of orders and may charge you for this
service. You should read this prospectus along with your financial institution's
agreement or materials describing this service.
BY AUTOMATED CLEARINGHOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
RETIREMENT INVESTMENTS
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at
1-800-341-7400 once you have completed the appropriate authorization form for
telephone transactions.
If you call before 3:00 p.m. (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 3:00 p.m. (Eastern time) your redemption will be wired to
you the following business day. You will receive that day's dividend.
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed. Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of
record;
. your redemption will be sent to an address of record that was changed
within the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is
an ACH member; or
. wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts a Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from a Fund if
those checks are undeliverable and returned to the Fund.
REDEMPTIONS FROM RETIREMENT ACCOUNTS
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund will pay any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions cause the account balance to fall below
the minimum initial investment amount. Before an account is closed, you will be
notified and allowed 30 days to purchase additional Shares to meet the
minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be primarily dividends. Redemptions are
taxable sales. Please consult your tax adviser regarding your federal, state and
local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISER FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. Under the investment advisory contract, which is
subject to annual renewal by the Fund's Board of Trustees, the Adviser will
waive the amount, limited to the amount of the advisory fee, by which the Fund's
aggregate annual operating expenses, including the investment advisory fee but
excluding interest, taxes, brokerage commissions, expenses of registering or
qualifying the Fund and its shares under federal and state laws, and
extraordinary expenses exceed 0.45% of its average daily net assets.
Last Meeting of Shareholders
A Special Meeting for the shareholders of the Former Fund was held on November
17, 1999. On October 15, 1999, the record date for shareholders voting at the
meeting, there were 388,186,446 total outstanding shares. The following items
were considered by shareholders and the results of their voting were as
follows:
AGENDA ITEM 1
Election of Trustees:
<TABLE>
<CAPTION>
Abstentions Withheld
and Broker Authority
Names For Against Non-Votes To Vote
<S> <C> <C> <C> <C>
John F. Cunningham 273,622,230 158,322
J. Christopher Donahue 273,519,174 261,378
Charles F. Mansfield, Jr. 273,622,230 158,322
John S. Walsh 273,580,818 199,734
</TABLE>
AGENDA ITEM 2
To approve amendments to, and a restatement of, the Former Fund's Declaration of
Trust:
a. To approve an amendment and restatement of the Former Fund's Declaration of
Trust to require the approval by a majority of the outstanding voting shares in
the event of the sale and conveyance of the assets of the Former Fund to another
trust or corporation.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
<S> <C> <C> <C>
273,343,321 113,260 288,222 35,749
</TABLE>
b. To amend and restate the Former Fund's Declaration of Trust to permit the
Board of Trustees to liquidate assets of the Former Fund, and distribute the
proceeds of such assets to the holders of such shares representing such
interests, without seeking shareholder approval.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
<S> <C> <C> <C>
271,713,104 1,690,667 341,032 35,749
</TABLE>
AGENDA ITEM 3
To approve a proposed Agreement and Plan of Reorganization between the Former
Fund and Money Market Obligations Trust, on behalf of its series, Money Market
Trust (the "New Fund"), whereby the New Fund would acquire all of the assets of
the Former Fund in exchange for shares of the New Fund to be distributed pro
rata by the Former Fund to its shareholders in complete liquidation and
termination of the Former Fund.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
<S> <C> <C> <C>
272,685,601 566,074 520,128 35,749
</TABLE>
Financial Information
FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Former Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Deloitte & Touche LLP, whose report, along
with the Former Fund's audited financial statements, is included in the Annual
Report.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended July 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income From Investment Operations:
Net investment income 0.05 0.05 0.05 0.05 0.05
Less Distributions:
Distributions from net investment income (0.05) (0.05) (0.05) (0.05) (0.05)
Net Asset Value, End ofPeriod $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return1 4.88% 5.35% 5.19% 5.31% 5.42%
Ratios to Average Net Assets:
Expenses 0.46% 0.46% 0.46% 0.46% 0.46%
Net investment income 4.81% 5.24% 5.09% 5.22% 5.32%
Supplemental Data:
Net assets, end of period (000 omitted) $380,400 $412,104 $464,012 $513,687 $507,272
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
Further information about the Fund's performance is contained in the Former
Fund's Prospectus, dated September 30, 1999.
[LOGO of Federated World-Class Investment Manager]
Money Market Trust
A Portfolio of Money Market Obligations Trust
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Former Fund's SAI, Annual and
SemiAnnual Reports to shareholders and will be contained in the Fund's Annual
and Semi-Annual Reports as they become available. The Annual Report discusses
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year. To obtain the SAI, Annual
Report, SemiAnnual Report and other information without charge, and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
[LOGO of Federated]
Money Market Trust
Federated Investors Fund
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N229
8083102A (1/00)
Federated is a registered mark of Federated Investors, Inc.
2000 \c\Federated Investors, Inc. [Recycled LOGO]
STATEMENT OF ADDITIONAL INFORMATION
MONEY MARKET TRUST
A Portfolio of Money Market Obligations Trust
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Money Market Trust (Fund), dated
January 31, 2000. This SAI incorporates by reference the Fund's Annual Report.
Obtain the prospectus or the Annual Report without charge by calling 1-800-341-
7400.
JANUARY 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Addresses
Cusip 60934N229
8083102B (1/00)
How is the Fund Organized?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on July 24, 1978, will
be reorganized as a portfolio of the Trust on February 1, 2000. The Fund's
investment adviser is Federated Investment Management Company (Adviser).
Securities in Which the Fund Invests
SECURITIES DESCRIPTIONS AND TECHNIQUES
The Fund's principal securities are described in the prospectus. Additional
securities, and further details regarding the principal securities, are set
forth below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment objective.
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
may invest.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government of the
United States. U.S. Treasury securities are generally regarded as having the
lowest credit risks.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies. The credit risks of corporate debt securities vary widely among
issuers.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default.
Commercial paper investments will be limited to commercial paper rated A-1 by
Standard & Poor's (S&P), Prime-1 by Moody's Investors Services (Moody's) or F-1
by Fitch ICBA, Inc. (Fitch).
Demand Instruments
Demand instruments are corporate debt securities that the issuer must repay upon
demand. Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The Fund treats
demand instruments as short-term securities, even though their stated maturity
may extend beyond one year.
Municipal Securities
Municipal securities are issued by states, counties, cities and other political
subdivisions and authorities. Although many municipal securities are exempt from
federal income tax, the Fund may invest in taxable municipal securities.
Asset Backed Securities
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed income
assets (including other fixed income securities) may be used to create an asset
backed security. Asset backed securities may take the form of commercial paper,
notes, or pass through certificates. Asset backed securities have prepayment
risks.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate and credit risks of a zero coupon security.
Bank Instruments
Bank instruments are unsecured interest-bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Yankee instruments are denominated in U.S. dollars and
issued by U.S. branches of foreign banks. Eurodollar instruments are
denominated in U.S. dollars and issued by non-U.S. branches of U.S. or foreign
banks.
The Fund will not invest in instruments issued by banks or savings and loans
unless (a) at the time of investment they have capital, surplus and undivided
profits in excess of $100 million (as of the date of their most recently
published financial statements), or (b) the principal amount of the instrument
is insured in full by the Federal Deposit Insurance Corporation (FDIC) or
Federal Saving and Loan Insurance Corporation (FSLIC).
Insurance Contracts
Insurance contracts include guaranteed investment contracts, funding agreements
and annuities. The Fund treats these contracts as fixed income securities.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement also includes arrangements where
securities or other liquid assets secure payment of a fixed income security. If
a default occurs, these assets may be sold and the proceeds paid to the
security's holders. Either form of credit enhancement reduces credit risks by
providing another source of payment for a fixed income security.
Foreign Securities
Foreign securities are securities of issuers based outside the United States.
The Fund considers an issuer to be based outside the United States if:
. it is organized under the laws of, or has a principal office located in,
another country;
. the principal trading market for its securities is in another country; or
it (or its subsidiaries) derived in its most current fiscal year at least 50%
of its total assets, capitalization, gross revenue or profit from goods
produced, services performed, or sales made in another country.
Along with the risks normally associated with domestic securities of the same
type, foreign securities are subject to risks of foreign investing.
SPECIAL TRANSACTIONS
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
Inter-fund Borrowing and Lending Arrangements
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. (Federated funds) to lend
and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary
for both borrowing and lending funds, and an inter-fund loan is only made if it
benefits each participating fund. Federated administers the program according to
procedures approved by the Fund's Board of Trustees (Board), and the Board
monitors the operation of the program. Any inter-fund loan must comply with
certain conditions set out in the exemption, which are designed to assure
fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may be
made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the Bank Loan Rate), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate.
Securities Lending
The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.
The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.
Loans are subject to termination at the option of the Fund or the borrower. The
Fund will not have the right to vote on securities while they are on loan, but
it will terminate a loan in anticipation of any important vote. The Fund may pay
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.
Asset Coverage
In order to secure its obligations in connection with special transactions, the
Fund will either own the underlying assets or set aside readily marketable
securities with a value that equals or exceeds the Fund's obligations. Unless
the Fund has other readily marketable assets to set aside, it cannot trade
assets used to secure such obligations without terminating a special
transaction. This may cause the Fund to miss favorable trading opportunities or
to realize losses on special transactions.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
INVESTMENT RATINGS
The ratings categories of a nationally recognized statistical rating
organization (NRSRO) are determined without regard for sub-categories and
gradations. For example, securities rated SP-1 by S&P, MIG-1 by Moody's, or F-
1+ or F-1 by Fitch are all considered rated in the highest short-term rating
category. The Fund will follow applicable regulations in determining whether a
security rated by more than one rating service can be treated as being in the
highest short-term rating category. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in the prospectus. Additional risk factors are
outlined below.
Credit Risks
Fixed income securities generally compensate for greater credit risk by paying
interest at a higher rate. The difference between the yield of a security and
the yield of a U.S. Treasury security with a comparable maturity (the spread)
measures the additional interest paid for risk. Spreads may increase generally
in response to adverse economic or market conditions. A security's spread may
also increase if the security's rating is lowered, or the security is perceived
to have an increased credit risk. An increase in the spread will cause the price
of the security to decline.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Risks of Foreign Investing
Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable than those of the U.S. Securities in foreign
markets may also be subject to taxation policies that reduce returns for U.S.
investors.
Prepayment Risks
Unlike traditional fixed income securities, which pay a fixed rate of interest
until maturity (when the entire principal amount is due), payments on asset
backed securities include both interest and a partial payment of principal.
Partial payment of principal may be comprised of scheduled principal payments as
well as unscheduled payments from voluntary prepayment, refinancing, or
foreclosure of the underlying loans. If the Fund receives unscheduled
prepayments, it may have to reinvest the proceeds in other fixed income
securities with lower interest rates, higher credit risks or other less
favorable characteristics.
FUNDAMENTAL INVESTMENT OBJECTIVE
The investment objective of the Fund is stability of principal and current
income consistent with stability of principal. The investment objective of the
Fund may not be changed by the Board without shareholder approval.
INVESTMENT LIMITATIONS
Diversification
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the U.S. or its
agencies or instrumentalities and repurchase agreements collateralized by such
U.S. government securities; and securities of other investment companies) if, as
a result, more than 5% of the value of its total assets would be invested in
securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.
Borrowing Money and Issuing Senior Securities
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Lending
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
Concentration
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry. In addition, investments in bank instruments,
and investments in certain industrial development bonds funded by activities in
a single industry, will be deemed to constitute investment in an industry,
except when held for temporary defensive purposes. The investment of more than
25% of the value of the Fund's total assets in any one industry will constitute
concentration.
The above limitations cannot be changed by the Board unless authorized by the
"vote of a majority of its outstanding voting securities," as defined by the
Investment Company Act of 1940. The following limitations, however, may be
changed by the Board without shareholder approval. Shareholders will be notified
before any material change in these limitations becomes effective.
Pledging Assets
The Fund will not mortgage, pledge or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal
securities law. Under criteria established by the Board, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, the Fund will limit their purchase, together
with other illiquid securities, to 10% of its net assets.
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.
For purposes of the diversification limitation, 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."
For purposes of the concentration limitation, (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset-backed
securities will be classified according to the underlying assets securing such
securities. To conform to the current view of the SEC that only domestic bank
instruments may be excluded from industry concentration limitations, the Fund
will not exclude foreign bank instruments from industry concentration limits as
long as the policy of the SEC remains in effect.
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 (the Rule), which regulates money
market mutual funds. The Fund will determine the effective maturity of its
investments according to the Rule. The Fund may change these operational
policies to reflect changes in the laws and regulations without the approval of
its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board will take any steps it considers 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.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of a Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
Account and Share Information
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding Shares
of all series entitled to vote.
As of January 7, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Shares: Fiduciary Trust Company
International, New York, NY, owned approximately 88,965,100 shares (22.16%); The
Brotherhood BK & Trust Company, Kansas City, KS, owned approximately 35,458,973
shares (8.83%); and Davidson Trust Company, Great Falls, MT, owned approximately
26,223,370 shares (6.53%).
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
Who Manages and Provides Services to the Fund?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
43 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January 7, 2000, the Trust's Board and Officers as a group owned less than
1% of the Trust's outstanding Shares.
<TABLE>
<CAPTION>
Name
Birth Date Aggregate Total
Compensation
Address Principal Occupations Compensation From Trust
and
Position With Trust for Past Five Years From Fund Fund
Complex
- ------------------------ -------------------------------------------- --------------------
- ----------------------------
<S> <C> <C> <C>
John F. Donahue*#+ Chief Executive Officer and Director $ 0 $0 for the
Trust and 43other
Birth Date: July 28, 1924 or Trustee of the Federated Fund investment
companies in the
Federated Investors Tower Complex; Chairman and Trustee, Fund Complex
1001 Liberty Avenue Federated Investment Management
Pittsburgh, PA Company; Chairman and Director,
CHAIRMAN AND TRUSTEE Federated Investors, Inc., Federated
Investment Counseling and Federated
Global Investment Management Corp.;
Chairman, Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated $1,266.12 $116,760.63
for the Trust and
Birth Date: February 3, 1934 Fund Complex; Director, Member of 43 other
investment companies
15 Old Timber Trail Executive Committee, Children's in the Fund
Complex
Pittsburgh, PA Hospital of Pittsburgh; Director,
TRUSTEE Robroy Industries, Inc. (coated
steel conduits/computer storage
equipment); formerly: Senior
Partner, Ernst & Young LLP;
Director, MED 3000 Group, Inc.
(physician practice management);
Director, Member of Executive
Committee, University of Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated $1,392.96 $128,455.37
for the Trustand
Birth Date: June 23, 1937 Fund Complex; President, Investment 43 other
investment
Grubb & Ellis/Investment Properties Corporation; Senior Vice companies
in the Fund Complex
Properties Corporation President, John R. Wood and
3201 Tamiami Trail North Associates, Inc., Realtors; Partner
Naples, FL or Trustee in private real estate
TRUSTEE ventures in Southwest Florida;
formerly: President, Naples Property
Management, Inc. and Northgate
Village Development Corporation.
Nicholas P. Constantakis Director or Trustee of the Federated Fund Complex; $1,266.12 $73,191.21 for
the Trust and 37
Birth Date: September 3, 1939 Director, Michael Baker Corporation (engineering, other
investment companies in the
175 Woodshire Drive construction, operations and technical services); Fund Complex
Pittsburgh, PA formerly: Partner, Andersen Worldwide SC.
TRUSTEE
John F. Cunningham Director or Trustee of some of the Federated Fund $ 639.50 $93,190.48 for
the Trust and 37
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive other
investment companies in the
353 El Brillo Way Officer, Cunningham & Co., Inc. (strategic business Fund Complex
Palm Beach, FL consulting); Trustee Associate, Boston College;
TRUSTEE Director, Iperia Corp. (communications/software);
formerly: Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of the Federated $ 0 $0 for the
Trust and 30 other
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds investment
companies in the Fund
Federated Investors Tower in the Federated Fund Complex; President, Chief Complex
1001 Liberty Avenue Executive Officer and Director, Federated Investors,
Pittsburgh, PA Inc.; President and Trustee, Federated Investment
PRESIDENT AND TRUSTEE Management Company and Federated Investment
Counseling; President and Director, Federated
Global Investment Management Corp.; President,
Passport Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director, Federated
Services Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $1,266.12 $116,760.63
for the Trustand 43
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; other
investment companies in the
3471 Fifth Avenue Suite 1111 Medical Director, University of Pittsburgh Medical Fund Complex
Pittsburgh, PA Center - Downtown; Hematologist, Oncologist and
TRUSTEE Internist, University of Pittsburgh Medical Center;
Member, National Board of Trustees, Leukemia Society
of America.
Peter E. Madden Director or Trustee of the Federated Fund Complex; $1,124.92 $109,153.60
for the Trustand 43
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of other
investment companies in the
One Royal Palm Way Massachusetts General Court; President, State Street Fund Complex
100 Royal Palm Way Bank and Trust Company and State Street Corporation.
Palm Beach, FL Previous Positions: Director, VISA USA and VISA
TRUSTEE International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation; Director, The Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund $ 639.50 $102,573.91
for the Trustand 40
Birth Date: April 10, 1945 Complex; Executive Vice President, Legal and External other
investment companies in the
80 South Road Affairs, Dugan Valve Contess, Inc. (marketing, Fund Complex
Westhampton Beach, NY communications, technology and consulting); formerly
TRUSTEE Management Consultant.
Previous Positions: Chief Executive Officer, PBTC
International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase Manhattan
Bank; Senior Vice President, Marine Midland Bank;
Vice President, Citibank; Assistant Professor of
Banking and Finance, Frank G. Zarb School of
Business, Hofstra University.
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $1,330.19 $128,455.37
for the Trust and 43
S.J.D.# President, Law Professor, Duquesne University; other
investment companies in the
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Fund Complex
President, Duquesne University Michael Baker Corp. (engineering, construction,
Pittsburgh, PA operations and technical services).
TRUSTEE Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of
Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $1,266.12 $116,760.63
for the Trust and 43
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. other
investment companies in the
4905 Bayard Street Previous Positions: National Spokesperson, Aluminum Fund Complex
Pittsburgh, PA Company of America; television producer; business
TRUSTEE owner.
John S. Walsh Director or Trustee of some of the Federated Fund $ 639.50 $94,536.85 for
the Trustand 39
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. other
investment companies in the
2007 Sherwood Drive (manufacturer of construction temporary heaters); Fund Complex
Valparaiso, IN President and Director, Manufacturers Products, Inc.
TRUSTEE (distributor of portable construction heaters);
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
Edward C. Gonzales Trustee or Director of some of the Funds in the $ 0 $0 for the
Trust and 42 other
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice investment
company in the Fund
Federated Investors Tower President and Treasurer of some of the Funds in the Complex
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
EXECUTIVE VICE PRESIDENT Management Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee,
Federated Shareholder Services Company.
John W. McGonigle Executive Vice President and Secretary of the $ 0 $0 for the
Trust and 43 other
Birth Date: October 26, 1938 Federated Fund Complex; Executive Vice President, investment
companies in the Fund
Federated Investors Tower Secretary and Director, Federated Investors, Inc.; Complex
1001 Liberty Avenue Trustee, Federated Investment Management Company and
Pittsburgh, PA Federated Investment Counseling; Director, Federated
EXECUTIVE VICE Global Investment Management Corp., Federated Services
PRESIDENT AND SECRETARY Company and Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice $ 0 $0 for the
Trust and 43 other
Birth Date: June 17, 1954 President -Funds Financial Services Division, investment
companies in the Fund
Federated Investors Tower Federated Investors, Inc.; formerly: various Complex
1001 Liberty Avenue management positions within Funds Financial Services
Pittsburgh, PA Division of Federated Investors, Inc.
TREASURER
Richard B. Fisher President or Vice President of some of the Funds in $ 0 $0 for the
Trust and 41 other
Birth Date: May 17, 1923 the Federated Fund Complex; Director or Trustee of investment
companies in the Fund
Federated Investors Tower some of the Funds in the Federated Fund Complex; Complex
1001 Liberty Avenue Executive Vice President, Federated Investors, Inc.;
Pittsburgh, PA Chairman and Director, Federated Securities Corp.
VICE PRESIDENT
William D. Dawson, III Chief Investment Officer of this Fund and various $ 0 $0 for the
Trust and 42 other
Birth Date: March 3, 1949 other Funds in the Federated Fund Complex; Executive investment
companies in the Fund
Federated Investors Tower Vice President, Federated Investment Counseling, Complex
1001 Liberty Avenue Federated Global Investment Management Corp.,
Pittsburgh, PA Federated Investment Management Company and Passport
CHIEF INVESTMENT OFFICER Research, Ltd.; Registered Representative, Federated
Securities Corp.; Portfolio Manager, Federated
Administrative Services; Vice President,
Federated Investors, Inc.; formerly: Executive
Vice President and Senior Vice President,
Federated Investment Counseling Institutional
Portfolio Management Services Division; Senior
Vice President, Federated Investment Management
Company and Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. $ 0 $0 for the
Trust and 6 other
Birth Date: September 15, 1959 Ms. Cunningham joined Federated in 1981 and has been a investment
companies in the Fund
Federated Investors Tower Senior Portfolio Manager and a Senior Vice President Complex
1001 Liberty Avenue of the Fund's Adviser since 1997. Ms. Cunningham
Pittsburgh, PA served as a Portfolio Manager and a Vice President of
VICE PRESIDENT the Fund's Adviser from 1993 through 1996. Ms.
Cunningham is a Chartered Financial Analyst and
received her M.B.A. in Finance from Robert Morris
College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $ 0 $0 for the
Trust and 7 other
Birth Date: Ochson joined Federated in 1982 and has been a Senior investment
companies in the Fund
September 12, 1953 Portfolio Manager and a Senior Vice President of the Complex
Federated Investors Tower Fund's Adviser since 1996. From 1988 through 1995, Ms.
1001 Liberty Avenue Ochson served as a Portfolio Manager and a Vice
Pittsburgh, PA President of the Fund's Adviser. Ms. Ochson is a
VICE PRESIDENT Chartered Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Trust or any Fund shareholder 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.
The Adviser must waive the portion of its advisory fee that increases the Fund's
aggregate annual operating expenses above 0.45% of its average daily net assets.
The Fund's operating expenses include the advisory fee but exclude interest,
taxes, brokerage commissions, expenses of registering the Fund and its Shares
under federal and state laws, expenses of withholding taxes, and extraordinary
expenses.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
<TABLE>
<CAPTION>
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated Funds
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio. Federated Services Company may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT public accountants
The independent public accountants for the Fund, Deloitte & Touche LLP, plans
and performs its audit so that it may provide an opinion as to whether the
Fund's financial statements and financial highlights are free of material
misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
For the Year Ended July 31, 1999 1998 1997
<S> <C> <C> <C>
Advisory Fee Earned $1,762,698 $1,715,287 $2,020,387
Advisory Fee Reduction $ 706,475 $ 599,001 $ 662,649
Administrative Fee $ 332,269 $ 323,485 $ 381,501
Shareholder Services Fee $ 220,337 -- --
</TABLE>
If the Fund's expenses are capped at a particular level, the cap does not
include reimbursement to the Fund of any expenses incurred by shareholders who
use the transfer agent's subaccounting facilities.
For the fiscal years ended July 31, 1999, 1998 and 1997, fees paid by the Fund
for services are prior to the Fund's reorganization as a portfolio of the Trust
on February 1, 2000
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the SEC standard method for
calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year and ten-year periods ended
July 31, 1999.
Yield and Effective Yield are given for the 7-day period ended July 31, 1999.
Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on February 1, 2000.
<TABLE>
<CAPTION>
7-Day Period 1 Year 5 Year 10 Years
------------- ------- ------- ---------
<S> <C> <C> <C> <C>
Money Market Trust
- --------------------
Total Return -- 4.88% 5.23% 5.22%
Yield 4.72% -- -- --
Effective Yield 4.84% -- -- --
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD AND EFFECTIVE YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized base-
period return by: adding one to the base-period return, raising the sum to the
365/7th power; and subtracting one from the result.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
. references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
. charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
. discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
. information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which they invest, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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 use in advertising may include:
. 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.
. 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.
. Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
. Salomon 30-Day CD Index compares rate levels of 30-day certificates of
deposit from the top ten prime representative banks.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion, $13.1 billion and 115
million respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
Financial Information
The Financial Statements for the Former Fund for the fiscal year ended July 31,
1999 are for prior to the Fund's reorganization as a portfolio of the Trust on
February 1, 2000.
Addresses
Money Market Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Auditors
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
PROSPECTUS
Federated Tax-Free Trust
A Portfolio of Money Market Obligations Trust
A money market mutual fund seeking to provide dividend income exempt from
federal regular income taxes while seeking relative stability of principal by
investing in a portfolio of short-term, high-quality tax exempt securities.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Contents
<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 5
What are the Specific Risks of Investing in the Fund? 6
What Do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 7
How to Redeem Shares 8
Account and Share Information 9
Who Manages the Fund? 10
Last Meeting of Shareholders 11
Financial Information 11
Independent Auditors' Report 27
</TABLE>
NOT FDIC INSURED
MAY LOSE VALUE
NOT BANK GUARANTEE
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is to provide dividend
income exempt from federal regular income taxes while seeking relative stability
of principal. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests in a portfolio of short-term, high- quality tax exempt
securities. At least 80% of the Fund's annual interest income will be exempt
from federal regular income tax. Interest income from the Fund's investments may
be subject to federal alternative minimum tax for individuals and corporations
(AMT). The Fund's dollar-weighted average portfolio maturity will be 90 days or
less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund.
The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.
Risk/Return Bar Chart and Table
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Federated Tax Free Trust as of the calendar year-end for
each of ten years. The `y' axis reflects the "% Total Return" beginning with
"0%" and increasing in increments of 1% up to 6%. The `x' axis represents
calculation periods (for the last ten calendar years of the Fund beginning with
the earliest year) through the calendar year ended 1999. The light gray shaded
chart features ten distinct vertical bars, each shaded in charcoal, and each
visually representing by height the total return percentages for the calendar
year stated directly at its base. The calculated total return percentage for the
Fund for each calendar year is stated directly at the top of each respective
bar, for the calendar years 1990 through 1999. The percentages noted are: 5.69%,
4.32%, 2.75%, 2.14%, 2.57%, 3.57%, 3.14%, 3.33%, 3.18% and 3.00% respectively.
Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's total returns on a
calendar year-end basis.
The Fund's shares are sold without a sales charge (load). The total returns
displayed above are based upon net asset value.
Within the period shown in the Chart, the Fund's highest quarterly return was
1.43% (quarter ended December 31, 1990). Its lowest quarterly return was 0.49%
(quarter ended March 31, 1994).
Average Annual Total Return Table
The following table represents the Fund's Average Annual Total Returns for the
calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
Calendar Period
<S> <C>
1 Year 3.00%
5 Years 3.24%
10 Years 3.36%
</TABLE>
The Fund's 7-Day Net Yield as of December 31, 1999 was 4.23%. You may call the
Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
returns.
The Bar Chart and Performance Table reflect historical performance data for
Federated Tax-Free Trust before its reorganization as a portfolio of Money
Market Obligations Trust on November 1, 1999.
What are the Fund's Fees and Expenses?
FEDERATED TAX-FREE TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
<TABLE>
<CAPTION>
<S>
<C>
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, as applicable) None Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and other Distributions) (as a percentage of offering
price) None
Redemption Fee (as a percentage of amount redeemed, if
applicable) None
Exchange
Fee
None
Annual Fund Operating Expenses (Before Waivers)
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management
Fee/1/
0.40%
Distribution (12b-1)
Fee None
Shareholder Services
Fee/2/ 0.25%
Other
Expenses
0.13%
Total Annual Fund Operating Expenses (before
waivers) 0.78%
Total Waiver of Fund Expenses
(contractual) 0.33%
Total Actual Annual Fund Operating Expenses (after
waivers) 0.45%
- ----------------------------------------------------------------------------------------------------------------------------------
1 Pursuant to the investment advisory contract, the adviser waived a portion of
the management fee. The management fee paid by the
Fund (after the contractual waiver) was 0.27% for the fiscal year ended November 30, 1999. Shareholders must
approve any change to
the contractual waiver.
2 The shareholder services fee has been reduced. The shareholder services fee
paid by the Fund (after the reduction) was 0.05% for
the fiscal year ended November 30, 1999.
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Shares for the time
periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Shares operating expenses as shown in the table remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year $ 46
3 Years $ 144
5 Years $ 252
10 Years $ 567
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests in a portfolio of high-quality tax exempt securities maturing
in 397 days or less. At least 80% of the Fund's annual interest income will be
exempt from federal regular income tax. Interest from the Fund's investments may
be subject to AMT. The Fund will have an average portfolio maturity of 90 days
or less. The Fund's investment adviser (Adviser) actively manages the Fund's
portfolio, seeking to limit the credit risk taken by the Fund and select
investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors, such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve's monetary policy. The Adviser structures the
portfolio by investing primarily in variable rate demand instruments and
municipal notes. The Adviser generally shortens the portfolio maturity when it
expects interest rates to rise and extends the maturity when it expects interest
rates to fall. This strategy seeks to enhance the returns from favorable
interest rate changes and reduce the effect of unfavorable changes.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in securities subject to federal regular income tax. It may
do this to minimize potential losses and maintain liquidity to meet shareholder
redemptions during adverse market conditions. This may cause the Fund to receive
and distribute taxable income to investors.
Temporary investments will be of comparable quality to other securities in
which the Fund invests.
What are the Principal Securities in Which the Fund Invests?
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to regular federal income taxes. Fixed income securities pay interest,
dividends or distributions at a specified rate. The rate may be a fixed
percentage of the principal or adjusted periodically. The issuer of a fixed
income security must also repay the principal amount of the security, normally
within a specified time.
Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
The following describes the types of tax exempt securities in which the Fund
may invest.
Variable Rate Demand Instruments
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.
Municipal Notes
Municipal notes are short-term tax exempt securities. Many municipalities issue
such notes to fund their current operations before collecting taxes or other
municipal revenues. Municipalities may also issue notes to fund capital projects
prior to issuing long-term bonds. The issuers typically repay the notes at the
end of their fiscal year, either with taxes, other revenues or proceeds from
newly issued notes or bonds.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
INVESTMENT RATINGS
The securities in which the Fund invests must be rated in the highest short-term
rating category by one or more NRSROs or be of comparable quality to securities
having such ratings.
What are the Specific Risks of Investing in the Fund?
CREDIT RISKS
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities. Many fixed income securities receive credit
ratings from NRSROs such as Standard & Poor's and Moody's Investors Services.
These NRSROs assign ratings to securities by assessing the likelihood of issuer
default. Lower credit ratings correspond to higher credit risk. If a security
has not received a rating, the Fund must rely entirely upon the Adviser's credit
assessment.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities credit
enhanced by banks or companies with similiar characteristics. As a result, the
Fund will be more susceptible to any economic, business, politicalor other
developments which generally affect these entities.
What Do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share. The
Fund does not charge a front- end sales charge. NAV is determined at 12:00 noon
and 3:00 p.m. (Eastern time) and as of the end of regular trading (normally 4:00
p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum
is reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to institutions acting in an agency or fiduciary capacity or
to individuals, directly or through investment professionals. The Distributor
and its affiliates may pay out of their assets other amounts (including items of
material value) to investment professionals for marketing and servicing Shares.
The Distributor is a subsidiary of Federated Investors, Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 3:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number Nominee/Institution Name Fund
Name and Number and Account Number.
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds). Orders by mail are considered received when payment
by check is converted into federal funds (normally the business day after the
check is received) and Shares begin earning dividends the next day.
BY AUTOMATIC INVESTMENTS
You may establish an account with your financial institution to automatically
purchase Shares on pre- determined dates or when your bank account reaches a
certain level. Under this program, participating financial institutions are
responsible for prompt transmission of orders and may charge you for this
service. You should read this prospectus along with your financial institution's
agreement or materials describing this service. BY AUTOMATED CLEARINGHOUSE
(ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 12:00 noon (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 12:00 noon (Eastern time) your redemption will be wired to
you the following business day. You will receive that day's dividend.
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is
an ACH member; or
. wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes. Capital gains and non-exempt
dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions are taxable sales. Please consult your tax adviser regarding your
federal, state, and local tax liability.
Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISER FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. Under the investment advisory contract, which is
subject to annual renewal by the Fund's Board of Trustees, the Adviser will
waive the amount, limited to the amount of the advisory fee, by which the Fund's
aggregate annual operating expenses, including the investment advisory fee but
excluding interest, taxes, brokerage commissions, expenses of registering or
qualifying the Fund and its shares under federal and state laws and regulations,
expenses of withholding taxes, and extraordinary expenses exceed 0.45% of its
average daily net assets.
Last Meeting of Shareholders
A Special Meeting for the Shareholders of the Former Fund was held on September
23, 1999. On July 26, 1999, the record date for shareholders voting at the
meeting, there were 512,607,500 total outstanding shares. The following items
were considered by shareholders and the results of their voting were as
follows:
AGENDA ITEM 1
Election of Trustees:
<TABLE>
<CAPTION>
Names For Against Abstentions
Withheld
and Broker
Authority
Non-Votes
to Vote
<S> <C> <C> <C> <C>
John F. Cunningham
407,334,026 361,258
J. Christopher Donahue
407,334,026 361,258
Charles F. Mansfield, Jr.
407,334,026 361,258
John S. Walsh
407,334,026 361,258
</TABLE>
AGENDA ITEM 2
To approve amendments to and a restatement of, the Former Fund's Declaration of
Trust:
(a) To require approval by a majority of the outstanding voting shares in the
event of the sale or conveyance of the assets of the Former Fund to another
trust or corporation.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
<S> <C> <C> <C>
405,489,215 2,177,148 28,921 0
</TABLE>
(b) To permit the Board to liquidate assets of the Former Fund without seeking
shareholder approval.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
<S> <C> <C> <C>
216,527,294 189,422,094 1,745,896 0
</TABLE>
AGENDA ITEM 3
To approve a proposed Agreement and Plan of Reorganization between the Former
Fund and Money Market Obligations Trust, on behalf of its series, Federated Tax-
Free Trust (the "New Fund"), whereby the New Fund would acquire all of the
assets of the Former Fund in exchange for shares of the New Fund to be
distributed pro rata by the Former Fund to its shareholders in complete
liquidation and termination of the Former Fund.
<TABLE>
<CAPTION>
For Against Abstain Broker Non-Votes
<S> <C> <C> <C>
403,928,531 1,920,442 1,846,311 0
</TABLE>
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.
This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in this
prospectus.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended November 30 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Income from Investment Operations:
Net investment income 0.03 0.03 0.03
0.03 0.04
Less Distributions:
Distributions from net investment income (0.03) (0.03) (0.03)
(0.03) (0.04)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Total Return1 2.95% 3.21% 3.31%
3.18% 3.57%
Ratios to Average Net Assets:
Expenses 0.45% 0.45% 0.45%
0.45% 0.45%
Net investment income 2.90% 3.17% 3.25%
3.12% 3.51%
Supplemental Data:
Net assets, end of period (000 omitted) $527,071 $517,887 $635,519
$747,785 $807,369
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if
applicable.
See Notes which are an integral part of the Financial Statements
Portfolio of Investments
</TABLE>
Portfolio of Investments
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Principal
Value
Amount
<S>
<C> <C>
SHORT-TERM MUNICIPALS--99.4%/1/
Alabama--1.0%
$ 5,215,000 Anniston, AL, IDB, (Series 1989-A) Weekly VRDNs (Union Foundry Co.)/(Amsouth
Bank $ 5,215,000
N.A., Birmingham LOC)
- ----------------------------------------------------------------------------------------------------------------
Alaska--3.6%
10,000,000 Alaska State Housing Finance Corp., MERLOTs (Series 1999D) Weekly VRDNs (First
Union 10,000,000
National Bank, Charlotte, N.C. LIQ)
7,200,000 Alaska State Housing Finance Corp., Variable Rate Certificates (Series 1997A)
Weekly 7,200,000
VRDNs (Bank of America, N.A. LIQ)
1,935,000 Anchorage, AK, (Series A), 4.25% Bonds (FGIC INS),
4/1/2000 1,939,680
- ----------------------------------------------------------------------------------------------------------------
TOTAL 19,139,680
- ----------------------------------------------------------------------------------------------------------------
Arizona--0.4%
2,000,000 Maricopa County, AZ School District No. 28 Kyrene Elementary, Second Series
Bonds 1,958,643
(FGIC INS), 7/1/2000
- ----------------------------------------------------------------------------------------------------------------
Colorado--0.4%
2,340,000 Loveland, CO, IDR (Series 1993S), 4.10% TOBs (Safeway, Inc.)/(Bankers Trust Co.,
New 2,340,000
York LOC), Mandatory Tender 12/1/1999
- ----------------------------------------------------------------------------------------------------------------
Connecticut--1.0%
5,000,000 /2/ Connecticut State HFA, Variable Rate Certificates (Series 1998S), 3.70% TOBs (Bank
of 5,000,000
America, N.A. LIQ), Optional Tender 8/17/2000
- ----------------------------------------------------------------------------------------------------------------
Delaware--0.5%
2,650,000 Delaware Transportation Authority, 5.25% Bonds (AMBAC INS),
7/1/2000 2,675,506
- ----------------------------------------------------------------------------------------------------------------
District Of Columbia--1.4%
7,190,000 District of Columbia, Variable Rate Demand/Fixed Rate Revenue Bonds (Series
1997) 7,190,000
Weekly VRDNs (Children's Defense Fund)/(Allfirst LOC)
- ----------------------------------------------------------------------------------------------------------------
Florida--9.3%
1,395,000 ABN AMRO MuniTOPS Certificates Trust (Florida Non-AMT) Series 1998-8 Weekly
VRDNs 1,395,000
(Dade County, FL Water & Sewer System)/(FGIC INS)/(ABN AMRO
Bank N.V., Amsterdam LIQ) 9,825,000 ABN AMRO MuniTOPS Certificates Trust
(Florida Non-AMT) Series 1998-9 Weekly
VRDNs 9,825,000
(Florida State Board of Education Capital Outlay)/(FSA INS)/(ABN AMRO Bank N.V.,
Amsterdam LIQ)
5,000,000 /2/ ABN AMRO MuniTOPS Certificates Trust (Florida Non-AMT) Series
1999-11, (Series 5,000,000
1999-11), 3.85% TOBs (Tampa Bay Water Utility System,
FL)/(FGIC INS)/(ABN AMRO Bank N.V., Amsterdam LIQ), Optional
Tender 3/8/2000
3,850,000 Florida Housing Finance Corp., MERLOTs (Series 1998 B) Weekly VRDNs (MBIA
Insurance 3,850,000
Corp. INS)/(First Union National Bank, Charlotte, N.C. LIQ)
$ 20,000,000 Florida State Board of Education Capital Outlay, SGA (Series 1997-67) Daily
VRDNs $ 20,000,000
(Societe Generale, Paris LIQ)
590,000 Highlands County, FL Health Facilities, Variable Rate Demand Revenue
Bonds 590,000
(Series1996A) Weekly VRDNs (Adventist Health System)/(SunTrust Bank, Central Florida
LOC)
6,115,000 Orange County, FL HFA, Variable Rate Certificates (Series 1997G) Weekly VRDNs
(GNMA 6,115,000
COL)/(Bank of America, N.A. LIQ)
2,495,000 Tampa Bay Water Utility System, FL, (PA-576) Weekly VRDNs (FGIC INS)/(Merrill
Lynch 2,495,000
Capital Services, Inc. LIQ)
- ----------------------------------------------------------------------------------------------------------------
TOTAL 49,270,000
- ----------------------------------------------------------------------------------------------------------------
Georgia--3.0%
5,000,000 /2/ Bibb County, GA, PT-199, 3.30% TOBs (Georgia State GTD)/(Bayerische Hypotheken-
und 5,000,000
Vereinsbank AG LIQ), Optional Tender 5/11/2000
5,725,000 Burke County, GA Development Authority, PCRB's (Series 1998A), 3.50% CP
(Oglethorpe 5,725,000
Power Corp. Vogtle Project)/(AMBAC INS)/(Rabobank Nederland, Utrecht LIQ), Mandatory
Tender 1/25/2000
5,000,000 Metropolitan Atlanta Rapid Transit Authority, Floater Certificates (Series
1998-59) 5,000,000
Weekly VRDNs (MBIA Insurance Corp. INS)/(Morgan Stanley, Dean Witter Municipal
Funding, Inc. LIQ)
- ----------------------------------------------------------------------------------------------------------------
TOTAL 15,725,000
- ----------------------------------------------------------------------------------------------------------------
Illinois--7.5%
10,000,000 ABN AMRO MuniTOPS Certificates Trust (Multistate Non-AMT) Series 1998-14 Weekly
VRDNs 10,000,000
(Cook County, IL)/(FGIC INS)/(ABN AMRO Bank N.V., AmsterdamLIQ)
10,000,000 Chicago, IL Board of Education, Variable Rate Certificates (Series 1996BB)
Weekly 10,000,000
VRDNs (MBIA Insurance Corp. INS)/(Bank of America, N.A. LIQ)
4,500,000 /2/ Chicago, IL Public Building Commission, PT-155, 3.90% TOBs
(Chicago, IL Board
of 4,500,000
Education)/(MBIA Insurance Corp. INS)/(Bayerische Hypotheken-und Vereinsbank AG LIQ),
Optional Tender 10/12/2000
4,995,000 /2/ Chicago, IL, Variable Rate Certificates (Series 1998M), 3.70% TOBs (FGIC INS)/(Bank
of 4,995,000
America, N.A. LIQ), Optional Tender 7/13/2000
9,910,000 Metropolitan Pier & Exposition Authority, IL, (1998 FR/RI-A69) Daily VRDNs
(McCormick 9,910,000
Place)/(FGIC INS)/(Bank of New York, New York LIQ)
- ----------------------------------------------------------------------------------------------------------------
TOTAL 39,405,000
- ----------------------------------------------------------------------------------------------------------------
Louisiana--0.7%
3,610,000 Louisiana PFA, Advance Funding Notes (Series 1999), 4.25% TRANs (East Baton
Rouge 3,623,062
Parish, LA), 10/24/2000
- ----------------------------------------------------------------------------------------------------------------
Maryland--5.7%
4,895,000 Maryland Health & Higher Educational Facilities Authority, 6.75% Bonds (Francis
Scott 5,088,011
Key Medical Center)/(United States Treasury PRF), 7/1/2000
$ 3,115,000 Maryland Health & Higher Educational Facilities Authority, Facility Authority
Revenue $ 3,115,000
Bonds (Series 1998) Weekly VRDNs (Woodbourne Foundation, Inc.)/(Allfirst LOC)
7,525,000 Maryland Health & Higher Educational Facilities Authority, Variable Rate Demand/
Fixed 7,525,000
Rate Revenue Bonds Weekly VRDNs (Capitol College)/(Allfirst LOC)
10,900,000 Montgomery County, MD, EDR Weekly VRDNs (U.S. Pharmacopeial
Convention 10,900,000
Facility)/(Chase Manhattan Bank N.A., New York LOC)
3,595,000 Prince Georges County, MD, (1997 Issue) Weekly VRDNs (Mona Branch Avenue
Ltd. 3,595,000
Partnership)/(Allfirst LOC)
- ----------------------------------------------------------------------------------------------------------------
TOTAL 30,223,011
- ----------------------------------------------------------------------------------------------------------------
Massachusetts--0.6%
2,900,000 Palmer, MA, 7.70% Bonds (United States Treasury PRF),
10/1/2000 3,040,813
- ----------------------------------------------------------------------------------------------------------------
Michigan--1.5%
3,700,000 ABN AMRO MuniTOPS Certificates Trust (Michigan Non-AMT) Series 1998-11
WeeklyVRDNs 3,700,000
(DeWitt, MI Public Schools)/(FSA INS)/(ABN AMRO Bank N.V.,
Amsterdam LIQ) 4,000,000 ABN AMRO MuniTOPS Certificates Trust (Michigan
Non-AMT) Series 1998-13 Weekly
VRDNs 4,000,000
(Michigan State Trunk Line)/(MBIA Insurance Corp. INS)/(ABN AMRO Bank N.V., Amsterdam
LIQ)
- ----------------------------------------------------------------------------------------------------------------
TOTAL 7,700,000
- ----------------------------------------------------------------------------------------------------------------
Minnesota--6.0%
3,000,000 ABN AMRO MuniTOPS Certificates Trust (Minnesota Non-AMT) Series 1998-6 Weekly
VRDNs 3,000,000
(Minneapolis/St. Paul, MN Airport Commission)/(AMBAC INS)/(ABN AMRO Bank N.V.,
Amsterdam LIQ)
5,000,000 Minneapolis, MN, (Series 1993) Weekly VRDNs (Market Square Real Estate,
Inc.)/ 5,000,000
(Norwest Bank Minnesota, N.A. LOC)
2,500,000 Minnesota State HFA, (Series 1991A) PT-235 Weekly VRDNs (Commerzbank AG, Frankfurt
LIQ) 2,500,000
12,000,000 Rochester, MN Health Care Facility Authority Weekly VRDNs (Mayo
Foundation) 12,000,000
9,000,000 Rochester, MN Health Care Facility Authority Weekly VRDNs (Mayo
Foundation) 9,000,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL 31,500,000
- ----------------------------------------------------------------------------------------------------------------
Mississippi--1.3%
7,000,000 Jackson County, MS Port Facility , 3.85% TOBs (Chevron U.S.A., Inc.), Mandatory
Tender 7,000,000
5/1/2000
- ----------------------------------------------------------------------------------------------------------------
Missouri--1.5%
3,115,000 Missouri State HEFA, Health Facilities Revenue Bonds (Series 1996A) Weekly
VRDNs 3,115,000
(Deaconess Long Term Care of Missouri)/(Bank One, Texas N.A. LOC)
4,950,000 /2/ Missouri State HEFA, PT-191, 3.25% TOBs (Health Midwest)/(MBIA Insurance
Corp. 4,950,000
INS)/(Banco Santander Central Hispano, S.A. LIQ), Optional Tender 5/11/2000
- ----------------------------------------------------------------------------------------------------------------
TOTAL 8,065,000
- ----------------------------------------------------------------------------------------------------------------
Multi State--6.1%
$ 6,499,820 ABN AMRO Chicago Corp. 1997-1 LeaseTOPS Trust Weekly VRDNs (Lasalle National
Bank, $ 6,499,820
Chicago LIQ)/(Lasalle National Bank, Chicago LOC)
11,792,000 Clipper Tax-Exempt Trust (Non-AMT Multistate), (Series A) Weekly VRDNs (State
Street 11,792,000
Bank and Trust Co. LIQ)
13,782,040 Equity Trust I, (1996 Series) Weekly VRDNs (Bayerische Hypotheken-und Vereinsbank
AG 13,782,040
LOC)
- ----------------------------------------------------------------------------------------------------------------
TOTAL 32,073,860
- ----------------------------------------------------------------------------------------------------------------
New York--4.3%
8,695,000 Long Island Power Authority, (PA-420) Weekly VRDNs (MBIA Insurance Corp.
INS)/ 8,695,000
(Merrill Lynch Capital Services, Inc. LIQ)
4,000,000 Nassau County, NY, (Series 1999C), 4.25% RANs (Bank of New York, New York
LOC), 4,007,282
3/15/2000
5,000,000 /2/ New York City, NY Transitional Finance Authority, 1999 Trust Receipts FR/RI-A46,
3.90% 5,000,000
TOBs (Bank of New York, New York LIQ), Optional Tender 1/26/2000
5,000,000 /2/ New York City, NY Transitional Finance Authority, 1999 Trust Receipts FR/RI-A47,
3.85% 5,000,000
TOBs (Bank of New York, New York LIQ), Optional Tender 2/23/2000
- ----------------------------------------------------------------------------------------------------------------
TOTAL 22,702,282
- ----------------------------------------------------------------------------------------------------------------
North Carolina--4.9%
20,000,000 Martin County, NC IFA, (Series 1993) Weekly VRDNs (Weyerhaeuser
Co.) 20,000,000
6,000,000 North Carolina State, Floater Certificates (Series 1998-38) Weekly VRDNs
(Morgan 6,000,000
Stanley, Dean Witter Municipal Funding, Inc. LIQ)
- ----------------------------------------------------------------------------------------------------------------
TOTAL 26,000,000
- ----------------------------------------------------------------------------------------------------------------
Ohio--1.6%
3,300,000 Clark County, OH, (Series 1999) Weekly VRDNs (Ohio Masonic Home)/(AMBAC INS)/
(Harris 3,300,000
Trust & Savings Bank, Chicago LIQ)
3,700,000 Montgomery County, OH, (Series 1998B), 3.65% CP (Miami (OH) Valley
Hospital), 3,700,000
Mandatory Tender 1/28/2000
1,500,000 South-Western City School District, OH, 3.00% BANs (AMBAC INS),
12/1/1999 1,500,000
- ----------------------------------------------------------------------------------------------------------------
TOTAL 8,500,000
- ----------------------------------------------------------------------------------------------------------------
Oklahoma--1.1%
2,440,000 Muskogee, OK Industrial Trust, (Series 1985) Weekly VRDNs (Muskogee Mall
Limited 2,440,000
Partnership)/(Bank of America, N.A. LOC)
3,310,000 Muskogee, OK Industrial Trust, (Series 1985) Weekly VRDNs (Warmack Muskogee
Ltd. 3,310,000
Partnership)/(Bank of America, N.A. LOC)
- ----------------------------------------------------------------------------------------------------------------
TOTAL 5,750,000
- ----------------------------------------------------------------------------------------------------------------
Pennsylvania--6.3%
3,400,000 Dauphin County, PA General Authority, (Education and Health Loan Program, Series
1997) 3,400,000
Weekly VRDNs (AMBAC INS)/(Chase Manhattan Bank N.A., New York
LIQ) $ 2,500,000 Easton Area School District, PA, (Series 1997) Weekly VRDNs
(FGIC INS)/(FGIC $ 2,500,000
Securities Purchase, Inc. LIQ)
20,000,000 Erie County, PA Hospital Authority Weekly VRDNs (St. Vincent Health
System)/(Mellon 20,000,000
Bank NA, Pittsburgh LOC)
7,500,000 Pennsylvania State University, PT-242 Weekly VRDNs (Bayerische
Hypotheken-und 7,500,000
Vereinsbank AG LIQ)
- ----------------------------------------------------------------------------------------------------------------
TOTAL 33,400,000
- ----------------------------------------------------------------------------------------------------------------
South Carolina--2.8%
2,000,000 Florence County, SC Public Facility Corp., Law Enforcement Project - Civic
Center, 2,041,215
7.60% Bonds (Florence County, SC Hospital)/(United States Treasury PRF), 3/1/2000(@101)
5,000,000 South Carolina State Public Service Authority, 3.60% CP (Bank of America, N.A.,
Bank 5,000,000
of Nova Scotia, Toronto, Commerzbank AG, Frankfurt and Toronto-Dominion Bank LIQs),
Mandatory Tender 12/8/1999
7,500,000 South Carolina State Public Service Authority, 3.75% CP (Bank of America, N.A.,
Bank 7,500,000
of Nova Scotia, Toronto, Commerzbank AG, Frankfurt and Toronto-Dominion Bank LIQs),
Mandatory Tender 2/22/2000
- ----------------------------------------------------------------------------------------------------------------
TOTAL 14,541,215
- ----------------------------------------------------------------------------------------------------------------
South Dakota--1.1%
6,000,000 South Dakota Housing Development Authority, (Series 1999 C), 3.20% BANs,
4/7/2000 6,000,000
- ----------------------------------------------------------------------------------------------------------------
Texas--15.3%
5,360,000 ABN AMRO MuniTOPS Certificates Trust (Multi-State Non-AMT) Series 1998-26 Weekly
VRDNs 5,360,000
(Grapevine-Colleyville, TX Independent School District)/(Texas Permanent School Fund
Guarantee Program GTD)/(ABN AMRO Bank N.V., AmsterdamLIQ)
3,528,000 ABN AMRO MuniTOPS Certificates Trust (Multistate Non-AMT) Series 1998-24 Weekly
VRDNs 3,528,000
(Barbers Hill, TX Independent School District)/(Texas Permanent School Fund Guarantee
Program GTD)/(ABN AMRO Bank N.V., Amsterdam LIQ)
10,890,000 Aldine, TX Independent School District, (Series 1997) SGB-30 Weekly VRDNs
(Texas 10,890,000
Permanent School Fund Guarantee Program GTD)/(Societe Generale, Paris LIQ)
5,000,000 /2/ Conroe, TX Independent School District, PT-1168, 3.65% TOBs (Texas Permanent
School 5,000,000
Fund Guarantee Program GTD)/(Merrill Lynch Capital Services, Inc. LIQ), Optional
Tender 7/20/2000
5,250,000 Gulf Coast, TX Waste Disposal Authority, Pollution Control Revenue Refunding
bonds 5,250,000
(Series 1995) Daily VRDNs (Exxon Corp.)
5,000,000 Harris County, TX HFDC, Hospital Revenue Bonds (Series 1997B), 3.70% CP
(Memorial 5,000,000
Hospital System)/(MBIA Insurance Corp. INS)/(Chase Bank of Texas LIQ), Mandatory
Tender 3/1/2000
7,100,000 Houston, TX Water & Sewer System, FR/RI (Series 1999A-29) Weekly VRDNs (Bank of
New 7,100,000
York, New York LIQ)/(United States Treasury PRF) $ 2,080,000
Houston, TX, Series C, 5.50% Bonds, 4/1/2000 $ 2,095,907
6,560,000 /2/ McKinney, TX Independent School District, (PT-1180), 3.85%
TOBs (Texas Permanent 6,560,000
School Fund Guarantee Program GTD)/(Merrill Lynch Capital Services, Inc. LIQ),
Optional Tender 8/24/2000
4,945,000 /2/ Round Rock Independent School District, TX, (PT-1138), 3.25%
TOBs (Texas Permanent 4,945,000
School Fund Guarantee Program GTD)/(Merrill Lynch Capital Services, Inc. LIQ),
Optional Tender 12/9/1999
4,935,000 /2/ San Antonio Independent School District, TX, (PT-1184), 3.80%
TOBs (Texas Permanent 4,935,000
School Fund Guarantee Program GTD)/(Merrill Lynch Capital Services, Inc. LIQ),
Optional Tender 9/7/2000
7,000,000 San Antonio, TX Electric & Gas, Municipal Securities Trust Receipts (Series 1997
SG 7,000,000
101) Weekly VRDNs (Societe Generale, Paris LIQ)
5,500,000 San Antonio, TX Water Authority, Capital Appreciation Bonds Bonds (United
States 2,314,937
Treasury PRF), 42.09% 5/1/2000
2,050,000 TX Pooled Tax Exempt Trust, Certificates of Participation (Series 1996) Weekly
VRDNs 2,050,000
(Bank One, Texas N.A. LOC)
8,500,000 Texas State, 4.50% TRANs,
8/31/2000 8,548,783
- ----------------------------------------------------------------------------------------------------------------
TOTAL 80,577,627
- ----------------------------------------------------------------------------------------------------------------
Virginia--8.1%
23,910,000 ABN AMRO MuniTOPS Certificates Trust (Virginia Non-AMT) Series 1998-21
WeeklyVRDNs 23,910,000
(Norfolk, VA Water Revenue)/(FSA INS)/(ABN AMRO Bank N.V.,
Amsterdam LIQ) 12,000,000 Fairfax County, VA IDA, 1998 Trust Receipts
FR/RI-A35 Weekly VRDNs (Fairfax
Hospital 12,000,000
System)/(Bayerische Hypotheken-und Vereinsbank AG LIQ)/(United States Treasury PRF)
6,570,000 Newport News, VA Redevelopment & Housing Authority, (PA-152) Weekly VRDNs
(Indian 6,570,000
Lakes Apartments)/(Merrill Lynch Capital Services, Inc. LIQ)/(Merrill Lynch Capital
Services, Inc. LOC)
- ----------------------------------------------------------------------------------------------------------------
TOTAL 42,480,000
- ----------------------------------------------------------------------------------------------------------------
West Virginia--1.8%
6,530,000 Cabell County Commission, WV, Life Care Facilities Multi-Option Revenue Bonds
(Series 6,530,000
1995) Weekly VRDNs (Foster Foundation)/(Huntington National
Bank, Columbus, OH LOC) 2,875,000 Oak Hill, WV, (Series 1991A) Weekly VRDNs
(Fayette Plaza)/(ABN AMRO Bank
N.V., 2,875,000
Amsterdam LOC)
- ----------------------------------------------------------------------------------------------------------------
TOTAL 9,405,000
- ----------------------------------------------------------------------------------------------------------------
Wisconsin--0.6%
$ 3,300,000 Wisconsin Health and Educational Facilities Authority, Revenue Bonds (Series
1994) $ 3,300,000
Weekly VRDNs (Felician Health Care, Inc.)/(Bank One, N.A. LOC)
- ----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (AT AMORTIZED
COST)/3/ $ 523,800,699
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
1 The Fund may only invest in securities rated in the highest short-term rating
category by one or more NRSROs or be of comparable quality to securities
having such ratings.
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 applicable regulations in determining whether a
security is rated and whether a security rated by multiple NRSROs in
different rating categories should be identified as a First or Second Tier
security.
At November 30, 1999, the portfolio securities were rated as follows:
Tier Rating Percentage Based on Total Market Value (Unaudited)
<TABLE>
<CAPTION>
First Tier Second Tier
- -------------------------------------
<S> <C>
100.0% 0%
</TABLE>
2 Denotes a restricted security which is subject to restrictions on resale
under federal securities laws. At November 30, 1999, these securities
amounted to $60,885,000 which represents 11.6% of net assets.
3 Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($527,070,612) at November 30, 1999.
The following acronyms are used throughout this portfolio:
AMBAC --American Municipal Bond Assurance Corporation
AMT --Alternative Minimum Tax
BANs --Bond Anticipation Notes
COL --Collateralized
CP --Commercial Paper
EDR --Economic Development Revenue
FGIC --Financial Guaranty Insurance Company
FSA --Financial Security Assurance
GNMA --Government National Mortgage Association
GTD --Guaranty
HEFA --Health and Education Facilities Authority
HFA --Housing Finance Authority
HFDC --Health Facility Development Corporation
IDA --Industrial Development Authority
IDB --Industrial Development Bond
IDR --Industrial Development Revenue
IFA --Industrial Finance Authority
INS --Insured
LIQ --Liquidity Agreement
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance
MERLOTs --Municipal Exempt Receipts Liquidity Optional Tender Series
PFA --Public Facility Authority
PRF --Prerefunded
RANs --Revenue Anticipation Notes
TOBs --Tender Option Bonds
TRANs --Tax and Revenue Anticipation Notes
VRDNs --Variable Rate Demand Notes
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
YEAR ENDED NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Assets:
<S> <C> <C>
Total investments in securities, at amortized cost and value $
523,800,699
Cash
412,116
Income
receivable
4,256,790
Receivable for shares
sold 3,338
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS
528,472,943
- ----------------------------------------------------------------------------------------------------------------------------
Liabilities:
Payable for shares redeemed $ 12,124
Income distribution payable 1,350,472
Accrued expenses 39,735
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL
LIABILITIES
1,402,331
- ----------------------------------------------------------------------------------------------------------------------------
Net Assets for 527,061,474 shares outstanding $
527,070,612
- ----------------------------------------------------------------------------------------------------------------------------
Net Assets Consist of:
Paid in capital $
527,053,613
Accumulated net realized loss on
investments (48,334)
Undistributed net investment
income 65,333
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL NET ASSETS $
527,070,612
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$527,070,612 / 527,061,474 shares
outstanding $1.00
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Operations
YEAR ENDED NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Investment Income:
<S> <C> <C>
<C>
Interest
$ 18,550,666
- --------------------------------------------------------------------------------------------------------------------------------
Expenses:
Investment adviser fee $ 2,212,024
Administrative personnel and services fee 416,967
Custodian fees 19,965
Transfer and dividend disbursing agent fees and expenses 55,848
Directors'/Trustees' fees 14,987
Auditing fees 14,985
Legal fees 9,493
Portfolio accounting fees 94,119
Shareholder services fee 1,382,515
Share registration costs 8,412
Printing and postage 18,745
Insurance premiums 45,560
Taxes 75
Miscellaneous 8,329
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL EXPENSES 4,302,024
- --------------------------------------------------------------------------------------------------------------------------------
Waivers:
Waiver of investment adviser fee $ (698,998)
Waiver of shareholder services fee (1,106,012)
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL WAIVERS (1,805,010)
- --------------------------------------------------------------------------------------------------------------------------------
Net
expenses
2,497,014
- --------------------------------------------------------------------------------------------------------------------------------
Net investment
income 16,053,652
- --------------------------------------------------------------------------------------------------------------------------------
Net realized gain on
investments 28,087
- --------------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from
operations $ 16,081,739
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended November 30
1999 1998
Increase (Decrease) in Net Assets
Operations:
<S> <C>
<C>
Net investment income $ 16,053,652
$ 17,911,917
Net realized gain on investments ($48,334) and ($53,876) respectively, as
28,087 11,456
computed for federal tax purposes)
- -----------------------------------------------------------------------------------------------------------------------------------
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
16,081,739 17,923,373
- -----------------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
Distributions from net investment income
(16,053,652) (17,911,917)
- -----------------------------------------------------------------------------------------------------------------------------------
Share Transactions:
Proceeds from sale of shares
1,674,871,084 1,890,281,389
Net asset value of shares issued to shareholders in payment of
1,164,731 1,421,172
distributionsdeclared
Cost of shares redeemed
(1,666,879,961) (2,009,346,623)
- -----------------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from share transactions
9,155,854 (117,644,062)
- -----------------------------------------------------------------------------------------------------------------------------------
Change in net assets
9,183,941 (117,632,606)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of period
517,886,671 635,519,277
- -----------------------------------------------------------------------------------------------------------------------------------
End of period $ 527,070,612
$ 517,886,671
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
NOVEMBER 30, 1999
ORGANIZATION
Federated Tax-Free Trust (the "Fund") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. Effective November 1, 1999, the Fund became a portfolio of Money Market
Obligations Trust (the "Trust"). Effective February 1, 2000, the Trust will
consist of forty portfolios. The financial statements included herein are only
those of the Fund. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholders interest is limited to the portfolio in which the shares are held.
The investment objective of the Fund is to provide dividend income exempt from
federal regular income taxes while seeking relative stability of principal.
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 uses the amortized cost method to value its portfolio securities 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. Non-cash dividends included in dividend income, if any, are recorded at
fair value.
Federal Taxes
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
At November 30, 1999, the Fund, for federal tax purposes, had a capital loss
carryforward of $48,334, which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent permitted by
the Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will expire as
follows:
<TABLE>
<CAPTION>
Expiration Year Expiration Amount
<S> <C>
2004 $ 3,112
2005 $14,032
2006 $31,190
</TABLE>
When-Issued and Delayed Delivery Transactions
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date. Losses may occur on these transactions due to changes in market
conditions or the failure of counterparties to perform under the contract.
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 future. 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.
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 a trade date basis.
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).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Year Ended November 30
1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S>
<C> <C>
Shares sold
1,674,871,084 1,890,281,389
Shares issued to shareholders in payment of distributions declared
1,164,731 1,421,172
Shares redeemed
(1,666,879,961) (2,009,346,623)
- ---------------------------------------------------------------------------------------------------------------------------------
NET CHANGE RESULTING FROM SHARE TRANSACTIONS
9,155,854 (117,644,062)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment adviser fee equal to
0.40% of the Fund's average daily net assets. The Adviser will waive, to the
extent of its adviser fee, the amount, if any, by which the Fund's aggregate
annual operating expenses exceed 0.45% of average daily net assets of the
Fund.
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 a scale that ranges from 0.15% to 0.075% of the
average daily net assets of all funds advised by Federated Investors, Inc.,
subject to a $125,000 minimum per portfolio and $30,000 per each additional
class.
Shareholder Services Fee
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. FSSC may
voluntarily choose to waive any portion of its fee. FSSC can modify or terminate
this voluntary waiver at any time at its sole discretion.
Transfer and Dividend Disbursing Agent Fees and Expenses
FServ, through its subsidiary 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 November 30, 1999, 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 complied with Rule 17a-7 under the Act, and
amounted to $822,128,000 and $758,788,624 respectively.
General
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
Independent Auditors' Report
TO THE BOARD OF TRUSTEES OF MONEY MARKET OBLIGATIONS TRUST AND SHAREHOLDERS OF
FEDERATED TAX-FREE TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Tax-Free Trust (the "Fund") as of
November 30, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets for the years ended November 30,
1999 and 1998 and the financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund'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 audits to
provide reasonable assuranace about whether the financial statements and
financial highlights are free of material mistatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the securities
owned at November 30, 1999, by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. 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 our audits provide a reasonable
basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Fund as of
November 30, 1999, the results of its operations, the changes in its net assets
and financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
January 14, 2000
[LOGO of Federated World-Class Investment Manager]
Federated
Tax-Free
Trust
A Portfolio of Money Market Obligations Trust
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Semi-Annual Reports
to shareholders as they become available. To obtain the SAI, Semi-Annual Report
and other information without charge and make inquiries, call your investment
professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected]. or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
[LOGO of Federatd]
Federated Tax-Free Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor
Investment Company Act File No. 811-2891
Cusip 60934N666
8010414A (1/00)
Federated is a registered mark
of Federated Investors, Inc.
2000 \c\Federated Investors, Inc.
STATEMENT OF ADDITIONAL INFORMATION
FEDERATED TAX-FREE TRUST
A Portfolio of Money Market Obligations Trust
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated Tax-Free Trust (Fund),
dated January 31, 2000. Obtain the prospectus without charge by calling
1-800-341-7400.
JANUARY 31, 2000
CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Investment Ratings
Addresses
Cusip 60934N666
8010414B (1/00)
How is the Fund Organized?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on October 30, 1975,
was reorganized as a portfolio of the Trust on April 26, 1999. The Fund's
investment adviser is Federated Investment Management Company (Adviser).
Securities in Which the Fund Invests
In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
may invest.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is not
subject to federal regular income taxes. Typically, states, counties, cities and
other political subdivisions and authorities issue tax exempt securities. The
market categorizes tax exempt securities by their source of repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact property
or other taxes. The issuer must impose and collect taxes sufficient to pay
principal and interest on the bonds. However, the issuer's authority to impose
additional taxes may be limited by its charter or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues received by
the issuer such as specific taxes, assessments, tolls, or fees. Bondholders
may not collect from the municipality's general taxes or revenues. For
example, a municipality may issue bonds to build a toll road, and pledge the
tolls to repay the bonds. Therefore, a shortfall in the tolls normally would
result in a default on the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new
factory to improve its local economy. The municipality would lend the
proceeds from its bonds to the company using the factory, and the company
would agree to make loan payments sufficient to repay the bonds. The bonds
would be payable solely from the company's loan payments, not from any
other revenues of the municipality. Therefore, any default on the loan
normally would result in a default on the bonds.
The interest on many types of private activity bonds is subject to the
federal alternative minimum tax (AMT). The Fund may invest in bonds subject
to AMT.
Municipal Leases
Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically subject to
annual appropriation. In other words, a municipality may end a lease, without
penalty, by not providing for the lease payments in its annual budget. After
the lease ends, the lessor can resell the equipment or facility but may lose
money on the sale.
The Fund may invest in securities supported by pools of municipal leases. The
most common type of lease backed securities are certificates of participation
(COPs). However, the Fund may also invest directly in individual leases.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below
the amount payable at maturity. The difference between the purchase price and
the amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate and credit risks of a zero coupon security.
Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases
the company providing credit enhancement makes all payments directly to the
security holders and receives reimbursement from the issuer. Normally, the
credit enhancer has greater financial resources and liquidity than the issuer.
For this reason, the Adviser usually evaluates the credit risk of a fixed
income security based solely upon its credit enhancement.
Common types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement also includes arrangements
where securities or other liquid assets secure payment of a fixed income
security. If a default occurs, these assets may be sold and the proceeds paid
to the security's holders. Either form of credit enhancement reduces credit
risks by providing another source of payment for a fixed income security.
SPECIAL TRANSACTIONS
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment
and delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into
these transactions so that the market values of the securities bought may vary
from the purchase prices. Therefore, delayed delivery transactions create
interest rate risks for the Fund. Delayed delivery transactions also involve
credit risks in the event of a counterparty default.
Inter-fund Borrowing and Lending Arrangements
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. (Federated funds) to lend
and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary
for both borrowing and lending funds, and an inter-fund loan is only made if
it benefits each participating fund. Federated administers the program
according to procedures approved by the Fund's Board of Trustees (Board, and
the Board monitors the operation of the program. Any inter-fund loan must
comply with certain conditions set out in the exemption, which are designed to
assure fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may
be made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term
borrowings (the Bank Loan Rate), as determined by the Board. The interest rate
imposed on inter-fund loans is the average of the Repo Rate and the Bank Loan
Rate.
Asset Coverage
In order to secure its obligations in connection with special transactions,
the Fund will either own the underlying assets, enter into an offsetting
transaction or set aside readily marketable securities with a value that
equals or exceeds the Fund's obligations. Unless the Fund has other readily
marketable assets to set aside, it cannot trade assets used to secure such
obligations without terminating a special transaction. This may cause the Fund
to miss favorable trading opportunities or to realize losses on special
transactions.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may make temporary defensive investments in the following taxable
securities.
Treasury Securities
Treasury securities are direct obligations of the federal government of the
United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency of other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities.
Bank Instruments
Bank Instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use
the proceeds (or bank loans) to repay maturing paper. If the issuer cannot
continue to obtain liquidity in this fashion, its commercial paper may
default.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from
a dealer or bank and agrees to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price, reflecting
the Fund's return on the transaction. This return is unrelated to the interest
rate on the underlying security. The Fund will enter into repurchase
agreements only with banks and other recognized financial institutions, such
as securities dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is
the seller (rather than the buyer) of the securities, and agrees to repurchase
them at an agreed upon time and price. A reverse repurchase agreement may be
viewed as a type of borrowing by the Fund. Reverse repurchase agreements are
subject to credit risks. In addition, reverse repurchase agreements create
leverage risks because the Fund must repurchase the underlying security at a
higher price, regardless of the market value of the security at the time of
repurchase.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
INVESTMENT RATINGS
A highest rating category of a nationally recognized statistical rating
organization (NRSRO) is determined without regard for sub-categories and
gradations. For example, securities rated SP-1+ or SP-1 by Standard & Poor's
Ratings Group (S&P), MIG-1 by Moody's Investors Service (Moody's), or F-1+ or F-
1 by Fitch Investors Service, Inc. (Fitch) are all considered rated in the
highest short-term rating category. The Fund will follow applicable regulations
in determining whether a security rated by more than one NRSRO can be treated as
being in the highest short-term rating category. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Fixed income securities generally compensate for greater credit risk by paying
interest at a higher rate. The difference between the yield of a security and
the yield of an "AAA." - rated general obligation security or index with a
comparable maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security's rating is
lowered, or the security is perceived to have an increased credit risk. An
increase in the spread will cause the price of the security to decline.
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICY
The Fund's fundamental investment objective is to provide for its shareholders
dividend income exempt from federal regular income taxes while seeking relative
stability of principal.
As a fundamental investment policy, under normal market circumstances, at least
80% of the Fund's annual interest income will be exempt from Federal regular
income tax.
This investment objective and policy may not be changed by the Board without
shareholder approval.
INVESTMENT LIMITATIONS
Diversification
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized by
such U.S. government securities; and securities of other investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.
Borrowing Money and Issuing Senior Securities
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the Investment Company Act of 1940, as
amended (1940 Act).
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Lending
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Concentration
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry,
except that the Fund may concentrate its investments in short-term tax exempt
securities which are guaranteed by the U.S. government, regardless of the
location of the issuing municipality. Government securities, municipal
securities and bank instruments are not be deemed to constitute an industry.
The above limitations cannot be changed by the Board unless authorized by the
"vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
Purchases on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.
Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Investing in Restricted Securities
The Fund may invest in securities subject to restriction or resale under the
federal securities laws.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.
For purposes of the diversification limitation, 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
Fund's Prospectus and this Statement of Additional Information, in order to
comply with applicable laws and regulations, including the provisions of and
regulations under the 1940 Act. In particular, the Fund will comply with the
various requirements of Rule 2a-7 (the Rule), which regulates money market
mutual funds. The Fund will determine the effective maturity of its investments
according to the Rule. The Fund may change these operational policies to reflect
changes in the laws and regulations without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board will take any steps it considers 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.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the 1940 Act,
the Fund is obligated to pay Share redemptions to any one shareholder in cash
only up to the lesser of $250,000 or 1% of the net assets represented by such
Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
Account and Share Information
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 7, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Shares: Fiduciary Trust Company
International, New York, NY, owned approximately 169,273,168 shares (27.97%);
and Bova & Company, Charlotte, NC, owned approximately 40,618,259 shares
(6.71%).
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
Who Manages and Provides Services to the Fund?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
43 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January 7, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding shares.
<TABLE>
<CAPTION>
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Name
Birth Date Aggregate
Total Compensation
Address Principal Occupations Compensation
From Trust and Fund
Position With Trust for Past Five Years From Fund
Complex
- -------------------------------- ------------------------------------------------------------ ------------
- --------------------
<S> <C> <C> <C>
John F. Donahue*#+ Chief Executive Officer and Director or Trustee of the $0 $0
for the Trust and
Birth Date: July 28, 1924 Federated Fund Complex; Chairman and Trustee, Federated 43
Federated Investors Tower Investment Management Company; Chairman and Director,
other investment
1001 Liberty Avenue Federated Investors, Inc., Federated Investment Counseling
companies in the
Pittsburgh, PA and Federated Global Investment Management Corp.; Chairman,
Fund Complex
CHAIRMAN AND TRUSTEE Passport Research, Ltd.
- -----------------------------------------------------------------------------------------------------------------------------------
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; Director, $1,339.50
$116,760.63 for the
Birth Date: February 3, 1934 Member of Executive Committee, Children's Hospital of
Trust
15 Old Timber Trail Pittsburgh; Director, Robroy Industries, Inc. (coated steel
and 43 other
Pittsburgh, PA conduits/computer storage equipment); formerly: Senior
investment companies
TRUSTEE Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc. in
the Fund Complex
(physician practice management); Director, Member of
Executive Committee, University of Pittsburgh.
- -----------------------------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; President, $1,473.64
$128,455.37 for the
Birth Date: June 23, 1937 Investment Properties Corporation; Senior Vice President,
Trust
Grubb & Ellis/Investment John R. Wood and Associates, Inc., Realtors; Partner or
and 43 other
Properties Corporation Trustee in private real estate ventures in Southwest Florida;
investment companies
3201 Tamiami Trail North formerly: President, Naples Property Management, Inc. and in
the Fund Complex
Naples, FL Northgate Village Development Corporation.
TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------------------
Nicholas P. Constantakis Director or Trustee of the Federated Fund Complex; Director, $1,339.50
$73,191.21 for the
Birth Date: September 3, 1939 Michael Baker Corporation (engineering, construction,
Trust and
175 Woodshire Drive operations and technical services); formerly: Partner, 37
other investment
Pittsburgh, PA Andersen Worldwide SC.
companies
TRUSTEE in
the Fund Complex
- -----------------------------------------------------------------------------------------------------------------------------------
John F. Cunningham Director or Trustee of some of the Federated Fund Complex; $1,339.50
$93,190.48 for the
Birth Date: March 5, 1943 Chairman, President and Chief Executive Officer, Cunningham &
Trust and
353 El Brillo Way Co., Inc. (strategic business consulting); Trustee Associate, 37
other investment
Palm Beach, FL Boston College; Director, Iperia Corp.
companies
TRUSTEE (communications/software); formerly: Director, Redgate in
the Fund Complex
Communications and EMC Corporation (computer
storage systems).
Previous Positions: Chairman of the Board and Chief Executive
Officer, Computer Consoles, Inc.; President and Chief
Operating Officer, Wang Laboratories; Director, First
National Bank of Boston; Director, Apollo Computer, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue+ President or Executive Vice President of the Federated Fund $0 $0
for the Trust and
Birth Date: April 11, 1949 Complex; Director or Trustee of some of the Funds in the 30
Federated Investors Tower Federated Fund Complex; President, Chief Executive Officer
other investment
1001 Liberty Avenue and Director, Federated Investors, Inc.; President and
companies in the
Pittsburgh, PA Trustee, Federated Investment Management Company and
Fund Complex
PRESIDENT AND TRUSTEE Federated Investment Counseling; President and Director,
Federated Global Investment Management Corp.; President,
Passport Research, Ltd.; Trustee, Federated Shareholder
Services Company; Director, Federated Services Company.
- -----------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; Professor $1,339.50
$116,760.63 for the
Birth Date: October 11, 1932 of Medicine, University of Pittsburgh; Medical Director,
Trust
3471 Fifth Avenue University of Pittsburgh Medical Center - Downtown;
and 43 other
Suite 1111 Hematologist, Oncologist and Internist, University of
investment companies
Pittsburgh, PA Pittsburgh Medical Center; Member, National Board of in
the Fund Complex
TRUSTEE Trustees, Leukemia Society of America.
- -----------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Director or Trustee of the Federated Fund Complex; formerly: $1,252.84
$109,153.60 for the
Birth Date: March 16, 1942 Representative, Commonwealth of Massachusetts General Court;
Trust
One Royal Palm Way President, State Street Bank and Trust Company and State
and 43 other
100 Royal Palm Way Street Corporation.
investment companies
Palm Beach, FL in
the Fund Complex
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts Bankers
Association; Director, Depository Trust Corporation;
Director, The Boston Stock Exchange.
- -----------------------------------------------------------------------------------------------------------------------------------
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated Fund Complex; $1,406.62
$102,573.91 for the
Birth Date: April 10, 1945 Executive Vice President, Legal and External Affairs, Dugan
Trust
80 South Road Valve Contess, Inc. (marketing, communications, technology
and 40 other
Westhampton Beach, NY and consulting); formerly Management Consultant.
investment companies
TRUSTEE in
the Fund Complex
Previous Positions: Chief Executive Officer, PBTC
International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief
Financial Officer of Retail Banking Sector,
Chase Manhattan Bank; Senior Vice President,
Marine Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business,
Hofstra University.
- -----------------------------------------------------------------------------------------------------------------------------------
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; President, $1,473.64
$128,455.37 for the
S.J.D.# Law Professor, Duquesne University; Consulting Partner,
Trust
Birth Date: December 20, 1932 Mollica & Murray; Director, Michael Baker Corp. (engineering,
and 43 other
President, Duquesne University construction, operations and technical services).
investment companies
Pittsburgh, PA in
the Fund Complex
TRUSTEE Previous Positions: Dean and Professor of Law, University of
Pittsburgh School of Law; Dean and Professor of Law,
Villanova University School of Law.
- -----------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; Public $1,339.50
$116,760.63 for the
Birth Date: June 21, 1935 Relations/Marketing/Conference Planning.
Trust
4905 Bayard Street
and 43 other
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum Company
investment companies
TRUSTEE of America; television producer; business owner. in
the Fund Complex
- -----------------------------------------------------------------------------------------------------------------------------------
John S. Walsh Director or Trustee of some of the Federated Fund Complex; $1,339.50
$94,536.85 for the
Birth Date: November 28, 1957 President and Director, Heat Wagon, Inc. (manufacturer of
Trust
2007 Sherwood Drive construction temporary heaters); President and Director,
and 39 other
Valparaiso, IN Manufacturers Products, Inc. (distributor of portable
investment companies
TRUSTEE construction heaters); President, Portable Heater Parts, a in
the Fund Complex
division of Manufacturers Products, Inc.; Director, Walsh &
Kelly, Inc. (heavy highway contractor); formerly: Vice
President, Walsh & Kelly, Inc.
- -----------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Trustee or Director of some of the Funds in the Federated $0 $0
for the Trust and
Birth Date: October 22, 1930 Fund Complex; President, Executive Vice President and 42
Federated Investors Tower Treasurer of some of the Funds in the Federated Fund Complex;
other investment
1001 Liberty Avenue Vice Chairman, Federated Investors, Inc.; Vice President,
company in the
Pittsburgh, PA Federated Investment Management Company, Federated Investment
Fund Complex
EXECUTIVE VICE PRESIDENT Counseling, Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company.
- -----------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Executive Vice President and Secretary of the Federated Fund $0 $0
for the Trust and
Birth Date: October 26, 1938 Complex; Executive Vice President, Secretary and Director, 43
Federated Investors Tower Federated Investors, Inc.; Trustee, Federated Investment
other investment
1001 Liberty Avenue Management Company and Federated Investment Counseling;
companies in the
Pittsburgh, PA Director, Federated Global Investment Management Corp.,
Fund Complex
EXECUTIVE VICE PRESIDENT AND Federated Services Company and Federated Securities Corp.
SECRETARY
- -----------------------------------------------------------------------------------------------------------------------------------
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice President - $0 $0
for the Trust and
Birth Date: June 17, 1954 Funds Financial Services Division, Federated Investors, Inc.; 43
Federated Investors Tower formerly: various management positions within Funds Financial
other investment
1001 Liberty Avenue Services Division of Federated Investors, Inc.
companies in the
Pittsburgh, PA
Fund Complex
TREASURER
- -----------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher President or Vice President of some of the Funds in the $0 $0
for the Trust and
Birth Date: May 17, 1923 Federated Fund Complex; Director or Trustee of some of the 41
Federated Investors Tower Funds in the Federated Fund Complex; Executive Vice
other investment
1001 Liberty Avenue President, Federated Investors, Inc.; Chairman and Director,
companies in the
Pittsburgh, PA Federated Securities Corp.
Fund Complex
VICE PRESIDENT
- -----------------------------------------------------------------------------------------------------------------------------------
William D. Dawson, III Chief Investment Officer of this Fund and various other Funds $0 $0
for the Trust and
Birth Date: March 3, 1949 in the Federated Fund Complex; Executive Vice President, 42
Federated Investors Tower Federated Investment Counseling, Federated Global Investment
other investment
1001 Liberty Avenue Management Corp., Federated Investment Management Company and
companies in the
Pittsburgh, PA Passport Research, Ltd.; Registered Representative, Federated
Fund Complex
CHIEF INVESTMENT OFFICER Securities Corp.; Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors, Inc.;
formerly: Executive Vice President and Senior Vice President,
Federated Investment Counseling Institutional Portfolio
Management Services Division; Senior Vice President,
Federated Investment Management Company and Passport
Research, Ltd.
- -----------------------------------------------------------------------------------------------------------------------------------
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the Trust. Ms. $0 $0
for the Trust and
Birth Date: September 15, 1959 Cunningham joined Federated in 1981 and has been a Senior 6
Federated Investors Tower Portfolio Manager and a Senior Vice President of the Fund's
other investment
1001 Liberty Avenue Adviser since 1997. Ms. Cunningham served as a Portfolio
companies in the
Pittsburgh, PA Manager and a Vice President of the Fund's Adviser from 1993
Fund Complex
VICE PRESIDENT through 1996. Ms. Cunningham is a Chartered Financial Analyst
and received her M.B.A. in Finance from Robert Morris College.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. Ochson $0 $0
for the Trust and
Birth Date: September 12, 1953 joined Federated in 1982 and has been a Senior Portfolio 7
Federated Investors Tower Manager and a Senior Vice President of the Fund's Adviser
other investment
1001 Liberty Avenue since 1996. From 1988 through 1995, Ms. Ochson served as a
companies in the
Pittsburgh, PA Portfolio Manager and a Vice President of the Fund's Adviser.
Fund Complex
VICE PRESIDENT Ms. Ochson is a Chartered Financial Analyst and received her
M.B.A. in Finance from the University of Pittsburgh.
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Fund or any Fund shareholder 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 Fund.
The Adviser must waive the portion of its advisory fee that increases the Fund's
aggregate annual operating expenses above 0.45% of its average daily net assets.
The Fund's operating expenses include the advisory fee but exclude interest,
taxes, brokerage commissions, expenses of registering the Fund and its shares
under federal and state laws, expenses of withholding taxes, and extraordinary
expenses.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
<TABLE>
<CAPTION>
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated Funds
- --------------------------------------------------------------------------------------------
<S> <C>
0.150 of 1% on the first $250 million
- --------------------------------------------------------------------------------------------
0.125 of 1% on the next $250 million
- --------------------------------------------------------------------------------------------
0.100 of 1% on the next $250 million
- --------------------------------------------------------------------------------------------
0.075 of 1% on assets in excess of $750 million
- --------------------------------------------------------------------------------------------
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountant for the Fund, Deloitte & Touche LLP, plans and
performs its audit so that it may provide an opinion as to whether the Fund's
financial statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
For the Year Ended November 30 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisory Fee Earned $2,212,024 $2,267,974 $2,902,993
- -------------------------------------------------------------------------------------------------------------
Advisory Fee Reduction $ 698,998 $ 700,126 $ 823,445
- -------------------------------------------------------------------------------------------------------------
Brokerage Commissions 0 0 0
- -------------------------------------------------------------------------------------------------------------
Administrative Fee $ 416,967 $ 427,513 $ 547,940
- -------------------------------------------------------------------------------------------------------------
Shareholder Services Fee $ 276,503 $ 283,496
- -------------------------------------------------------------------------------------------------------------
</TABLE>
If the Fund's expenses are capped at a particular level, the cap does not
include reimbursement to the Fund of any expenses incurred by shareholders who
use the transfer agent's subaccounting facilities.
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year and ten-year periods ended
November 30, 1999.
Yield and Effective Yield are given for the 7-day period ended November 30,
1999.
<TABLE>
<CAPTION>
7-Day Period 1 Year 5 Years 10
Years
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Return 2.95% 3.25% 3.38%
- -----------------------------------------------------------------------------------------------------------------------
Yield 3.44%
- -----------------------------------------------------------------------------------------------------------------------
Effective Yield 3.50%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD, EFFECTIVE YIELD AND TAX-EQUIVALENT YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized base-
period return by: adding one to the base-period return, raising the sum to the
365/7th power; and subtracting one from the result. The tax-equivalent yield of
Shares is calculated similarly to the yield, but is adjusted to reflect the
taxable yield that Shares would have had to earn to equal the actual yield,
assuming the maximum combined federal and state tax rate.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to the federal
alternative minimum tax and state and/or local taxes.
TAX EQUIVALENCY TABLE
Taxable Yield Equivalent for 2000 MultiState Municipal Fund
<TABLE>
<CAPTION>
Federal Income Tax Bracket: 15.00% 28.00% 31.00%
36.00% 39.60%
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
<C>
Joint Return $1-43,850 $43,851-105,950 $105,951-161,450 $161,451-288,350
Over 288,350
- ----------------------------------------------------------------------------------------------------------------------------------
Single Return $1-26,250 $ 26,251-63,550 $ 63,551-132,600 $132,601-288,350
Over 288,350
- ----------------------------------------------------------------------------------------------------------------------------------
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.18% 1.39% 1.45%
1.56% 1.66%
- ----------------------------------------------------------------------------------------------------------------------------------
1.50% 1.76% 2.08% 2.17%
2.34% 2.48%
- ----------------------------------------------------------------------------------------------------------------------------------
2.00% 2.35% 2.78% 2.90%
3.13% 3.31%
- ----------------------------------------------------------------------------------------------------------------------------------
2.50% 2.94% 3.47% 3.62%
3.91% 4.14%
- ----------------------------------------------------------------------------------------------------------------------------------
3.00% 3.53% 4.17% 4.35%
4.69% 4.97%
- ----------------------------------------------------------------------------------------------------------------------------------
3.50% 4.12% 4.86% 5.07%
5.47% 5.79%
- ----------------------------------------------------------------------------------------------------------------------------------
4.00% 4.71% 5.56% 5.80%
6.25% 6.62%
- ----------------------------------------------------------------------------------------------------------------------------------
4.50% 5.29% 6.25% 6.52%
7.03% 7.45%
- ----------------------------------------------------------------------------------------------------------------------------------
5.00% 5.88% 6.94% 7.25%
7.81% 8.28%
- ----------------------------------------------------------------------------------------------------------------------------------
5.50% 6.47% 7.64% 7.97%
8.59% 9.11%
- ----------------------------------------------------------------------------------------------------------------------------------
6.00% 7.06% 8.33% 8.70%
9.38% 9.93%
- ----------------------------------------------------------------------------------------------------------------------------------
6.50% 7.65% 9.03% 9.42%
10.16% 10.76%
- ----------------------------------------------------------------------------------------------------------------------------------
7.00% 8.24% 9.72% 10.14%
10.94% 11.59%
- ----------------------------------------------------------------------------------------------------------------------------------
7.50% 8.82% 10.42% 10.87%
11.72% 12.42%
- ----------------------------------------------------------------------------------------------------------------------------------
8.00% 9.41% 11.11% 11.59%
12.50% 13.25%
- ----------------------------------------------------------------------------------------------------------------------------------
8.50% 10.00% 11.81% 12.32%
13.28% 14.07%
- ----------------------------------------------------------------------------------------------------------------------------------
9.00% 10.59% 12.50% 13.04%
14.06% 14.90%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in calculating
the taxable yield equivalent.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
. references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
. charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
. discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
. information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
. 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.
. 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.
. Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion, $13.1 billion and 115
million respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
Investment Ratings
STANDARD & POOR'S SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes.
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNs) AND TENDER OPTION BONDS (TOBs) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
LONG-TERM DEBT RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest-rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
MOODY'S INVESTORS SERVICE SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investors Service (Moody's) short-term ratings are designated Moody's
Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or VMIG
ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated.
MIG1--This designation denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated broad
based access to the market for refinancing.
MIG2--This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNs) AND TENDER OPTION BONDS (TOBs) RATINGS
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
LONG-TERM DEBT RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.
NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.
NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.
FITCH IBCA, 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.
Addresses
FEDERATED TAX-FREE TRUST
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
PROSPECTUS
FEDERATED MASTER TRUST
A Portfolio of Money Market Obligations Trust
A money market mutual fund seeking current income consistent with stability of
principal by investing primarily in a portfolio of short-term, high-quality
fixed income securities issued by banks, corporations and the U.S. government.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Contents
<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which
the Fund Invests? 4
What are the Specific Risks of Investing in the Fund? 6
What do Shares Cost? 6
How is the Fund Sold? 7
How to Purchase Shares 7
How to Redeem Shares 8
Account and Share Information 9
Who Manages the Fund? 10
Financial Information 10
Independent Auditors' Report 22
</TABLE>
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is to provide current income
consistent with stability of principal. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests primarily in a portfolio of short-term, high-quality fixed
income securities issued by banks, corporations and the U.S. government. The
Fund will have a dollar-weighted average portfolio maturity of 90 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund.
The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.
RISK/RETURN BAR CHART AND TABLE
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Federated Master Trust as of the calendar year-end for
each of ten years. The `y' axis reflects the "% Total Return" beginning with
"0%" and increasing in increments of 2% up to 10%. The `x' axis represents
calculation periods (for the last ten calendar years of the Fund beginning with
the earliest year) through the calendar year ended 1999. The light gray shaded
chart features ten distinct vertical bars, each shaded in charcoal, and each
visually representing by height the total return percentages for the calendar
year stated directly at its base. The calculated total return percentage for the
Fund for each calendar year is stated directly at the top of each respective
bar, for the calendar years 1990 through 1999. The percentages noted are: 8.11%,
5.98%, 3.61%, 2.90%, 3.99%, 5.73%, 5.15%, 5.20%, 5.28% and 4.90% respectively.
Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's total returns on a
calendar year-end basis.
The Fund's shares are sold without a sales charge (load). The total returns
displayed above are based upon net asset value. Within the period shown in the
Chart, the Fund's highest quarterly return was 1.99% (quarter ended June 30,
1990). Its lowest quarterly return was 0.70% (quarters ended June 30 and
September 30, 1993).
Average Annual Total Return Table
The following table represents the Fund's Average Annual Total Returns for the
calendar periods ended December 31, 1999.
<TABLE>
<CAPTION>
Calendar Period Fund
<S> <C>
1 Year 4.90%
5 Years 5.27%
10 Years 5.09%
</TABLE>
The Fund's 7-Day Net Yield as of December 31, 1999 was 5.26%. You may call the
Fund at 1-800-341-7400 for the current 7-Day Net Yield.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
returns.
The Bar Chart and Performance Table reflect historical performance data for
Federated Master Trust before its reorganization as a portfolio of Money Market
Obligations Trust on April 26, 1999.
What are the Fund's Fees and Expenses?
FEDERATED MASTER TRUST
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
<TABLE>
<CAPTION>
Shareholder Fees
Fees Paid Directly From Your Investment
<S>
<C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as
applicable) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of
offering price). None
Redemption Fee (as a percentage of amount redeemed, if
applicable) None
Exchange
Fee
None
Annual Fund Operating Expenses (Before Waivers)
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management
Fee/1/
0.40%
Distribution (12b-1)
Fee None
Shareholder Services
Fee/2/ 0.25%
Other
Expenses
0.13%
Total Annual Fund Operating
Expenses 0.78%
Total Waiver of Fund Expenses
(contractual) 0.33%
Total Actual Annual Fund Operating Expenses (after
waivers) 0.45%
</TABLE>
/1/ Pursuant to the investment advisory contract, the adviser waived a portion
of the management fee. The management fee paid by the Fund (after the
contractual waiver) was 0.27% for the fiscal year ended November 30, 1999.
Shareholders must approve any change to the contractual waiver.
/2/ The shareholder services fee has been reduced. The shareholder services fee
paid by the Fund (after the reduction) was 0.05% for the fiscal year ended
November 30, 1999.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Shares for the time
periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Shares operating expenses as shown in the table remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<S> <C>
1 Year $ 46
3 Years $ 144
5 Years $ 252
10 Years $ 567
</TABLE>
What are the Fund's Investment Strategies?
The Fund invests primarily in a portfolio of short- term, high-quality fixed
income securities, issued by banks, corporations and the U.S. government,
maturing in 397 days or less. The Fund will have a dollar- weighted average
portfolio maturity of 90 days or less.
The Fund's investment adviser (Adviser) actively manages the Fund's portfolio,
seeking to limit the credit risk taken by the Fund and to select investments
with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook. The Adviser formulates its interest rate outlook by analyzing a variety
of factors such as current and expected U.S. economic growth; current and
expected interest rates and inflation; and the Federal Reserve's monetary
policy. The Adviser structures the portfolio by investing primarily in variable
rate demand instruments and commercial paper. The Adviser generally shortens the
portfolio's maturity when it expects interest rates to rise and extends the
maturity when it expects interest rates to fall. This strategy seeks to enhance
the returns from favorable interest rate changes and reduce the effect of
unfavorable changes.
Industry Concentration
The Fund may invest 25% or more of its assets in domestic bank instruments.
What are the Principal Securities in Which the Fund Invests?
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time.
The following describes the types of fixed income securities in which the Fund
may invest.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans to
companies.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default.
DEMAND INSTRUMENTS
Demand instruments are corporate debt securities that the issuer must repay upon
demand. Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The Fund treats
demand instruments as short-term securities, even though their stated maturity
may extend beyond one year.
Asset Backed Securities
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed income
assets (including other fixed income securities) may be used to create an asset
backed security. Asset backed securities may also take the form of commercial
paper, notes or pass through certificates.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Yankee instruments are denominated in U.S. dollars and
issued by U.S. branches of foreign banks. Eurodollar instruments are denominated
in U.S. dollars and issued by non- U.S. branches of U.S. or foreign banks.
Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return for the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
Repurchase agreements are subject to credit risks.
INVESTMENT 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 NRSROs or be of comparable quality
to securities having such ratings.
What are the Specific Risks of Investing in the Fund?
Although there are many factors which may effect an investment in the Fund, the
principal risks of investing in a corporate money market fund are described
below.
CREDIT RISK
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from NRSROs such as
Standard & Poor's and Moody's Investors Services. These NRSROs assign ratings to
securities by assessing the likelihood of issuer default. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating, the
Fund must rely entirely upon the Adviser's credit assessment.
Credit risk includes the possibility that a party to a transaction involving
the Fund will fail to meet is obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
SECTOR RISKS
A substantial part of the Fund's portfolio may be comprised of securities credit
enhanced by banks or companies with similar characteristics. As a result, the
Fund will be more susceptible to any economic, business, political or other
developments which generally affect these entities.
What do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share. The
Fund does not charge a front- end sales charge. NAV is determined at 12:00 noon
and 3:00 p.m. (Eastern time) and as of the end of regular trading (normally 4:00
p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller minimum amount as long as the $25,000
minimum is reached within 90 days. An institutional investor's minimum
investment is calculated by combining all accounts it maintains with the Fund.
Accounts established through investment professionals may be subject to a
smaller minimum investment amount. Keep in mind that investment professionals
may charge you fees for their services in connection with your Share
transactions.
How is the Fund Sold?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to institutions acting in an agency or fiduciary capacity or
to individuals, directly or through investment professionals.
The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 3:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check.
You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees incurred by the Fund or Federated
Shareholder Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds). Orders by mail are considered received when payment
by check is converted into federal funds (normally the business day after the
check is received) and Shares begin earning dividends the next day.
BY AUTOMATIC INVESTMENTS
You may establish an account with your financial institution to automatically
purchase Shares on pre- determined dates or when your bank account reaches a
certain level. Under this program, participating financial institutions are
responsible for prompt transmission of orders and may charge you for this
service. You should read this prospectus along with your financial institution's
agreement or materials describing this service.
BY AUTOMATED CLEARINGHOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption
amount you will receive is based upon the next calculated NAV after the Fund
receives the order from your investment professional. Investment professionals
are responsible for promptly submitting redemption requests and providing proper
written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund
at 1-800-341-7400 once you have completed the appropriate authorization form for
telephone transactions.
If you call before 3:00 p.m. (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 3:00 p.m. (Eastern time) your redemption will be wired to
you the following business day. You will receive that day's dividend.
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317 All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all Shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of
record;
. your redemption will be sent to an address of record that was changed
within the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of
record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is
an ACH member; or
. wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions cause the account balance to fall below
the minimum initial investment amount. Before an account is closed, you will be
notified and allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be primarily dividends. Redemptions are
taxable sales. Please consult your tax adviser regarding your federal, state and
local tax liability. Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISER FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. Under the investment advisory contract, which is
subject to annual renewal by the Fund's Board of Trustees, the Adviser will
waive the amount, limited to the amount of the advisory fee, by which the Fund's
aggregate annual operating expenses, including the investment advisory fee but
excluding interest, taxes, brokerage commissions, expenses of registering or
qualifying the Fund and its shares under federal and state laws and regulations,
expenses of withholding taxes, and extraordinary expenses exceed 0.45% of its
average daily net assets.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of all
dividends and capital gains.
This information has been audited by Deloitte & Touche LLP, whose report,
along with the Fund's audited financial statements, is included in this
prospectus.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended November 30 1999 1998 1997
1996 1995
<S> <C> <C> <C>
<C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Income from Investment
Operations:
Net investment income 0.05 0.05 0.05
0.05 0.06
Less
Distributions:
Distributions from net investment income (0.05) (0.05) (0.05)
(0.05) (0.06)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
Total Return/1/ 4.86% 5.33% 5.27%
5.18% 5.73%
Ratios to Average Net
Assets:
Expenses 0.45% 0.45% 0.45%
0.45% 0.46%
Net investment income 4.73% 5.22% 5.16%
5.04% 5.59%
Supplemental
Data:
Net assets, end of period (000 omitted) $358,670 $465,134 $494,399
$626,764 $729,144
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable. See Notes which are an
integral part of the Financial Statements
Portfolio of Investments
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Principal
Value
Amount
<C>
<S> <C>
ASSET-BACKED SECURITIES-1.4%
Finance - Automotive-0.7%
$ 1,171,563 Honda Auto Lease Trust 1999-A, Class A1, 5.445%,
8/15/2000 $ 1,171,563
1,481,225 Toyota Auto Receivables 1999-A Owner Trust, Class 1, 5.365%,
8/11/2000 1,481,225
TOTAL 2,652,788
Finance -
Equipment-0.7%
522,508 Caterpillar Financial Asset Trust 1999-A, Class 1, 5.365%,
7/25/2000 522,508
1,686,699 Copelco Capital Funding LLC 1999-B, Class A-1, 5.937%,
10/18/2000 1,686,699
313,410 Heller Equipment Asset Receivables Trust 1999-1, Class A1, 4.948%,
5/13/2000 313,410
TOTAL 2,522,617
TOTAL ASSET-BACKED
SECURITIES 5,175,405
CERTIFICATES OF
DEPOSIT-6.1%
Banking-6.1%
5,000,000 Bank of Montreal, 5.200%,
5/12/2000 4,998,925
10,000,000 Canadian Imperial Bank of Commerce, 5.000% - 5.270%, 1/27/2000 -
3/3/2000 9,998,916
2,000,000 Svenska Handelsbanken, Stockholm, 5.150%,
3/20/2000 1,999,826
5,000,000 UBS AG, 5.080% - 5.250%, 1/13/2000 -
3/10/2000 5,000,226
TOTAL CERTIFICATES OF
DEPOSIT 21,997,893
COMMERCIAL
PAPER-39.0%1
Banking-23.2%
3,000,000 Aspen Funding Corp., (Insured by MBIA Insurance Corp.), 6.030%,
2/2/2000 2,968,343
10,000,000 Barclays US Funding Corp., (Guaranteed by Barclays Bank PLC, London), 10.000%,
1/3/2000 9,991,667
18,000,000 Cregem North America, Inc., (Guaranteed by Credit Communal de Belgique,
Brussles), 17,960,771
5.350% - 5.920%, 12/2/1999 -
2/14/2000
18,000,000 Den Danske Corp., Inc., (Guaranteed by Den Danske Bank A/S), 5.890%,
3/1/2000 17,732,005
5,000,000 Greenwich Funding Corp., 4.930% - 5.930%, 1/18/2000 -
2/1/2000 4,959,299
10,000,000 Park Avenue Receivables Corp., 5.900%,
2/10/2000 9,883,639
13,000,000 UBS Finance (Delaware), Inc., (UBS AG LOC), 4.860% - 5.360%, 12/6/1999 -
12/23/1999 12,979,194
2,000,000 Westpac Capital Corp., (Guaranteed by Westpac Banking Corp. Ltd.,
Sydney), 1,950,700
5.800%,5/2/2000
5,000,000 Wood Street Funding Corp., 6.000%,
1/28/2000 4,951,667
TOTAL 83,377,285
COMMERCIAL PAPER-continued/1/
Consumer
Products-1.1%
$ 4,000,000 Diageo Capital PLC, (Guaranteed by Diageo PLC), 5.700%,
1/31/2000 $ 3,961,367
Finance -
Commercial-10.8%
13,000,000 Asset Securitization Cooperative Corp., 5.750% - 5.900%, 1/31/2000 -
2/24/2000 12,859,299
4,000,000 General Electric Capital Corp., 5.920%,
2/25/2000 3,943,431
10,067,000 Receivables Capital Corp., 5.940%,
1/28/2000 9,970,659
10,000,000 Sheffield Receivables Corp., 5.950%,
2/11/2000 9,881,000
2,000,000 Sigma Finance, Inc., 6.030%,
2/4/2000 1,979,958
TOTAL 38,634,347
Finance -
Retail-0.8%
3,000,000 CommoLoCo, (Guaranteed by American General Finance Corp.), 5.940%,
1/26/2000 2,974,613
Insurance-1.7%
1,000,000 CXC, Inc., 5.940%,
1/27/2000 990,595
5,000,000 Marsh USA Inc., 5.980%,
2/16/2000 4,940,325
TOTAL 5,930,920
Pharmaceuticals and Health
Care-1.4%
5,000,000 American Home Products Corp., 5.700%,
2/9/2000 4,944,583
TOTAL COMMERCIAL
PAPER 139,823,115
CORPORATE
NOTES-11.5%
Banking-2.3%
3,000,000 First National Bank of Chicago, 6.025%,
11/13/2000 2,998,151
2,000,000 First National Bank of Chicago, 6.070%,
10/10/2000 1,999,179
3,000,000 First National Bank of Chicago, 6.163%,
10/16/2000 2,998,809
TOTAL 7,996,139
Brokerage-2.8%
10,000,000 Goldman Sachs Group, LP, 6.000%,
3/14/2000 10,000,000
Finance -
Commercial-6.4%
21,000,000 Beta Finance, Inc., 5.000%, - 5.200% 1/20/2000
5/10/2000 21,000,000
2,000,000 Sigma Finance, Inc., 6.000%,
8/11/2000 2,000,000
TOTAL 23,000,000
TOTAL CORPORATE
NOTES 40,996,139
LOAN
PARTICIPATION-9.0%
Electrical
Equipment-0.9%
3,100,000 Mt. Vernon Phenol Plant Partnership, (Guaranteed by General Electric Co.),
6.120%, 3,100,000
5/17/2000
LOAN
PARTICIPATION-continued
Electronics-5.3%
$ 19,000,000 Hewlett-Packard Co., 5.460%, 12/8/1999 -
12/10/1999 $ 19,000,000
Finance -
Automotive-2.8%
10,000,000 General Motors Acceptance Corp., Mortgage of PA, (Guaranteed by General
Motors 10,000,000
Acceptance Corp.), 5.448%,
12/1/1999
TOTAL LOAN
PARTICIPATION 32,100,000
NOTES - VARIABLE-28.3%/3/
Banking-10.6%
645,000 Dave White Chevrolet, Inc., Series 1996, (Huntington National Bank, Columbus, OH
LOC), 645,000
5.960%,
12/2/1999
25,000,000 /2/Liquid Asset Backed Securities Trust, Series 1996-3, (Westdeutsche
Landesbank 25,000,000
Girozentrale Swap Agreement), 5.448%,
12/15/1999
4,807,887 /2/Rabobank Optional Redemption Trust, Series 1997-101, 6.186%,
2/15/99 4,807,887
5,000,000 Three Rivers Funding Corp., 5.910%,
2/17/2000 5,000,000
1,485,000 White Brothers Properties, Series 1996, (Huntington National Bank, Columbus, OH
LOC), 1,485,000
5.960%,
12/2/1999
1,135,000 Winona Lake, IN, Series 1999 B, Grace Villiage, (Firstar Bank, Milwaukee LOC),
4.000%, 1,135,000
12/2/1999
TOTAL 38,072,887
Brokerage-2.6%
4,700,000 Morgan Stanley, Dean Witter & Co., 5.860%,
2/4/2000 4,700,000
4,700,000 Morgan Stanley, Dean Witter & Co., 5.910%,
2/4/2000 4,700,000
TOTAL 9,400,000
Finance -
Automotive-1.3%
4,700,000 General Motors Acceptance Corp., 5.860%,
3/7/2000 4,700,000
Finance -
Commercial-4.5%
11,000,000 Sigma Finance, Inc., 5.625%,
12/27/1999 11,000,000
3,000,000 Sigma Finance, Inc., 5.860%,
11/30/1999 3,000,000
2,000,000 Sigma Finance, Inc., 6.030%,
3/22/2000 2,000,000
TOTAL 16,000,000
Insurance-9.3%
2,000,000 Aspen Funding Corp., (Insured by MBIA Insurance Corp.), 5.456%,
1/18/2000 2,000,000
2,000,000 GE Life and Annuity Assurance Co., 5.593%,
11/30/1999 2,000,000
6,283,194 /2/Liquid Asset Backed Securities Trust, Series 1997-3 Senior Notes, (Guaranteed by
AMBAC 6,283,194
Financial Group, Inc.), 5.486%,
12/28/1999
20,000,000 Monumental Life Insurance Co., 5.670%,
12/1/1999 20,000,000
NOTES - VARIABLE-continued/3/
Insurance-continued
$ 3,000,000 Security Life of Denver Insurance Co., 6.359%,
2/10/2000 $ 3,000,000
TOTAL 33,283,194
TOTAL NOTES -
VARIABLE 101,456,081
REPURCHASE AGREEMENTS-13.0%/4/
15,000,000 Deutsche Bank Financial, Inc., 5.740%, dated 11/30/1999, due
12/1/1999 15,000,000
11,600,000 Bank of America, 5.780%, dated 11/30/1999, due
12/1/1999 11,600,000
10,000,000 Donaldson, Lufkin and Jenrette Securities Corp., 5.680%, dated 11/30/1999,
due 10,000,000
12/1/1999
10,000,000 Societe Generale Securities Corp., 5.680%, dated 11/30/1999, due
12/1/1999 10,000,000
TOTAL REPURCHASE
AGREEMENTS 46,600,000
U.S.
TREASURY-0.8%
Treasury
Securities-0.8%
3,000,000 United States Treasury Bill, 4.730%,
1/6/2000 2,985,810
TOTAL INVESTMENTS (AT AMORTIZED
COST)5 $ 391,134,443
</TABLE>
1 Each issue shows the rate of discount at the time of purchase for discount
issues, or the coupon for interest bearing issues.
2 Denotes a restricted security which is subject to restrictions on resale
under federal securities laws. At November 30, 1999, these securities
amounted to $36,091,081, which is 10.0% of net assets.
3 Floating rate note with current rate and next reset date shown. 4 Repurchase
agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreements is through participation in a joint
account with other Federated funds.
5 Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($358,670,407) at November 30, 1999.
The following acronyms are used throughout this portfolio:
AMBAC -American Municipal Bond Assurance Corporation
LLC -Limited Liability Corporation
LOC -Letter of Credit
LP -Limited Partnership
MBIA -Municipal Bond Investors Assurance
PLC -Public Limited Company
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Assets:
<S> <C>
<C>
Investments in repurchase agreements $
46,600,000
Investments in securities
344,534,443
Total investments in securities, at amortized cost and value $
391,134,443
Income receivable
2,950,270
Receivable for shares
sold 142,807
TOTAL ASSETS 394,227,520 Liabilities:
Payable for investments purchased $
33,810,338
Payable for shares redeemed
323,660
Income distribution payable
1,082,723
Payable to Bank
314,414
Accrued expenses
25,978
TOTAL LIABILITIES
35,557,113
Net Assets for 358,670,407 shares outstanding $
358,670,407
Net Asset Value, Offering Price and Redemption Proceeds Per
Share:
$358,670,407 / 358,670,407 shares
outstanding $1.00
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Operations
YEAR ENDED NOVEMBER 30, 1999
<TABLE>
<CAPTION>
Investment Income:
<S> <C> <C>
<C>
Interest
$ 21,877,848
Expenses:
Investment adviser fee $
1,685,257
Administrative personnel and services fee
317,671
Custodian fees
32,518
Transfer and dividend disbursing agent fees and expenses
28,592
Directors'/Trustees' fees
15,104
Auditing fees
15,055
Legal fees
10,529
Portfolio accounting fees
85,466
Shareholder services fee
1,053,285
Share registration costs
35,292
Printing and postage
36,521
Insurance premiums
23,606
Miscellaneous
7,394
TOTAL EXPENSES
3,346,290
Waivers:
Waiver of investment adviser fee $
(572,456)
Waiver of shareholder services fee
(842,628)
TOTAL WAIVERS
(1,415,084)
Net
expenses
1,931,206
Net investment income
$ 19,946,642
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended November 30 1999
1998
Increase (Decrease) in Net
Assets
Operations:
<S> <C>
<C>
Net investment income $ 19,946,642 $
27,388,081
Distributions to
Shareholders:
Distributions from net investment income (19,946,642)
(27,388,081)
Share
Transactions:
Proceeds from sale of shares 1,876,762,299
2,348,710,920
Net asset value of shares issued to shareholders in payment of
distributions declared 4,945,762
6,627,670
Cost of shares redeemed (1,988,171,549)
(2,384,603,857)
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (106,463,488)
(29,265,267)
Change in net assets (106,463,488)
(29,265,267)
Net
Assets:
Beginning of period 465,133,895
494,399,162
End of period $ 358,670,407 $
465,133,895
</TABLE>
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
NOVEMBER 30, 1999
ORGANIZATION
Federated Master Trust (the "Fund") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. Effective April 26, 1999, the Fund became a portfolio of the Money
Market Obligations Trust (the "Trust"). Effective February 1, 2000, the Trust
will consist of forty portfolios. The financial statements included herein are
only those of the Fund. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
investment objective of the Fund is current income consistent with stability of
principal.
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 uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act.
Repurchase Agreements
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
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 and/or standards
reviewed or established by the Board of Trustees (the "Trustees"). Risks may
arise from the potential inability of counterparties to honor the terms of these
agreements. Accordingly, the Fund could receive less than the repurchase price
on the sale of collateral securities.
The Fund, along with the other affiliated investment companies, may utilize a
joint trading account for the purpose of entering into one or more repurchase
agreements.
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"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at fair value.
Federal Taxes
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
Restricted Securities
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
Many restricted securities may be resold in the secondary market in transactions
exempt from registration. In some cases, the restricted securities may be resold
without registration upon exercise of a demand feature. Such restricted
securities may be determined to be liquid under criteria established by the
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.
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. Losses may occur on these transactions due to changes in market
conditions or the failure of counterparties to perform under the contact.
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 a trade date basis.
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).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Year Ended November 30
1999 1998
<S>
<C> <C>
Shares sold
1,876,762,299 2,348,710,920
Shares issued to shareholders in payment of distributions declared
4,945,762 6,627,670
Shares redeemed
(1,988,171,549) (2,384,603,857)
NET CHANGE RESULTING FROM SHARE TRANSACTIONS
(106,463,488) (29,265,267)
</TABLE>
Investment Adviser Fee and Other Transactions with Affiliates
Investment Adviser Fee
Federated Investment Management Company, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment adviser fee equal to
0.40% of the Fund's average daily net assets. The Adviser will waive to the
extent of its advisory fee, the amount, if any, by which the Fund's aggregate
operating expenses exceed 0.45% of average daily net assets of the Fund.
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 a scale that ranges from 0.15% to 0.075% of the
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors, Inc., subject to a $125,000 minimum per portfolio and
$30,000 per additional class. Shareholder Services Fee
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Trust shares for the period. The fee paid to FSSC is used to
finance certain services for shareholders and to maintain shareholder accounts.
FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or
terminate this voluntary waiver at any time at its sole discretion.
Transfer and Dividend Disbursing Agent Fees and Expenses
FServ, through its subsidiary 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.
General
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
Independent Auditors' Report
To the Board of Trustees of Money Market Obligations Trust and Shareholders of
Federated Master Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Master Trust (the "Fund") as of
November 30, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets for the years ended November 30,
1999 and 1998 and the financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund'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 audits to
provide 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 the securities
owned at November 30, 1999, by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. 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 our audits provide a reasonable
basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Fund as of
November 30, 1999, the results of its operations, the changes in its net assets
and its financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 14, 2000
[Federated Logo]
World-Class Investment Manager(R)
Federated Master Trust
A Portfolio of Money Market Obligations Trust
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000 is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Semi-Annual Report
to shareholders as it becomes available. To obtain the SAI, Semi-Annual Report
and other information without charge, and make inquiries, call your investment
professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
[Federated Logo]
Federated Master Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor
Investment Company Act File No. 811-5950
Cusip 60934N740
8010411A (1/00)
Federated is a registered mark
of Federated Investors, Inc.
2000 (c)Federated Investors, Inc.
[LOGO]
RECYCLED
PAPER
STATEMENT OF ADDITIONAL INFORMATION
FEDERATED MASTER TRUST
A Portfolio of Money Market Obligations Trust
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated Master Trust (Fund), dated
January 31, 2000. Obtain the prospectus without charge by calling 1-800-341-
7400.
JANUARY 31, 2000
CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Addresses
Cusip 60934N740
8010411B (1/00)
How is the Fund Organized?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on October 30, 1975,
was reorganized as a portfolio of the Trust on April 26, 1999. The Fund's
investment adviser is Federated Investment Management Company (Adviser).
Securities in Which the Fund Invests
In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
may invest.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government of
the United States. U.S. Treasury securities are generally regarded as having
the lowest credit risks.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.
Corporate Debt Securities
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. The Fund may also purchase interests in bank loans
to companies. The credit risks of corporate debt securities vary widely among
issuers.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and
use the proceeds (or bank loans) to repay maturing paper. If the issuer
cannot continue to obtain liquidity in this fashion, its commercial paper
may default.
Commercial paper investments will be limited to commercial paper rated A-1
by Standard & Poor's (S&P), Prime-1 by Moody's Investors Services
(Moody's), or F-1 by Fitch ICBA, Inc (Fitch). The Fund may invest in excess
of 25% of the value of its assets in commercial paper issued by finance
companies. The finance companies in which the Fund intends to invest can be
divided into two categories, commercial finance companies and consumer
finance companies. Commercial finance companies are principally engaged in
lending to corporations or other businesses. Consumer finance companies are
primarily engaged in lending to individuals. Captive finance companies or
finance subsidiaries which exist to facilitate the marketing and financial
activities of their parent will, for purposes of industry concentration, be
classified in the industry of their parent's corporation.
Demand Instruments
Demand instruments are corporate debt securities that the issuer must repay
upon demand. Other demand instruments require a third party, such as a
dealer or bank, to repurchase the security for its face value upon demand.
The Fund treats demand instruments as short-term securities, even though
their stated maturity may extend beyond one year.
Municipal Securities
Municipal securities are issued by states, counties, cities and other
political subdivisions and authorities. Although many municipal securities are
exempt from federal income tax, the Fund may invest in taxable municipal
securities.
Asset Backed Securities
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed
income assets (including other fixed income securities) may be used to create
an asset backed security. Asset backed securities may take the form of
commercial paper, notes, or pass through certificates. Asset backed securities
have prepayment risks.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below
the amount payable at maturity. The difference between the purchase price and
the amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate and credit risks of a zero coupon security.
Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Yankee instruments are denominated in U.S. dollars and
issued by U.S. branches of foreign banks. Eurodollar instruments are
denominated in U.S. dollars and issued by non-U.S. branches of U.S. or foreign
banks.
In addition, the Fund may invest 25% or more of the value of its total assets
in instruments 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. The Fund only invests in bank
instruments either issued by an institution having capital, surplus and
undivided profits over $100 million, or insured by the Bank Insurance Fund or
the Savings Association Insurance Fund. Bank instruments may include
Eurodollar Certificates of Deposit, Yankee Certificates of Deposit, Canadian
Time Deposits, and Eurodollar Time Deposits. The Fund will treat securities
credit enhanced with a bank's letter of credit as bank instruments.
Insurance Contracts
Insurance contracts include guaranteed investment contracts, funding
agreements and annuities. The Fund treats these contracts as fixed income
securities.
Credit Enhancement
Common types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement also includes arrangements
where securities or other liquid assets secure payment of a fixed income
security. If a default occurs, these assets may be sold and the proceeds paid
to the security's holders. Either form of credit enhancement reduces credit
risks by providing another source of payment for a fixed income security.
Foreign Securities
Foreign securities are securities of issuers based outside the United States.
The Fund considers an issuer to be based outside the United States if:
. it is organized under the laws of, or has a principal office located in,
another country;
. the principal trading market for its securities is in another country; or
. it (or its subsidiaries) derived in its most current fiscal year at least 50%
of its total assets, capitalization, gross revenue or profit from goods
produced, services performed, or sales made in another country.
Along with the risks normally associated with domestic securities of the same
type, foreign securities are subject to risks of foreign investing.
SPECIAL TRANSACTIONS
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit risks
in the event of a counterparty default.
Inter-fund Borrowing and Lending Arrangements
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. (Federated funds) to lend
and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary
for both borrowing and lending funds, and an inter-fund loan is only made if it
benefits each participating fund. Federated administers the program according to
procedures approved by the Fund's Board of Trustees (Board), and the Board
monitors the operation of the program. Any inter-fund loan must comply with
certain conditions set out in the exemption, which are designed to assure
fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may be
made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the Bank Loan Rate), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate.
Asset Coverage
In order to secure its obligations in connection with special transactions, the
Fund will either own the underlying assets or set aside readily marketable
securities with a value that equals or exceeds the Fund's obligations. Unless
the Fund has other readily marketable assets to set aside, it cannot trade
assets used to secure such obligations without terminating the special
transaction. This may cause the Fund to miss favorable trading opportunities or
to realize losses on derivative contracts or special transactions.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
INVESTMENT RATINGS
A nationally recognized rating service's highest rating category is determined
without regard for sub-categories and gradations. For example, securities rated
A-1 or A-1+ by S&P, Prime-1 by Moody's, D-1 or D-1+ by Duff & Phelps, or F-1 (+
or -) by Fitch are all considered rated in the highest short-term rating
category. The Fund will follow applicable regulations in determining whether a
security rated by more than one nationally recognized ratings service can be
treated as being in the second highest short-term rating category; currently,
such securities must be rated by two nationally recognized rating services two
highest rating categories. See "Regulatory Compliance."
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Fixed income securities generally compensate for greater credit risk by paying
interest at a higher rate. The difference between the yield of a security and
the yield of a U.S. Treasury security with a comparable maturity (the spread)
measures the additional interest paid for risk. Spreads may increase generally
in response to adverse economic or market conditions. A security's spread may
also increase if the security's rating is lowered, or the security is perceived
to have an increased credit risk. An increase in the spread will cause the price
of the security to decline.
Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.
Risks of Foreign Investing
Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable than those of the United States. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors.
Prepayment Risks
Unlike traditional fixed income securities, which pay a fixed rate of interest
until maturity (when the entire principal amount is due), payments on asset
backed securities include both interest and a partial payment of principal.
Partial payments of principal may be comprised of scheduled principal payments
as well as unscheduled payments from voluntary prepayment, refinancing, or
foreclosure of the underlying loans. If the Fund receives unscheduled
prepayments, it may have to reinvest the proceeds in other fixed income
securities with lower interest rates, higher credit risks or other less
favorable characteristics.
FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICY
The Fund's fundamental investment objective is current income consistent with
stability of principal and liquidity. The investment objective may not be
changed by the Fund's Trustee's without shareholder approval.
The Fund may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations.
Money market instruments include, but are not limited to, U.S. Treasury Bills,
all other marketable obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, instruments of banks and savings and loans
which are members of the Federal Deposit Insurance Corporation or Federal
Savings and Loan Insurance Corporation (such as certificates of deposit, demand
and time deposits, savings shares and bankers' acceptances), repurchase
agreements, prime commercial paper including variable amount demand master
notes, and instruments secured by such obligations.
The Fund may purchase money market instruments, including bank instruments and
commercial paper, which are not rated but are determined by the Board or its
designee to be of comparable quality to the other bank or corporate obligations
in which the Fund may invest.
INVESTMENT LIMITATIONS
Diversification
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash, cash
items, securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized by
such U.S. government securities, and securities of other investment companies)
if as a result more than 5% of the value of its total assets would be invested
in the securities of that issuer, or it would own more than 10% of the
outstanding voting securities of that issuer.
Buying on Margin
The Fund will not purchase any securities on margin but it may obtain such
short-term credits necessary for the clearance of purchases and sales of
securities. The Fund may purchase and dispose of U.S. Government securities
before the issuance thereof. The Fund may also purchase U.S. Government
securities on a delayed delivery basis. The settlement dates of these
transactions shall be determined by the mutual agreement of the parties.
Selling Short
The Fund will not sell any securities short.
Investing in Commodities
The Fund will not invest in commodities, commodity contracts or real estate,
except that the Fund may purchase money market instruments issued by companies
which invest in real estate or interests therein.
Underwriting
The Fund will not engage in underwriting of securities issued by others.
Lending
The Fund will not make loans to other persons; provided, however, that the
purchase or holding of money market instruments, to include repurchase
agreements and variable amount demand master notes, in accordance with the
Fund's investment objective and policies, shall not constitute the making of a
loan.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
The above limitations cannot be changed by the Board unless authorized by the
"vote of a majority of its outstanding voting securities," as defined by the
Investment Company Act. The following limitations, however, may be changed by
the Board without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Borrowing Money and Issuing Senior Securities
The Fund will not mortgage, pledge or hypothecate 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 10% of
the value of the total assets at the time of the pledge.
Concentration
The Fund will not invest 25% or more of its total assets in any one industry.
However, investing in U.S. government securities and domestic bank instruments
shall not be considered investment in any one industry.
Pledging Assets
The Fund will not mortgage, pledge or hypothecate 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 10% of
the value of the total assets at the time of the pledge.
Illiquid Securities
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities including certain restricted securities not determined to be
liquid under criteria established by the Board, non-negotiable time deposits,
and repurchase agreements providing for settlement in more than seven days after
notice.
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 invest in puts, calls, straddles, spreads, or any combination
of them.
For purposes of the diversification limitation, 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 (the Rule), which regulates money
market mutual funds. The Fund will determine the effective maturity of its
investments according to the Rule. The Fund may change these operational
policies to reflect changes in the laws and regulations without the approval of
its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 the Rule. Under the Rule,
the Board 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 Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the two
values. The Board will take any steps it considers 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.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
Account and Share Information
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 7, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Shares: Saxon & Co., Lester, PA, owned
approximately 85,596,904 shares (24.81%); and Trust Company of Washington,
Seattle, WA, owned approximately 26,915,402 shares (7.80%).
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
Who Manages and Provides Services to the Fund?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
43 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January 7, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding shares.
<TABLE>
<CAPTION>
Name
Birth Date Aggregate
Address Principal Occupations Compensation
Position With Trust for Past Five Years From Fund
- ------------------------------- -------------------------------------------- ------------
- ----------------------
<S> <C> <C> <C>
John F. Donahue*#+ Chief Executive Officer and Director or $0 $0
for the Trust and
Birth Date: July 28, 1924 Trustee of the Federated Fund Complex; 43
other investment
Federated Investors Tower Chairman and Trustee, Federated Investment
companies in the
1001 Liberty Avenue Management Company; Chairman and Director,
Fund Complex
Pittsburgh, PA Federated Investors, Inc.,
Federated
CHAIRMAN AND TRUSTEE Investment Counseling and Federated Global
Investment Management Corp.; Chairman,
Passport Research, Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas G. Bigley Director or Trustee of the Federated Fund $808.11
$116,760.63 for
Birth Date: February 3, 1934 Complex; Director, Member of Executive the
Trust
15 Old Timber Trail Committee, Children's Hospital of and
43 other
Pittsburgh, PA Pittsburgh; Director, Robroy Industries,
investment
TRUSTEE Inc. (coated steel conduits/computer
companies in the
storage equipment); formerly: Senior
Fund Complex
Partner, Ernst & Young LLP; Director, MED
3000 Group, Inc. (physician practice
management); Director, Member of Executive
Committee, University of Pittsburgh.
- ------------------------------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Director or Trustee of the Federated Fund $889.05
$128,455.37 for
Birth Date: June 23, 1937 Complex; President, Investment Properties the
Trust
Grubb & Ellis/Investment Properties Corporation; Senior Vice President, John and
43 other
Corporation R. Wood and Associates, Inc., Realtors;
investment
3201 Tamiami Trail North Partner or Trustee in private real estate
companies in the
Naples, FL ventures in Southwest Florida; formerly:
Fund Complex
TRUSTEE President, Naples Property Management,
Inc. and Northgate Village Development
Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
Nicholas P. Constantakis Director or Trustee of the Federated Fund $392.62
$73,191.21 for
Birth Date: September 3, 1939 Complex; Director, Michael Baker the
Trust and
175 Woodshire Drive Corporation (engineering, construction, 37
other investment
Pittsburgh, PA operations and technical services);
companies in the
TRUSTEE formerly: Partner, Andersen Worldwide SC.
Fund Complex
- ------------------------------------------------------------------------------------------------------------------------------------
John F. Cunningham Director or Trustee of some of the $477.89
$93,190.48 for
Birth Date: March 5, 1943 Federated Fund Complex; Chairman, the
Trust and
353 El Brillo Way President and Chief Executive Officer, 37
other investment
Palm Beach, FL Cunningham & Co., Inc. (strategic business
companies in the
TRUSTEE consulting); Trustee Associate, Boston
Fund Complex
College; Director, Iperia Corp.
(communications/software); formerly:
Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board
and Chief Executive Officer, Computer
Consoles, Inc.; President and Chief
Operating Officer, Wang Laboratories;
Director, First National Bank of Boston;
Director, Apollo Computer, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue+ President or Executive Vice President of $0 $0
for the Trust and
Birth Date: April 11, 1949 the Federated Fund Complex; Director or 30
other investment
Federated Investors Tower Trustee of some of the Funds in the
companies in the
1001 Liberty Avenue Federated Fund Complex; President, Chief
Fund Complex
Pittsburgh, PA Executive Officer and Director, Federated
PRESIDENT AND TRUSTEE Investors, Inc.; President and Trustee,
Federated Investment Management Company
and Federated Investment Counseling;
President and Director, Federated Global
Investment Management Corp.; President,
Passport Research, Ltd.; Trustee,
Federated Shareholder Services Company;
Director, Federated Services Company.
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund $808.11
$116,760.63 for
Birth Date: October 11, 1932 Complex; Professor of Medicine, University the
Trust and 43
3471 Fifth Avenue of Pittsburgh; Medical Director,
other investment
Suite 1111 University of Pittsburgh Medical Center -
companies in the
Pittsburgh, PA Downtown; Hematologist, Oncologist and
Fund Complex
TRUSTEE Internist, University of Pittsburgh
Medical Center; Member, National Board of
Trustees, Leukemia Society of America.
- ------------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Director or Trustee of the Federated Fund $679.43
$109,153.60 for
Birth Date: March 16, 1942 Complex; formerly: Representative, the
Trust and 43
One Royal Palm Way Commonwealth of Massachusetts General
other investment
100 Royal Palm Way Court; President, State Street Bank and
companies in the
Palm Beach, FL Trust Company and State Street Corporation.
Fund Complex
TRUSTEE Previous Positions: Director, VISA USA and
VISA International; Chairman and
Director, Massachusetts Bankers
Association; Director, Depository Trust
Corporation; Director, The Boston Stock
Exchange.
- ------------------------------------------------------------------------------------------------------------------------------------
Charles F. Mansfield, Jr. Director or Trustee of some of the $493.94
$102,573.91 for
Birth Date: April 10, 1945 Federated Fund Complex; Executive Vice the
Trust and 40
80 South Road President, Legal and External Affairs,
other investment
Westhampton Beach, NY Dugan Valve Contess, Inc. (marketing,
companies in the
TRUSTEE communications, technology and
Fund Complex
consulting); formerly Management
Consultant.
Previous Positions: Chief Executive
Officer, PBTC International Bank; Partner,
Arthur Young & Company (now Ernst & Young
LLP); Chief Financial Officer of Retail
Banking Sector, Chase Manhattan Bank;
Senior Vice President, Marine Midland
Bank; Vice President, Citibank; Assistant
Professor of Banking and Finance, Frank G.
Zarb School of Business, Hofstra
University.
- ------------------------------------------------------------------------------------------------------------------------------------
John E. Murray, Jr., J.D., S.J.D.# Director or Trustee of the Federated Fund $889.05
$128,455.37 for the
Birth Date: December 20, 1932 Complex; President, Law Professor,
Trust and 43 other
President, Duquesne University Duquesne University; Consulting Partner,
investment companies
Pittsburgh, PA Mollica & Murray; Director, Michael Baker in
the Fund Complex
TRUSTEE Corp. (engineering, construction,
operations and technical services).
Previous Positions: Dean and Professor of
Law, University of Pittsburgh School of
Law; Dean and Professor of Law, Villanova
University School of Law.
- ------------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Director or Trustee of the Federated Fund $808.11
$116,760.63 for the
Birth Date: June 21, 1935 Complex; Public
Trust and 43 other
4905 Bayard Street Relations/Marketing/Conference Planning.
investment companies
Pittsburgh, PA Previous Positions: National Spokesperson, in
the Fund Complex
TRUSTEE Aluminum Company of America; television
producer; business owner.
- ------------------------------------------------------------------------------------------------------------------------------------
John S. Walsh Director or Trustee of some of the $477.89
$94,536.85 for the
Birth Date: November 28, 1957 Federated Fund Complex; President and
Trust and 39 other
2007 Sherwood Drive Director, Heat Wagon, Inc. (manufacturer
investment companies
Valparaiso, IN of construction temporary heaters); in
the Fund Complex
TRUSTEE President and Director, Manufacturers
Products, Inc. (distributor of portable
construction heaters); President, Portable
Heater Parts, a division of Manufacturers
Products, Inc.; Director, Walsh & Kelly,
Inc. (heavy highway contractor); formerly:
Vice President, Walsh & Kelly, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Trustee or Director of some of the Funds $0 $0
for the
Birth Date: October 22, 1930 in the Federated Fund Complex; President,
Trust and 42
Federated Investors Tower Executive Vice President and Treasurer of
other investment
1001 Liberty Avenue some of the Funds in the Federated Fund
company in the
Pittsburgh, PA Complex; Vice Chairman, Federated
Fund Complex
EXECUTIVE VICE PRESIDENT Investors, Inc.; Vice President, Federated
Investment Management Company, Federated
Investment Counseling, Federated Global
Investment Management Corp. and Passport
Research, Ltd.; Executive Vice President
and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services
Company.
- ------------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Executive Vice President and Secretary of $0 $0
for the
Birth Date: October 26, 1938 the Federated Fund Complex; Executive Vice
Trust and 43
Federated Investors Tower President, Secretary and Director,
other investment
1001 Liberty Avenue Federated Investors, Inc.; Trustee,
companies in the
Pittsburgh, PA Federated Investment Management Company
Fund Complex
EXECUTIVE VICE PRESIDENT AND and Federated Investment Counseling;
SECRETARY Director, Federated Global Investment
Management Corp., Federated Services
Company and Federated Securities Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard J. Thomas Treasurer of the Federated Fund Complex; $0 $0
for the
Birth Date: June 17, 1954 Vice President - Funds Financial Services
Trust and 43
Federated Investors Tower Division, Federated Investors, Inc.;
other investment
1001 Liberty Avenue formerly: various management positions
companies in the
Pittsburgh, PA within Funds Financial Services Division
Fund Complex
TREASURER of Federated Investors, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher President or Vice President of some of the $0 $0
for the
Birth Date: May 17, 1923 Funds in the Federated Fund Complex;
Trust and 41
Federated Investors Tower Director or Trustee of some of the Funds
other investment
1001 Liberty Avenue in the Federated Fund Complex; Executive
companies in the
Pittsburgh, PA Vice President, Federated Investors, Inc.;
Fund Complex
VICE PRESIDENT Chairman and Director, Federated
Securities Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
William D. Dawson, III Chief Investment Officer of this Fund and $0 $0
for the
Birth Date: March 3, 1949 various other Funds in the Federated Fund
Trust and 42
Federated Investors Tower Complex; Executive Vice President,
other investment
1001 Liberty Avenue Federated Investment Counseling, Federated
companies in the
Pittsburgh, PA Global Investment Management Corp.,
Fund Complex
CHIEF INVESTMENT OFFICER Federated Investment Management Company
and Passport Research, Ltd.; Registered
Representative, Federated Securities
Corp.; Portfolio Manager, Federated
Administrative Services; Vice President,
Federated Investors, Inc.; formerly:
Executive Vice President and Senior Vice
President, Federated Investment
Counseling Institutional Portfolio
Management Services Division; Senior
Vice President, Federated Investment
Management Company and Passport
Research, Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Deborah A. Cunningham Deborah A. Cunningham is Vice President of $0 $0
for the
Birth Date: September 15, 1959 the Trust. Ms. Cunningham joined
Trust and 6
Federated Investors Tower Federated in 1981 and has been a Senior
other investment
1001 Liberty Avenue Portfolio Manager and a Senior Vice
companies in the
Pittsburgh, PA President of the Fund's Adviser since
Fund Complex
VICE PRESIDENT 1997. Ms. Cunningham served as a Portfolio
Manager and a Vice President of the Fund's
Adviser from 1993 through 1996. Ms.
Cunningham is a Chartered Financial
Analyst and received her M.B.A. in Finance
from Robert Morris College.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary Jo Ochson Mary Jo Ochson is Vice President of the $0 $0
for the
Birth Date: September 12, 1953 Trust. Ms. Ochson joined Federated in
Trust and 7
Federated Investors Tower 1982 and has been a Senior Portfolio
other investment
1001 Liberty Avenue Manager and a Senior Vice President of the
companies in the
Pittsburgh, PA Fund's Adviser since 1996. From 1988
Fund Complex
VICE PRESIDENT through 1995, Ms. Ochson served as a
Portfolio Manager and a Vice President of
the Fund's Adviser. Ms. Ochson is a
Chartered Financial Analyst and received
her M.B.A. in Finance from the University
of Pittsburgh.
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Fund or any Fund shareholder 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 Fund.
The Adviser must waive the portion of its advisory fee that increases the Fund's
aggregate annual operating expenses above 0.45% of its average daily net assets.
The Fund's operating expenses include the advisory fee but exclude interest,
taxes, brokerage commissions, expenses of registering the Fund and its shares
under federal and state laws, expenses of withholding taxes, and extraordinary
expenses.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
<TABLE>
<CAPTION>
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated Funds
- ----------------------------------------------------------------------------------------------
<S> <C>
0.150 of 1% on the first $250 million
- ----------------------------------------------------------------------------------------------
0.125 of 1% on the next $250 million
- ----------------------------------------------------------------------------------------------
0.100 of 1% on the next $250 million
- ----------------------------------------------------------------------------------------------
0.075 of 1% on assets in excess of $750 million
- ----------------------------------------------------------------------------------------------
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountant for the Fund, Deloitte & Touche LLP, plans and
performs its audit so that it may provide an opinion as to whether the Fund's
financial statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
For the Year Ended November 30 1999 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisory Fee Earned $1,685,257 $2,105,177 $2,332,976
Advisory Fee Reduction $ 572,456 $ 655,273 $ 715,043
Administrative Fee $ 317,671 $ 396,826 $ 440,349
Shareholder Services Fee $ 210,657 $ 263,147
</TABLE>
If the Fund's expenses are capped at a particular level, the cap does not
include reimbursement to the Fund of any expenses incurred by shareholders who
use the transfer agent's subaccounting facilities.
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year and ten-year periods ended
November 30, 1999.
Yield and Effective Yield are given for the 7-day period ended November 30,
1999.
<TABLE>
<CAPTION>
7-Day Period 1 Year 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Return 4.86% 5.27% 5.11%
- ----------------------------------------------------------------------------------------------------
Yield 5.22%
- ----------------------------------------------------------------------------------------------------
Effective Yield 5.36%
- ----------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD AND EFFECTIVE YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized base-
period return by: adding one to the base-period return, raising the sum to the
365/7th power; and subtracting one from the result.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
. references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
. charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
. discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
. information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
. 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.
. 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.
. Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion, $13.1 billion and 115
million respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
Addresses
FEDERATED MASTER TRUST
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
PROSPECTUS
Trust for Government Cash Reserves
A Portfolio of Money Market Obligations Trust
A money market mutual fund seeking high current income consistent with stability
of principal and liquidity by investing primarily in a portfolio of U.S.
Treasury and government agency securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Contents
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 4
What are the Specific Risks of Investing in the Fund? 5
What do Shares Cost? 5
How is the Fund Sold? 5
How to Purchase Shares 5
How to Redeem Shares 7
Account and Share Information 8
Who Manages the Fund? 8
Financial Information 10
Independent Auditors' Report 19
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is high current income
consistent with the stability of principal and liquidity. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests primarily in a portfolio of U.S. Treasury and government agency
securities that pay interest that is exempt from state personal income tax. The
Fund will have a dollar-weighted average portfolio maturity of 60 days or less;
portfolio securities will have a maturity of 397 days or less.
WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?
All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund.
The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.
Risk/Return Bar Chart and Table
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Trust for Government Cash Reserves as of the calendar
year-end for each of ten years. The `y' axis reflects the "% Total Return"
beginning with "0%" and increasing in increments of 2% up to 10%. The `x' axis
represents calculation periods (for the last ten calendar years of the Fund
beginning with the earliest year) through the calendar year ended 1999. The
light gray shaded chart features ten distinct vertical bars, each shaded in
charcoal, and each visually representing by height the total return percentages
for the calendar year stated directly at its base. The calculated total return
percentage for the Fund for each calendar year is stated directly at the top of
each respective bar, for the calendar years 1990 through 1999. The percentages
noted are: 7.87%, 5.71%, 3.45%, 2.86%, 3.96%, 5.59%, 5.05%, 5.17%, 5.11% and
4.78% respectively.
Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's total returns on a
calendar year-end basis. The Fund's shares are sold without a sales charge
(load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Fund's highest quarterly return was
1.94% (quarter ended June 30, 1990). Its lowest quarterly return was 0.70%
(quarter ended March 31, 1993). Average Annual Total Return Table The
following table represents the Fund's Average Annual Total Returns for the
calendar periods ended December 31, 1999. Calendar Period Investment Shares
1 Year 4.78% 5 Years 5.14% 10 Years 4.95% The Fund's 7-Day Net Yield as of
December 31, 1999 was 5.31%. You may call the Fund at 1-800-341-7400 for the
current 7-Day Net Yield.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
returns.
The Bar Chart and Performance Table reflect historical performance data for
Trust for Government Cash Reserves before its reorganization as a portfolio of
Money Market Obligations Trust on April 26, 1999. What are the Fund's Fees
and Expenses?
TRUST FOR GOVERNMENT CASH RESERVES
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, as applicable) None Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and other Distributions) (as a percentage of offering
None
price).
Redemption Fee (as a percentage of amount redeemed, if
applicable) None
Exchange
Fee
None
Annual Fund Operating Expenses (Before Waivers)/1/
Expenses That are Deducted From Fund Assets (as a percentage of average net
assets)
Management
Fee/2/
0.40%
Distribution (12b-1)
Fee None
Shareholder Services
Fee/3/ 0.25%
Other
Expenses
0.12%
Total Annual Fund Operating
Expenses 0.77%
1 Although not contractually obligated to do so, the adviser and shareholder
services provider waived certain amounts. These are shown below along with
the net expenses the Fund actually paid for the fiscal year ended November
30, 1999.
Total Waiver of Fund
Expenses 0.31%
Total Actual Annual Fund Operating Expenses (after
waivers) 0.46%
2 The adviser has voluntarily waived a portion of the management fee. The
adviser can terminate this voluntary waiver at any time. The management fee
paid by the Fund (after the voluntary waiver) was 0.29% for the fiscal year
ended November30,1999.
3 The shareholder services provider has voluntarily waived a portion of the
shareholder services fee. The shareholder services provider can terminate
this voluntary waiver at any time. The shareholder services fee paid by the
Fund (after the voluntary waiver) was 0.05% for the fiscal year ended
November 30, 1999.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Shares for the time
periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Shares operating expenses are before waivers as shown above
and remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be: 1 Year 3 Years 5 Years 10 Years
$79 $246 $428 $954
What are the Fund's Investment Strategies?
The Fund invests primarily in a portfolio of U.S. Treasury and government agency
securities that pay interest that is exempt from state personal income tax.
Portfolio securities will have a maturity of 397 days or less. In an effort to
qualify for the highest rating for money market funds issued by a nationally
recognized statistical rating organization ("NRSRO"), the Fund will limit its
dollar-weighted average portfolio maturity to 60 days or less.
The Fund's investment adviser (Adviser) targets a dollar-weighted average
portfolio maturity range based upon its interest rate outlook. The Adviser
formulates its interest rate outlook by analyzing a variety of factors, such as:
. current U.S. economic activity and the economic outlook;
. current short-term interest rates;
. the Federal Reserve Board's policies regarding short-term interest rate, and
. the potential effects of foreign economic activity on U.S. short-term
interest rates.
The Adviser generally shortens the portfolio's dollar- weighted average maturity
when it expects interest rates to rise and extends the maturity when it expects
interest rates to fall. The Adviser selects securities used to shorten or extend
the portfolio's dollar- weighted average maturity by comparing the returns
currently offered by different investments to their historical and expected
returns. What are the Principal Securities in Which the Fund Invests?
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer must repay the principal amount of the
security, normally within a specified time. The Fund may invest in the following
types of fixed income securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government of the
United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. What are the Specific
Risks of Investing in the Fund? INTEREST RATE RISK
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities. What do Shares Cost? You can
purchase or redeem Shares any day the New York Stock Exchange (NYSE) is open.
The Fund attempts to stablize the net asset value (NAV) of its shares at $1.00
by valuing the portfolio securities using the amoritzed cost method. The Fund
cannot guarantee that its NAV will always remain at $1.00 per share. The Fund
does not charge a front- end sales charge. NAV is determined at 12:00 noon and
1:00 p.m. (Eastern time) and as of the end of regular trading (normally 4:00
p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller amount as long as the $25,000 minimum
is reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.
How is the Fund Sold?
The Fund's distributor, Federated Securities Corp., markets the Shares described
in this prospectus to institutional investors, such as banks, fiduciaries,
custodians of public funds, corporations, unions, hospitals, insurance
companies, municipalities or to individuals, directly or through investment
professionals. The Distributor and its affiliates may pay out of their assets
amounts (including items of material value) to investment professionals for
marketing and servicing Shares. The Distributor is a subsidiary of Federated
Investors, Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 2:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
2:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check. You will
become the owner of Shares after the Fund receives your wire or your check. If
your check does not clear, your purchase will be canceled and you could be
liable for any losses or fees incurred by the Fund or Federated Shareholder
Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or
Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds). Orders by mail are considered received when payment
by check is converted into federal funds (normally the business day after the
check is received), and Shares begin earning dividends the next day.
BY AUTOMATIC INVESTMENTS
You may establish an account with your financial institution to automatically
purchase Shares on pre- determined dates or when your bank account reaches a
certain level. Under this program, participating financial institutions are
responsible for prompt transmission of orders and may charge you for this
service. You should read this prospectus along with your financial institution's
agreement or materials describing this service.
BY AUTOMATED CLEARINGHOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
RETIREMENT INVESTMENTS
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares through an
investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption
amount you will receive is based upon the next calculated NAV after the Fund
receives the order from your investment professional. Investment professionals
are responsible for promptly submitting redemption requests and providing proper
written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 2:00 p.m. (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 2:00 p.m. (Eastern time) your redemption will be wired to
you the following business day. You will receive that day's dividend.
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed. Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all Shareholders exactly as registered.
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is an
ACH member; or
. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.
You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.
REDEMPTIONS FROM RETIREMENT ACCOUNTS
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues Share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption or exchange request. For your
protection, send your certificates by registered or certified mail, but do not
endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions cause the account balance to fall below
the minimum initial investment amount. Before an account is closed, you will be
notified and allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
The Fund will limit its investments to those which, if owned directly, pay
interest exempt from state personal income tax. However, under the laws of some
states, the net investment income distributed by the Fund may be taxable to
shareholders.
Fund distributions are expected to be primarily dividends. Redemptions are
taxable sales. Please consult your tax adviser regarding your federal, state and
local tax liability. Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 175
mutual funds and separate accounts, which totaled approximately $111 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISER FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.
Financial Information
FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of all
dividends and capital gains.
This information has been audited by Deloitte & Touche LLP, whose report,
along with the Fund's audited financial statements, is included in this
prospectus.
Financial Highlights
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Year Ended November 30 1999/1/ 1998 1997
1996 1995
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00
Income from Investment Operations:
Net investment income 0.05 0.05 0.05 0.05 0.05
Less Distributions:
Distributions from net investment income (0.05) (0.05) (0.05) (0.05) (0.05)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Return/2/ 4.73% 5.16% 5.15% 5.08% 5.60%
Ratios to Average Net Assets:
Expenses 0.46% 0.46% 0.46% 0.46% 0.45%
Net investment income 4.61% 5.06% 5.02% 4.99% 5.45%
Expense waiver/reimbursement/3/ 0.31% 0.31% 0.31% 0.32% 0.32%
Supplemental Data:
Net assets, end of period (000 omitted) $449,476 $535,007 $562,704 $599,550 $739,553
</TABLE>
1 For the year ended November 30, 1999, the Fund was audited by Deloitte &
Touche LLP. Each of the previous years were audited by
other auditors.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 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
Portfolio of Investments
<TABLE>
<CAPTION>
<S> <C> <C>
NOVEMBER 30, 1999
Principal Value
Amount
GOVERNMENT AGENCIES-116.6%
$ 30,825,000 1 Federal Farm Credit System Discount Notes, 5.220% - 5.584%, 12/1/1999 -1/26/2000 $ 30,697,723
4,000,000 2 Federal Farm Credit System Floating Rate Notes, 5.230%,12/1/1999 3,998,422
6,500,000 Federal Farm Credit System, 5.000% - 5.400%, 4/3/2000 -7/3/2000 6,496,587
240,500,000 1 Federal Home Loan Bank System Discount Notes, 5.160% - 5.610%, 12/1/1999 -3/29/2000 238,661,643
42,500,000 2 Federal Home Loan Bank System Floating Rate Notes, 5.228% - 5.705%, 12/1/1999- 42,486,363
12/21/1999
53,810,000 Federal Home Loan Bank System, 4.790% - 6.050%, 1/14/2000 -10/25/2000 53,537,583
55,000,000 2 Student Loan Marketing Association Floating Rate Notes, 5.233% - 6.055%, 12/1/1999- 54,984,156
12/16/1999
21,300,000 Student Loan Marketing Association Master Notes, 5.755%,12/7/1999 21,300,000
5,500,000 Student Loan Marketing Association, 4.930% - 6.045%, 2/8/2000 -11/3/2000 5,499,182
66,500,000 1 Tennessee Valley Authority Discount Notes, 5.140% - 5.460%, 12/3/1999 -1/21/2000 66,378,752
TOTAL GOVERNMENT AGENCIES 524,040,411
TOTAL INVESTMENTS (AT AMORTIZED COST)/3/ $ 524,040,411
</TABLE>
1 Rates note reflect the effective yield.
2 Denotes variable rate securities which show current rate and next demand date.
3 Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($449,475,871) at November 30, 1999.
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
<S> <C> <C>
NOVEMBER 30, 1999
Assets:
Total investments in securities, at amortized cost and value $ 524,040,411
Cash 20,330
Income receivable 1,151,748
Receivable for shares sold 6,110
TOTAL ASSETS 525,218,599
Liabilities:
Payable for investments purchased $ 74,244,046
Payable for shares redeemed 3,490
Income distribution payable 1,453,064
Accrued expenses 42,128
TOTAL LIABILITIES 75,742,728
Net Assets for 449,475,871 shares outstanding $ 449,475,871
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$449,475,871 / 449,475,871 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements
Statement of Operations
YEAR ENDED NOVEMBER 30, 1999
Investment Income:
Interest $24,527,440
Expenses:
Investment adviser fee $ 1,934,025
Administrative personnel and services fee 364,564
Custodian fees 24,911
Transfer and dividend disbursing agent fees and expenses 14,658
Directors'/Trustees' fees 16,499
Auditing fees 13,000
Legal fees 12,779
Portfolio accounting fees 92,774
Shareholder services fee 1,208,766
Share registration costs 19,849
Printing and postage 15,499
Insurance premiums 2,525
Miscellaneous 10,501
TOTAL EXPENSES 3,730,350
Waivers:
Waiver of investment adviser fee $ (547,750)
Waiver of shareholder services fee (967,012)
TOTAL WAIVERS (1,514,762)
Net expenses 2,215,588
Net investment income $22,311,852
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
Year Ended November 30 1999 1998
Increase (Decrease) in Net Assets:
Operations:
Net investment income $ 22,311,852 $27,890,235
Distributions to Shareholders:
Distributions from net investment income (22,311,852) (27,890,235)
Share Transactions:
Proceeds from sale of shares 1,273,043,092 1,501,544,374
Net asset value of shares issued to shareholders in payment of 3,204,808 3,374,747
distributionsdeclared
Cost of shares redeemed (1,361,778,545) (1,532,616,817)
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (85,530,645) (27,697,696)
Change in net assets (85,530,645) (27,697,696)
Net Assets:
Beginning of period 535,006,516 562,704,212
End of period $ 449,475,871 $535,006,516
</TABLE>
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
NOVEMBER 30, 1999
ORGANIZATION
Trust for Government Cash Reserves (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as an open-end,
management investment company. Effective April 26, 1999, the Fund became a
portfolio of the Money Market Obligations Trust (the "Trust"). Effective
February 1, 2000, the Trust will consist of forty portfolios. The financial
statements included herein are only those of the Fund. The financial statements
of the other portfolios are presented separately. The assets of each portfolio
are segregated and a shareholder's interest is limited to the portfolio in which
the shares are held. The investment objective of the Fund is high current income
consistent with stability of principal and liquidity.
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 uses the amortized cost method to value its portfolio securities 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. Non cash dividends included in dividend income, if any, are recorded at
fair value.
Federal Taxes
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary. When-Issued and Delayed Delivery Transactions The Fund may
engage in when-issued or delayed delivery transactions. The Fund records
when-issued securities on the trade date and maintains security positions such
that sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed delivery
basis are marked to market daily and begin earning interest on the settlement
date. Losses may occur on these transactions due to changes in market conditions
or the failure of counterparties to perform under the contract. 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 a trade date basis.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Board of Trustees (the "Trustees") to
issue an unlimited number of full and fractional shares of beneficial interest
(without par value). Transactions in shares were as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended November 30 1999 1998
Shares sold 1,273,043,092 1,501,544,374
Shares issued to shareholders in payment of distributions declared 3,204,808 3,374,747
Shares redeemed (1,361,778,545) (1,532,616,817)
NET CHANGE RESULTING FROM SHARE TRANSACTIONS (85,530,645) (27,697,696)
</TABLE>
INVESTMENT ADVISER AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment adviser fee equal to
0.40% 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 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 a scale that ranges from 0.15% to 0.075% of the
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors, Inc., subject to a $125,000 minimum per portfolio and
$30,000 per each additional class. Shareholder Services Fee Under the
terms of a Shareholder Services Agreement with Federated Shareholder Services
Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets
of the Fund shares for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. FSSC may
voluntarily choose to waive any portion of its fee. FSSC can modify or terminate
this voluntary waiver at any time at its sole discretion. Transfer and
Dividend Disbursing Agent Fees and Expenses FServ, through its subsidiary
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. General Certain of the Officers and Trustees of the Trust are
Officers and Directors or Trustees of the above companies.
Change of Independent Auditors (unaudited)
On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit
Committee, requested and subsequently accepted the resignation of Arthur
Andersen LLP ("AA") as the Fund's independent auditors. AA's reports on the
Fund's financial statements for the fiscal years ended November 30, 1997 and
November 30, 1998, contained no adverse opinion or disclaimer of opinion nor
were they qualified or modified as to uncertainty, audit, scope or accounting
principles. During the Fund's fiscal years ended November 30, 1997 and November
30, 1998 there were no disagreements with AA on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of AA, would
have caused it to make reference to the subject matter of the disagreements in
connection with its reports on the financial statements for such years; and
there were no reportable events of the kind described in items 304(1)(v) of
Regulation S-K under the Securities Exchange Act of 1934, as amended.
The Fund, by action of its Trustees, upon the recommendation of the Audit
Committee, has engaged Deloitte & Touche, LLP ("D&T") as the independent
auditors to audit the Fund's financial statements for the fiscal year November
30, 1999. During the Fund's fiscal years ended November 30, 1997 and November
30, 1998, neither the Fund nor anyone on its behalf had consulted D&T on items
which concerned the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Fund's financial statements, or concerned the subject
of a disagreement (as defined in paragraph (a)(1)(iv) if item 304 of Regulation
S-K) of reportable events (as described in paragraph (a)(1)(v) of said item
304). Independent Auditors' Report
TO THE BOARD OF TRUSTEES OF MONEY MARKET OBLIGATIONS TRUST AND SHAREHOLDERS OF
TRUST FOR GOVERNMENT CASH RESERVES:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Trust for Government Cash Reserves (the "Fund")
as of November 30, 1999, and the related statement of operations, statement of
changes in net assets and the financial highlights for the year then ended.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The statement
of changes in net assets for the year ended November 30, 1998, and the financial
highlights for each of the periods in the four years ended November 30, 1998
were audited by other auditors whose report dated January 15, 1999, expressed an
unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
provide 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 the securities
owned at November 30, 1999, by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Fund as of
November 30, 1999, the results of its operations, the changes in its net assets
and financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
January 14, 2000
NOTES
NOTES
NOTES
PROSPECTUS
[LOGO OF FEDERATED]
Trust for
Government
Cash Reserves
A Portfolio of Money Market
Obligations Trust
JANUARY 31, 2000
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Semi-Annual Report
to shareholders as it becomes available. To obtain the SAI, Semi- Annual Report
and other information without charge, and make inquiries, call your investment
professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, D.C. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
[LOGO AND ADDRESS OF FEDERATED]
Investment Company Act File No. 811-5950
Cusip 60934N773
9022103A (1/00)
Federated is a registered mark
of Federated Investors, Inc.
2000 (c) Federated Investors, Inc.
STATEMENT OF ADDITIONAL INFORMATION
TRUST FOR GOVERNMENT CASH RESERVES
A Portfolio of Money Market Obligations Trust
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Trust for Government Cash Reserves
(Fund), dated January 31, 2000. Obtain the prospectus without charge by calling
1-800-341-7400.
JANUARY 31, 2000
CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Addresses
Cusip 60934N773
9022103B (1/00)
How is the Fund Organized?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on October 30, 1975,
was reorganized as a portfolio of the Trust on April 26, 1999. The Fund's
investment adviser is Federated Investment Management Company (Adviser).
Securities in Which the Fund Invests
In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
may invest.
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.
AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below
the amount payable at maturity. The difference between the purchase price and
the amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate and credit risks of a zero coupon security.
SPECIAL TRANSACTIONS
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment
and delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into
these transactions so that the market values of the securities bought may vary
from the purchase prices. Therefore, delayed delivery transactions create
interest rate risks for the Fund. Delayed delivery transactions also involve
credit risks in the event of a counterparty default.
Inter-fund Borrowing and Lending Arrangements
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. (Federated funds) to lend
and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary
for both borrowing and lending funds, and an inter-fund loan is only made if
it benefits each participating fund. Federated administers the program
according to procedures approved by the Fund's Board of Trustees (Board), and
the Board monitors the operation of the program. Any inter-fund loan must
comply with certain conditions set out in the exemption, which are designed to
assure fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may
be made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term
borrowings (the Bank Loan Rate), as determined by the Board. The interest rate
imposed on inter-fund loans is the average of the Repo Rate and the Bank Loan
Rate.
Asset Coverage
In order to secure its obligations in connection with special transactions,
the Fund will either own the underlying assets or set aside readily marketable
securities with a value that equals or exceeds the Fund's obligations. Unless
the Fund has other readily marketable assets to set aside, it cannot trade
assets used to secure such obligations without terminating a special
transaction. This may cause the Fund to miss favorable trading opportunities
or to realize losses on special transactions.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.
FUNDAMENTAL INVESTMENT OBJECTIVE
The Fund's fundamental investment objective is high current income consistent
with stability of principal and liquidity. The investment objective may not be
changed by the Board without shareholder approval.
INVESTMENT LIMITATIONS
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any securities on margin
but may obtain such short-term credits as may be necessary for clearance of
transactions.
Borrowing Money and Issuing Senior Securities
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 except 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 at
the time of the pledge.
Pledging Assets
The Fund will not mortgage, pledge or hypothecate 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 10% of
the value of the total assets at the time of the pledge.
Lending
The Fund will not make loans to other persons provided, however, that the
purchasing or holding of bonds, debentures, notes and Certificates of
Indebtedness or other debt securities of the U.S. Government or its agencies or
instrumentalities shall not be prohibited. In addition, the Fund may enter into
repurchase agreements covering U.S. Government securities with banks and other
financial institutions as permitted by its investment objective and policies.
Diversification
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized by
such U.S. government securities; and securities of other investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.
Concentration
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
For purposes of this restriction, the term concentration has the meaning set
forth in the 1940 Act, any rule or order thereunder, or any SEC staff
interpretation thereof. Government securities and municipal securities will not
be deemed to constitute an industry. Certain bank instruments will not be deemed
to be the securities of a single industry.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
The above limitations cannot be changed by the Board of Trustees (Board) unless
authorized by the "vote of a majority of its outstanding voting securities," as
defined by the Investment Company Act. The following limitations, however, may
be changed by the Board without shareholder approval. Shareholders will be
notified before any material change in these limitations becomes effective.
Illiquid Securities
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
Investing for Control
The Fund will not invest in securities of a company for the purpose of
exercising control or management.
For purposes of the diversification limitation, 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." In
addition, the Fund complies with the diversification requirements of Rule 2a-7,
which are more rigorous.
For purposes of the commodities restriction, investments in transactions
involving futures contracts and options, forward currency contracts, swap
transactions and other financial contracts that settle by payment of cash are
not deemed to be investments in commodities.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the value
of its net assets during the last fiscal year and has no present intent to do so
during the coming fiscal year.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940. In particular, the Fund will comply
with the various requirements of Rule 2a-7 (the Rule), which regulates money
market mutual funds. The Fund will determine the effective maturity of its
investments according to the Rule. The Fund may change these operational
policies to reflect changes in the laws and regulations without the approval of
its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of the
Fund computed by dividing the annualized daily income on the Fund's portfolio by
the net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the opposite may be true.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into account
current market conditions and the Fund's investment objective. The procedures
include monitoring the relationship between the amortized cost value per share
and the net asset value per share based upon available indications of market
value. The Trustees will decide what, if any, steps should be taken if there is
a difference of more than 0.5 of 1% between the two values. The Trustees will
take any steps they consider appropriate (such as redemption in kind or
shortening the average portfolio maturity) to minimize any material dilution or
other unfair results arising from differences between the two methods of
determining net asset value.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
Account and Share Information
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 7, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Shares: NMF & Co., Boston, MA, owned
approximately 81,974,851 shares (16.23%); Saxon & Co., Lester, PA, owned
approximately 74,264,930 shares (14.70%); Acadia & Co., Boston, MA, 64,071,101
shares (12.69%); Maril & Co., Milwaukee, WI, owned approximately 31,938,472
shares (6.32%); and Burlington Bank & Trust, Burlington, IA, owned approximately
26,670,507 shares (5.28%).
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
Who Manages and Provides Services to the Fund?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
43 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January 7, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding shares.
<TABLE>
<CAPTION>
Name
Birth Date Aggregate
Total Compensation
Address Principal Occupations Compensation From
Trust and Fund
Position With Trust for Past Five Years From Fund
Complex
- -------------------------------------- --------------------------------------------------- --------------
- -----------------------
<S> <C> <C> <C>
John F. Donahue*#+ Chief Executive Officer and Director or Trustee $0 $0
for the Trust and 43
Birth Date: July 28, 1924 of the Federated Fund Complex; Chairman and
other investment
Federated Investors Tower Trustee, Federated Investment Management
companies in the Fund
1001 Liberty Avenue Company; Chairman and Director, Federated
Complex
Pittsburgh, PA Investors, Inc., Federated Investment Counseling
CHAIRMAN AND TRUSTEE and Federated Global Investment Management
Corp.; Chairman, Passport Research, Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas G. Bigley Director or Trustee of the Federated Fund $852.75
$116,760.63 for the
Birth Date: February 3, 1934 Complex; Director, Member of Executive Trust
15 Old Timber Trail Committee, Children's Hospital of Pittsburgh; and
43 other
Pittsburgh, PA Director, Robroy Industries, Inc. (coated steel
investment companies
TRUSTEE conduits/computer storage equipment); formerly: in
the Fund Complex
Senior Partner, Ernst & Young LLP; Director, MED
3000 Group, Inc. (physician practice
management); Director, Member of Executive
Committee, University of Pittsburgh.
- ------------------------------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Director or Trustee of the Federated Fund $938.17
$128,455.37 for the
Birth Date: June 23, 1937 Complex; President, Investment Properties Trust
Grubb & Ellis/Investment Properties Corporation; Senior Vice President, John R. Wood and
43 other
Corporation 3201 and Associates, Inc., Realtors; Partner or
investment companies
Tamiami Trail North Trustee in private real estate ventures in in
the Fund Complex
Naples, FL Southwest Florida; formerly: President, Naples
TRUSTEE Property Management, Inc. and Northgate Village
Development Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
Nicholas P. Constantakis Director or Trustee of the Federated Fund $ 85.27
$73,191.21 for the
Birth Date: September 3, 1939 Complex; Director, Michael Baker Corporation
Trust and
175 Woodshire Drive (engineering, construction, operations and 37
other investment
Pittsburgh, PA technical services); formerly: Partner, Andersen
companies
TRUSTEE Worldwide SC. in
the Fund Complex
- ------------------------------------------------------------------------------------------------------------------------------------
John F. Cunningham Director or Trustee of some of the Federated $511.02
$93,190.48 for the
Birth Date: March 5, 1943 Fund Complex; Chairman, President and Chief
Trust and
353 El Brillo Way Executive Officer, Cunningham & Co., Inc. 37
other investment
Palm Beach, FL (strategic business consulting); Trustee
companies
TRUSTEE Associate, Boston College; Director, Iperia in
the Fund Complex
Corp. (communications/software); formerly:
Director, Redgate Communications and EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board and
Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer,
Wang Laboratories; Director, First National Bank
of Boston; Director, Apollo Computer, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue+ President or Executive Vice President of the $0 $0
for the Trust and 30
Birth Date: April 11, 1949 Federated Fund Complex; Director or Trustee of
other investment
Federated Investors Tower some of the Funds in the Federated Fund Complex;
companies in the Fund
1001 Liberty Avenue President, Chief Executive Officer and Director,
Complex
Pittsburgh, PA Federated Investors, Inc.; President and
PRESIDENT AND TRUSTEE Trustee, Federated Investment Management Company
and Federated Investment Counseling; President
and Director, Federated Global Investment
Management Corp.; President, Passport Research,
Ltd.; Trustee, Federated Shareholder Services
Company; Director, Federated Services Company.
- ------------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund $852.75
$116,760.63 for the
Birth Date: October 11, 1932 Complex; Professor of Medicine, University of Trust
3471 Fifth Avenue Pittsburgh; Medical Director, University of and
43 other
Suite 1111 Pittsburgh Medical Center - Downtown;
investment companies
Pittsburgh, PA Hematologist, Oncologist and Internist, in
the Fund Complex
TRUSTEE University of Pittsburgh Medical Center; Member,
National Board of Trustees, Leukemia Society of
America.
- ------------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Director or Trustee of the Federated Fund $719.49
$109,153.60 for the
Birth Date: March 16, 1942 Complex; formerly: Representative, Commonwealth Trust
One Royal Palm Way of Massachusetts General Court; President, State and
43 other
100 Royal Palm Way Street Bank and Trust Company and State Street
investment companies
Palm Beach, FL Corporation. in
the Fund Complex
TRUSTEE
Previous Positions: Director, VISA USA and VISA
International; Chairman and Director,
Massachusetts Bankers Association;
Director, Depository Trust Corporation;
Director, The Boston Stock Exchange.
- ------------------------------------------------------------------------------------------------------------------------------------
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated $529.02
$102,573.91 for the
Birth Date: April 10, 1945 Fund Complex; Executive Vice President, Legal Trust
80 South Road and External Affairs, Dugan Valve Contess, Inc. and
40 other
Westhampton Beach, NY (marketing, communications, technology and
investment companies
TRUSTEE consulting); formerly Management Consultant. in
the Fund Complex
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
- ------------------------------------------------------------------------------------------------------------------------------------
John E. Murray, Jr., J.D., S.J.D.# Director or Trustee of the Federated Fund $938.17
$128,455.37 for the
Birth Date: December 20, 1932 Complex; President, Law Professor, Duquesne Trust
President, Duquesne University University; Consulting Partner, Mollica & and
43 other
Pittsburgh, PA Murray; Director, Michael Baker Corp.
investment companies
TRUSTEE (engineering, construction, operations and in
the Fund Complex
technical services).
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of
Law.
- ------------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Director or Trustee of the Federated Fund $852.75
$116,760.63 for the
Birth Date: June 21, 1935 Complex; Public Relations/Marketing/Conference Trust
4905 Bayard Street Planning. and
43 other
Pittsburgh, PA
investment companies
TRUSTEE Previous Positions: National Spokesperson, in
the Fund Complex
Aluminum Company of America; television
producer; business owner.
- ------------------------------------------------------------------------------------------------------------------------------------
John S. Walsh Director or Trustee of some of the Federated $511.02
$94,536.85 for the
Birth Date: November 28, 1957 Fund Complex; President and Director, Heat Trust
2007 Sherwood Drive Wagon, Inc. (manufacturer of construction and
39 other
Valparaiso, IN temporary heaters); President and Director,
investment companies
TRUSTEE Manufacturers Products, Inc. (distributor of in
the Fund Complex
portable construction heaters); President,
Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh &
Kelly, Inc. (heavy highway contractor);
formerly: Vice President, Walsh & Kelly, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0
for the Trust and 42
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive
other investment
Federated Investors Tower Vice President and Treasurer of some of the
company in the
1001 Liberty Avenue Funds in the Federated Fund Complex; Vice Fund
Complex
Pittsburgh, PA Chairman, Federated Investors, Inc.; Vice
EXECUTIVE VICE PRESIDENT President, Federated Investment Management
Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice
President and Director, Federated Securities
Corp.; Trustee, Federated Shareholder Services
Company.
- ------------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Executive Vice President and Secretary of the $0 $0
for the Trust and 43
Birth Date: October 26, 1938 Federated Fund Complex; Executive Vice
other investment
Federated Investors Tower President, Secretary and Director, Federated
companies in the Fund
1001 Liberty Avenue Investors, Inc.; Trustee, Federated Investment
Complex
Pittsburgh, PA Management Company and Federated Investment
EXECUTIVE VICE PRESIDENT AND Counseling; Director, Federated Global
SECRETARY Investment Management Corp., Federated Services
Company and Federated Securities Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice $0 $0
for the Trust and 43
Birth Date: June 17, 1954 President - Funds Financial Services Division,
other investment
Federated Investors Tower Federated Investors, Inc.; formerly: various
companies in the Fund
1001 Liberty Avenue management positions within Funds Financial
Complex
Pittsburgh, PA Services Division of Federated Investors, Inc.
TREASURER
- ------------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher President or Vice President of some of the Funds $0 $0
for the Trust and 41
Birth Date: May 17, 1923 in the Federated Fund Complex; Director or
other investment
Federated Investors Tower Trustee of some of the Funds in the Federated
companies in the Fund
1001 Liberty Avenue Fund Complex; Executive Vice President,
Complex
Pittsburgh, PA Federated Investors, Inc.; Chairman and
VICE PRESIDENT Director, Federated Securities Corp.
- ------------------------------------------------------------------------------------------------------------------------------------
William D. Dawson, III Chief Investment Officer of this Fund and $0 $0
for the Trust and 42
Birth Date: March 3, 1949 various other Funds in the Federated Fund
other investment
Federated Investors Tower Complex; Executive Vice President, Federated
companies in the Fund
1001 Liberty Avenue Investment Counseling, Federated Global
Complex
Pittsburgh, PA Investment Management Corp., Federated
CHIEF INVESTMENT OFFICER Investment Management Company and Passport
Research, Ltd.; Registered Representative,
Federated Securities Corp.; Portfolio Manager,
Federated Administrative Services; Vice
President, Federated Investors, Inc.; formerly:
Executive Vice President and Senior Vice
President, Federated Investment Counseling
Institutional Portfolio Management Services
Division; Senior Vice President, Federated
Investment Management Company and Passport
Research, Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the $0 $0
for the Trust and 6
Birth Date: September 15, 1959 Trust. Ms. Cunningham joined Federated in 1981
other investment
Federated Investors Tower and has been a Senior Portfolio Manager and a
companies in the Fund
1001 Liberty Avenue Senior Vice President of the Fund's Adviser
Complex
Pittsburgh, PA since 1997. Ms. Cunningham served as a Portfolio
VICE PRESIDENT Manager and a Vice President of the Fund's
Adviser from 1993 through 1996. Ms. Cunningham
is a Chartered Financial Analyst and received
her M.B.A. in Finance from Robert Morris College.
- ------------------------------------------------------------------------------------------------------------------------------------
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. $0 $0
for the Trust and 7
Birth Date: September 12, 1953 Ms. Ochson joined Federated in 1982 and has been
other investment
Federated Investors Tower a Senior Portfolio Manager and a Senior Vice
companies in the Fund
1001 Liberty Avenue President of the Fund's Adviser since 1996. From
Complex
Pittsburgh, PA 1988 through 1995, Ms. Ochson served as a
VICE PRESIDENT Portfolio Manager and a Vice President of the
Fund's Adviser. Ms. Ochson is a Chartered
Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Fund or any Fund shareholder 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 Fund.
The Adviser must waive the portion of its advisory fee that increases the Fund's
aggregate annual operating expenses above 0.45% of its average daily net assets.
The Fund's operating expenses include the advisory fee but exclude interest,
taxes, brokerage commissions, expenses of registering the Fund and its shares
under federal and state laws, expenses of withholding taxes, and extraordinary
expenses.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
<TABLE>
<CAPTION>
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated Funds
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
0.150 of 1% on the first $250 million
- ---------------------------------------------------------------------------------------------------------------
0.125 of 1% on the next $250 million
- ---------------------------------------------------------------------------------------------------------------
0.100 of 1% on the next $250 million
- ---------------------------------------------------------------------------------------------------------------
0.075 of 1% on assets in excess of $750 million
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountant for the Fund, Deloitte & Touche LLP, plans and
performs its audit so that it may provide an opinion as to whether the Fund's
financial statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
For the Year Ended November 30 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advisory Fee Earned $1,934,025 $2,210,660 $2,555,772
- ---------------------------------------------------------------------------------------------------------------
Advisory Fee Reduction $ 547,750 $ 595,406 $ 675,932
- ---------------------------------------------------------------------------------------------------------------
Administrative Fee 364,564 $ 416,709 $ 482,402
- ---------------------------------------------------------------------------------------------------------------
Shareholder Services Fee $ 241,754 $ 276,335
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
If the Fund's expenses are capped at a particular level, the cap does not
include reimbursement to the Fund of any expenses incurred by shareholders who
use the transfer agent's subaccounting facilities.
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year and ten-year periods ended
November 30, 1999.
Yield and Effective Yield are given for the 7-day period ended November 30,
1999.
<TABLE>
<CAPTION>
7-Day Period 1 Year 5 Years 10 Years
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Return 4.73% 5.14% 4.97%
- -------------------------------------------------------------------------------------------------------------------------
Yield 5.08%
- -------------------------------------------------------------------------------------------------------------------------
Effective Yield 5.21%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD AND EFFECTIVE YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized base-
period return by: adding one to the base-period return, raising the sum to the
365/7th power; and subtracting one from the result.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
. references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
. charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
. discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
. information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
. 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.
. 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.
. Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
. Salomon 30-Day CD Index compares rate levels of 30-day certificates of
deposit from the top ten prime representative banks.
. Discount Corporation of New York 30-day Federal Agencies, a weekly quote of
the average daily offering price for selected federated agency issues
maturing in 30 days.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion, $13.1 billion and 115
million respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income - William D. Dawson, III; and global equities and
fixed income - Henry A. Frantzen. The Chief Investment Officers are Executive
Vice Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
Addresses
TRUST FOR GOVERNMENT CASH RESERVES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
PROSPECTUS
Trust for Short-Term
U.S. Government Securities
A Portfolio of Money Market Obligations Trust
A money market mutual fund seeking high current income consistent with stability
of principal and liquidity by investing primarily in a portfolio of U.S.
Treasury and government agency securities maturing in 397 days or less.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
CONTENTS
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 4
What are the Specific Risks of Investing in the Fund? 5
What do Shares Cost? 5
How is the Fund Sold? 6
How to Purchase Shares 6
How to Redeem Shares 7
Account and Share Information 8
Who Manages the Fund? 9
Financial Information 10
Independent Auditors' Report 19
NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
JANUARY 31, 2000
Risk/Return Summary
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund is a money market fund that seeks to maintain a stable net asset value
of $1.00 per share. The Fund's investment objective is high current income
consistent with stability of principal and liquidity. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the strategies and policies described in this prospectus.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund invests primarily in a portfolio of U.S. Treasury and government agency
securities maturing in 397 days or less. These investments include repurchase
agreements collateralized fully by U.S. Treasury and government agency
securities. The dollar-weighted average maturity of the Fund's portfolio will be
90 days or less. WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND? All
mutual funds take investment risks. Therefore, even though the Fund is a money
market fund that seeks to maintain a stable net asset value, it is possible to
lose money by investing in the Fund.
The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.
Risk/Return Bar Chart and Table
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Trust for Short-Term U.S. Government Securities as of
the calendar year-end for each of ten years. The `y' axis reflects the "% Total
Return" beginning with "0%" and increasing in increments of 3% up to 9%. The `x'
axis represents calculation periods (for the last ten calendar years of the Fund
beginning with the earliest year) through the calendar year ended 1999. The
light gray shaded chart features ten distinct vertical bars, each shaded in
charcoal, and each visually representing by height the total return percentages
for the calendar year stated directly at its base. The calculated total return
percentage for the Fund for each calendar year is stated directly at the top of
each respective bar, for the calendar years 1990 through 1999. The percentages
noted are: 8.00%, 5.86%, 3.58%, 2.86%, 3.91%, 5.64%, 5.06%, 5.22%, 5.15% and
4.80% respectively.
Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's total returns on a
calendar year-end basis.
The Fund's shares are sold without a sales charge (load). The total returns
displayed above are based upon net asset value.
Within the period shown in the Chart, the Fund's highest quarterly return was
1.97% (quarter ended September 30, 1990). Its lowest quarterly return was 0.70%
(quarter ended June 30, 1993). Average Annual Total Return Table The
following table represents the Fund's Average Annual Total Returns for the
calendar periods ended December 31, 1999. Calendar Period Fund 1 Year 4.80%
5 Years 5.17% 10 Years 5.00% The Fund's 7-Day Net Yield as of December 31,
1999 was 5.08%. You may call the Fund at 1-800-341-7400 for the current 7-Day
Net Yield.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
returns.
The Bar Chart and Performance Table reflect historical performance data for
Trust for Short-Term U.S. Government Securities before its reorganization as a
portfolio of Money Market Obligations Trust on April 26, 1999.
What are the Fund's Fees and Expenses?
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund.
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, as applicable) None Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and other Distributions) (as a percentage of offering
price) None
Redemption Fee (as a percentage of amount redeemed, if
applicable) None
Exchange
Fee
None
Annual Fund Operating Expenses (Before
Waivers)
Expenses That are Deducted From Fund Assets (as a percentage of average net
assets)
Management
Fee/1/
0.40%
Distribution (12b-1)
Fee None
Shareholder Services
Fee/2/ 0.25%
Other
Expenses
0.11%
Total Annual Fund Operating
Expenses 0.76%
Total Waiver of Fund Expenses
(contractual) 0.31%
Total Actual Annual Fund Operating Expenses (after
waivers) 0.45%
1 Pursuant to the investment advisory contract, the adviser waived a portion of
the management fee. The management fee paid by the Fund (after the contractual
waiver) was 0.29% for the fiscal year ended November 30, 1999. Shareholders
must approve any change to the contractual waiver.
2 The shareholder services fee has been reduced. The shareholder services fee
paid by the Fund (after the reduction) was 0.05% for the fiscal year ended
November 30, 1999.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund's
Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Shares for the time
periods indicated and then redeem all of your Shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Shares operating expenses as shown in the table remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
1 Year $ 46
3 Years $ 144
5 Years $ 252
10 Years $ 567
What are the Fund's Investment Strategies?
The Fund invests at least 65% of its total assets in a portfolio of U.S.
Treasury and government agency securities maturing in 397 days or less. These
investments include repurchase agreements collateralized fully by U.S. Treasury
and government agency securities. The dollar-weighted average maturity of the
Fund's portfolio will be 90 days or less.
The Fund's investment adviser (Adviser) targets a dollar-weighted average
portfolio maturity range based upon its interest rate outlook. The Adviser
formulates its interest rate outlook by analyzing a variety of factors, such as:
. current U.S. economic activity and the economic outlook;
. current short-term interest rates;
. the Federal Reserve Board's policies regarding short-term interest
rates; and
. the potential effects of foreign economic activity on U.S. short-term
interest rates.
The Adviser generally shortens the portfolio's dollar-weighted average maturity
when it expects interest rates to rise and extends the maturity when it expects
interest rates to fall. The Adviser selects securities used to shorten or extend
the portfolio's dollar-weighted average maturity by comparing the returns
currently offered by different investments to their historical and expected
returns.
What are the Principal Securities in Which the Fund Invests?
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. The Fund may
invest in the following types of fixed income securities.
U.S. Treasury Securities
U.S. Treasury securities are direct obligations of the federal government of the
United States.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser. Repurchase agreements are subject
to credit risks.
What are the Specific Risks of Investing in the Fund?
INTEREST RATE RISKS
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this risk
by purchasing short-term securities.
Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy. What do Shares Cost?
You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share. The
Fund does not charge a front- end sales charge. NAV is determined at 12:00 noon
and 3:00 p.m. (Eastern time) and as of the end of regular trading (normally 4:00
p.m. Eastern time) each day the NYSE is open.
The required minimum initial investment for Fund Shares is $25,000. There is
no required minimum subsequent investment amount.
An account may be opened with a smaller minimum amount as long as the $25,000
minimum is reached within 90 days. An institutional investor's minimum
investment is calculated by combining all accounts it maintains with the Fund.
Accounts established through investment professionals may be subject to a
smaller minimum investment amount. Keep in mind that investment professionals
may charge you fees for their services in connection with your Share
transactions.
How is the Fund Sold?
The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to institutions acting in an agency or fiduciary capacity or
to individuals, directly or through investment professionals.
The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).
How to Purchase Shares
You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.
THROUGH AN INVESTMENT PROFESSIONAL
. Establish an account with the investment professional; and
. Submit your purchase order to the investment professional before 3:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.
Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."
DIRECTLY FROM THE FUND
. Establish your account with the Fund by submitting a completed New Account
Form; and
. Send your payment to the Fund by Federal Reserve wire or check. You will
become the owner of Shares after the Fund receives your wire or your check. If
your check does not clear, your purchase will be canceled and you could be
liable for any losses or fees incurred by the Fund or Federated Shareholder
Services Company, the Fund's transfer agent.
An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.
By Wire
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or The Federated Funds). Orders by mail are considered received when payment
by check is converted into federal funds (normally the business day after the
check is received) and Shares begin earning dividends the next day.
BY AUTOMATIC INVESTMENTS
You may establish an account with your financial institution to automatically
purchase Shares on pre- determined dates or when your bank account reaches a
certain level. Under this program, participating financial institutions are
responsible for prompt transmission of orders and may charge you for this
service. You should read this prospectus along with your financial institution's
agreement or materials describing this service.
BY AUTOMATED CLEARINGHOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.
How to Redeem Shares
You should redeem Shares:
. through an investment professional if you purchased Shares
through an investment professional; or
. directly from the Fund if you purchased Shares directly from the Fund.
THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption
amount you will receive is based upon the next calculated NAV after the Fund
receives the order from your investment professional. Investment professionals
are responsible for promptly submitting redemption requests and providing proper
written redemption instructions as outlined below.
DIRECTLY FROM THE FUND
By Telephone
You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.
If you call before 3:00 p.m. (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.
If you call after 3:00 p.m. (Eastern time) your redemption will be wired to
you the following business day. You will receive that day's dividend.
By Mail
You may redeem Shares by mailing a written request to the Fund.
Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.
Send requests by mail to:
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:
Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317
All requests must include:
. Fund Name and Share Class, account number and account registration;
. amount to be redeemed; and
. signatures of all Shareholders exactly as registered
Call your investment professional or the Fund if you need special instructions.
Signature Guarantees
Signatures must be guaranteed if:
. your redemption will be sent to an address other than the address of record;
. your redemption will be sent to an address of record that was changed within
the last 30 days; or
. a redemption is payable to someone other than the shareholder(s) of record.
A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.
PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:
. an electronic transfer to your account at a financial institution that is an
ACH member; or
. wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.
LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:
. to allow your purchase to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets. You will not accrue interest or dividends on
uncashed checks from the Fund if those checks are undeliverable and returned
to the Fund.
ADDITIONAL CONDITIONS
Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
Share Certificates
The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.
Account and Share Information
ACCOUNT ACTIVITY
You will receive periodic statements reporting all account activity, including
dividends and capital gains paid.
DIVIDENDS AND CAPITAL GAINS
The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund pays any capital gains at least annually. Your dividends and
capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions cause the account balance to fall below
the minimum initial investment amount. Before an account is closed, you will be
notified and allowed 30 days to purchase additional Shares to meet the minimum.
TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.
Fund distributions are expected to be primarily dividends. Redemptions are
taxable sales. Please consult your tax adviser regarding your federal, state and
local tax liability. Who Manages the Fund?
The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The Adviser and other subsidiaries of Federated advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated was established in 1955 and is one of
the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
ADVISER FEES
The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. Under the investment advisory contract, which is
subject to annual renewal by the Fund's Board of Trustees, the Adviser will
waive the amount, limited to the amount of the advisory fee, by which the Fund's
aggregate annual operating expenses, including the investment advisory fee, but
excluding interest, taxes, brokerage commissions, expenses of registering or
qualifying the Fund and its shares under federal and state laws and regulations,
expenses of withholding taxes, and extraordinary expenses exceed 0.45% of its
average daily net assets. Financial Information FINANCIAL HIGHLIGHTS
The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of all
dividends and capital gains.
This information has been audited by Deloitte & Touche LLP, whose report,
along with the Fund's audited financial statements, is included in this
prospectus.
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year Ended November 30 1999 1998 1997 1996 1995
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00
Income From Investment Operation:
Net investment income 0.05 0.05 0.05 0.05 0.06
Less Distributions:
Distributions from net investment income (0.05) (0.05) (0.05) (0.05) (0.06)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00
Total Return/1/ 4.75% 5.20% 5.20% 5.09% 5.63%
Ratios to Average Net Assets:
Expenses 0.45% 0.45% 0.45% 0.45% 0.45%
Net investment income 4.65% 5.09% 5.07% 4.98% 5.47%
Supplemental Data:
Net assets, end of period (000 omitted) $583,103 $597,685 $675,988 $844,108 $952,757
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
See Notes which are an integral part of the Financial Statements
<TABLE>
<CAPTION>
<S> <C> <C>
Portfolio of Investments
NOVEMBER 30, 1999
Principal
Amount
Value
GOVERNMENT AGENCIES - 64.6%
$ 4,000,000 Federal Farm Credit System, 5.400%,7/3/2000 $ 3,996,448
55,000,000 1 Federal Home Loan Bank System Discount Notes, 5.490% - 5.615%, 1/21/2000 -3/1/2000 54,387,566
23,000,000 2 Federal Home Loan Bank System Floating Rate Notes, 5.215% - 5.303%, 12/15/1999- 22,990,905
2/12/2000
34,500,000 Federal Home Loan Bank System, 4.790% - 6.125%, 1/14/2000 -10/27/2000 34,491,200
59,626,000 1 Federal Home Loan Mortgage Corp. Discount Notes, 5.110% - 5.590%, 1/10/2000- 58,907,420
8/4/2000
20,000,000 2 Federal Home Loan Mortgage Corp. Floating Rate Notes, 5.278% - 5.423%, 12/17/1999- 19,994,106
12/22/1999
82,500,000 1 Federal National Mortgage Association Discount Notes, 4.610% - 5.632%, 1/18/2000- 81,474,251
6/22/2000
34,000,000 2 Federal National Mortgage Association Floating Rate Notes, 5.240% -5.939%, 33,984,004
12/15/1999 - 2/12/2000
16,000,000 Federal National Mortgage Association, 4.820% - 5.180%, 1/28/2000 -5/5/2000 15,995,691
48,500,000 2 Student Loan Marketing Association Floating Rate Notes, 5.720% - 6.055%, 12/7/1999- 48,483,872
12/16/1999
2,000,000 Student Loan Marketing Association, 6.045%,11/3/2000 1,998,910
TOTAL GOVERNMENT
AGENCIES 376,704,373
REPURCHASE AGREEMENTS41.4%3
20,000,000 Bank of America, 5.780%, dated 11/30/1999, due 12/1/1999 20,000,000
20,000,000 Bear, Stearns and Co., 5.740%, dated 11/30/1999, due 12/1/1999 20,000,000
4,500,000 Deutsche Bank Financial, Inc., 5.680%, dated 11/30/1999, due 12/1/1999 4,500,000
10,000,000 4 Goldman Sachs Group, LP, 5.650%, dated 9/20/1999, due 1/19/2000 10,000,000
19,000,000 4 Goldman Sachs Group, LP, 5.650%, dated 9/22/1999, due 1/21/2000 19,000,000
13,000,000 4 Morgan Stanley Group, Inc., 5.590%, dated 11/17/1999, due 1/18/2000 13,000,000
120,000,000 PaineWebber Group, Inc., 5.740%, dated 11/30/1999, due 12/1/1999 120,000,000
20,000,000 Paribas Corp., 5.780%, dated 11/30/1999, due 12/1/1999 20,000,000
15,000,000 Toronto Dominion Securities (USA), Inc., 5.780%, dated 11/30/1999, due 12/1/1999 15,000,000
TOTAL REPURCHASE AGREEMENTS 241,500,000
TOTAL INVESTMENTS (AT AMORTIZED COST)5 $ 618,204,373
</TABLE>
1 Rates noted reflect the effective yield.
2 Denotes variable rate securities which show current rate and next demand
date.
3 The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in a joint
account with other Federated funds.
4 Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days if the creditworthiness of the issuer is
downgraded.
5 Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($583,102,602) at November 30, 1999.
The following acronym is used throughout this portfolio:
LP-Limited Partnership
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
NOVEMBER 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
Assets:
Investments in repurchase agreements $ 241,500,000
Investments in securities 376,704,373
Total investments in securities, at amortized cost and value 618,204,373
Cash 94,605
Income receivable 1,582,335
Receivable for shares sold 456,692
TOTAL ASSETS 620,338,005
Liabilities:
Payable for investments purchased $ 34,745,533
Income distribution payable 2,440,853
Accrued expenses 49,017
TOTAL LIABILITIES 37,235,403
Net Assets for 583,102,602 shares outstanding $ 583,102,602
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$583,102,602 / 583,102,602 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements
Statement of Operations
YEAR ENDED NOVEMBER 30, 1999
Investment Income:
Interest $ 30,017,888
Expenses:
Investment adviser fee $ 2,353,621
Administrative personnel and services fee 443,658
Custodian fees 41,453
Directors'/Trustees' fees 16,241
Auditing fees 14,881
Legal fees 10,073
Portfolio accounting fees 98,896
Shareholder services fee 1,471,013
Share registration costs 22,705
Printing and postage 20,804
Insurance premiums 2,633
Miscellaneous 3,127
TOTAL EXPENSES 4,499,105
Waivers:
Waiver of investment adviser fee $ (665,987)
Waiver of shareholder services fee (1,176,811)
TOTAL WAIVERS (1,842,798)
Net expenses 2,656,307
Net investment income $ 27,361,581
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
Year Ended November 30 1999 1998
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 27,361,581 $ 33,320,259
Distributions to Shareholders:
Distributions from net investment income (27,361,581) (33,320,259)
Share Transactions:
Proceeds from sale of shares 1,855,387,107 2,254,528,698
Net asset value of shares issued to shareholders in payment of 4,880,070 4,826,995
distributions declared
Cost of shares redeemed (1,874,849,394) (2,337,658,641)
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (14,582,217) (78,302,948)
Change in net assets (14,582,217) (78,302,948)
Net Assets:
Beginning of period 597,684,819 675,987,767
End of period $ 583,102,602 $ 597,684,819
</TABLE>
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
NOVEMBER 30, 1999
ORGANIZATION
Trust For Short-Term U.S. Government Securities (the "Fund") is registered under
the Investment Company Act of 1940, as amended (the "Act"), as an open-end
management investment company. Effective April 26, 1999, the Fund became a
portfolio of Money Market Obligations Trust (the "Trust"). Effective February 1,
2000, the Trust will consist of forty portfolios. The financial statements
included herein are only those of the Fund. The financial statements of the
other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which the
shares are held. The investment objective of the Fund is high current income
consistent with stability of principal and liquidity. 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 uses the amortized cost
method to value its portfolio securities in accordance with Rule 2a-7 under the
Act. Repurchase Agreements It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System, or to have segregated within the custodian bank's
vault, all securities held as collateral under repurchase agreement
transactions. Additionally, procedures have been established by the Fund to
monitor, on a daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals the repurchase
price to be paid under the repurchase agreement transaction.
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 the guidelines and/ or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
The Fund, along with the other affiliated investment companies, may utilize a
joint trading account for the purpose of entering into one or more repurchase
agreements.
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"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at fair value.
Federal Taxes
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary. When-Issued and Delayed Delivery Transactions The Fund may
engage in when-issued or delayed delivery transactions. The Fund records
when-issued securities on the trade date and maintains security positions such
that sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed delivery
basis are marked to market daily and begin earning interest on the settlement
date. Losses may occur on these transactions due to changes in market conditions
or the failure of counterparties to perform under the contract. 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 a trade date basis.
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).
Transactions in shares were as follows:
Year Ended November 30
1999 1998
Shares sold
1,855,387,107 2,254,528,698
Shares issued to shareholders in payment of distributions declared
4,880,070 4,826,995
Shares redeemed
(1,874,849,394) (2,337,658,641)
NET CHANGE RESULTING FROM SHARE TRANSACTIONS
(14,582,217) (78,302,948)
INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment Adviser fee equal to
0.40% of the Fund's average daily net assets. The Adviser will waive, to the
extent of its advisory fee, the amount, if any, by which the Fund's aggregate
annual operating expenses exceed 0.45% of average daily net assets of the Fund.
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 a scale that ranges from 0.15% to 0.075% of the
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors, Inc., subject to a $125,000 minimum per portfolio and
$30,000 per each additional class. Shareholder Services Fee
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid is to obtain certain
services for shareholders and to maintain shareholder accounts. FSSC may
voluntarily choose to waive any portion of its fee. FSSC can modify or terminate
this voluntary waiver at any time at its sole discretion.
Transfer and Dividend Disbursing Agent Fees and Expenses
FServ, through its subsidiary 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. General Certain of the
Officers and Trustees of the Trust are Officers and Directors or Trustees of the
above companies. Independent Auditors' Report
TO THE BOARD OF TRUSTEES OF MONEY MARKET OBLIGATIONS TRUST AND
SHAREHOLDERS OF TRUST FOR SHORT TERM U.S. GOVERNMENT SECURITIES:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Trust for Short Term U.S. Government Securities
(the "Fund") as of November 30, 1999, and the related statement of operations
for the year then ended, the statement of changes in net assets for the years
ended November 30, 1999 and 1998 and the financial highlights for the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund'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 audits to
provide 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 the securities
owned at November 30, 1999, by correspondence with the custodian and brokers;
where replies were not received from brokers, we performed other auditing
procedures. 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 our audits provide a reasonable
basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Fund as of
November 30, 1999, the results of its operations, the changes in its net assets
and its financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
January 14, 2000
NOTES
NOTES
NOTES
PROSPECTUS
A Statement of Additional Information (SAI) dated January 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI and Semi-Annual Report
to shareholders as it becomes available. To obtain the SAI, Semi- Annual Report
and other information without charge, and make inquiries, call your investment
professional or the Fund at 1-800-341-7400.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
[LOGO OF FEDERATED AND ADDRESS]
Investment Company Act File No. 811-5950
Cusip 60934N781
8010415A (1/00)
[LOGO OF FEDERATED AND ADDRESS]
TRUST FOR
SHORT-TERM
U.S. GOVERNMENT
SECURITIES
A Portfolio of Money Market
Obligations Trust
JANUARY 31, 2000
STATEMENT OF ADDITIONAL INFORMATION
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
A Portfolio of Money Market Obligations Trust
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Trust for Short-Term U.S. Government
Securities (Fund), dated January 31, 2000. Obtain the prospectus without charge
by calling 1-800-341-7400.
JANUARY 31, 2000
Contents
How is the Fund Organized?
Securities in Which the Fund Invests
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Addresses
Cusip 60934N781
8010415B (1/00)
How is the Fund Organized?
The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on October 3, 1988. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on October 30, 1975,
was reorganized as a portfolio of the Trust on April 26, 1999. The Fund's
investment adviser is Federated Investment Management Company (Adviser).
Securities in Which the Fund Invests
In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.
SECURITIES DESCRIPTIONS AND TECHNIQUES
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the Fund
may invest.
Treasury Securities
Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.
Mortgage Backed Securities
Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates,
maturities and other terms. Mortgages may have fixed or adjustable interest
rates. Interests in pools of adjustable rate mortgages are known as ARMs.
Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer
deducts its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive
a pro rata share of all payments and pre-payments from the underlying
mortgages.
Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below
the amount payable at maturity. The difference between the purchase price and
the amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate and credit risks of a zero coupon security.
SPECIAL TRANSACTIONS
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from
a dealer or bank and agrees to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price, reflecting
the Fund's return on the transaction. This return is unrelated to the interest
rate on the underlying security. The Fund will enter into repurchase
agreements only with banks and other recognized financial institutions, such
as securities dealers, deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment
and delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into
these transactions so that the market values of the securities bought may vary
from the purchase prices. Therefore, delayed delivery transactions create
interest rate risks for the Fund. Delayed delivery transactions also involve
credit risks in the event of a counterparty default
The Fund does not intend to engage in delayed delivery transactions to an
extent that would cause the segregation of more than 20% of the total value of
its assets.
Inter-fund Borrowing and Lending Arrangements
The SEC has granted an exemption that permits the Fund and all other funds
advised by subsidiaries of Federated Investors, Inc. (Federated funds) to lend
and borrow money for certain temporary purposes directly to and from other
Federated funds. Participation in this inter-fund lending program is voluntary
for both borrowing and lending funds, and an inter-fund loan is only made if
it benefits each participating fund. Federated administers the program
according to procedures approved by the Fund's Board of Trustees (Board), and
the Board monitors the operation of the program. Any inter-fund loan must
comply with certain conditions set out in the exemption, which are designed to
assure fairness and protect all participating funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may
be made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the Repo Rate) and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term
borrowings (the Bank Loan Rate), as determined by the Board. The interest rate
imposed on inter-fund loans is the average of the Repo Rate and the Bank Loan
Rate.
Asset Coverage
In order to secure its obligations in connection with special transactions,
the Fund will either own the underlying assets or set aside readily marketable
securities with a value that equals or exceeds the Fund's obligations. Unless
the Fund has other readily marketable assets to set aside, it cannot trade
assets used to secure such obligations without terminating a special
transaction. This may cause the Fund to miss favorable trading opportunities
or to realize losses on special transactions.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.
INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.
Credit Risks
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.
FUNDAMENTAL INVESTMENT OBJECTIVE AND POLICY
The Fund's fundamental investment objective is high current income consistent
with stability of principal and liquidity.
The types of short-term U.S. Government securities which the Fund may invest in
include but are not limited to (1) direct obligations of the U.S. Treasury such
as U.S. Treasury bonds, notes, bills and Treasury Certificates of Indebtedness;
(2) notes, bonds and discount notes of U.S. Government instrumentalities, such
as Federal Land Banks, Central Bank for Cooperatives, Federal Intermediate
Credit Bank, Federal Home Loan Banks, Farmers Home Administration, Federal
National Mortgage Association, maturing in thirteen months or less from the date
of acquisition or purchased pursuant to repurchase agreements which provide for
repurchase by the seller within thirteen months from the date of acquisition. A
repurchase agreement is a contract between the Fund and a bank or other
recognized financial institution providing for purchase and simultaneous
agreement to resell U.S. Government securities for later delivery at an agreed
upon price and rate of interest. The Fund will not enter into repurchase
agreements with securities for later delivery at an agreed upon price and rate
of interest. The Fund will not enter into repurchase agreements with securities
dealers if such transactions constitute the purchase of an interest in such
dealer under the Investment Company Act of 1940. The Fund may also purchase and
sell short-term U.S. Government securities on a delayed- delivery basis. The
settlement dates of these transactions shall be determined by the mutual
agreement of the parties. These purchases may occur a month or more before
delivery is due. An instrumentality is a government agency organized under
federal charter with government supervision. Some obligations issued or
guaranteed by agencies or instrumentalities of the U.S. Government are backed by
the full faith and credit of the United States; others are backed by the credit
of the agency or instrumentality issuing the obligation.
The investment objective and policy may not be changed by the Board without
shareholder approval, except that the underlined portion of the policy may be
changed by the Board without shareholder approval.
INVESTMENT LIMITATIONS
Buying on Margin
The Fund will not purchase any securities on margin but may obtain such
short-term credits as may be necessary for clearance of purchase and sales of
securities. The Fund may purchase and dispose of U.S. Government securities
before the issuance thereof. The Fund may also purchase U.S. Government
securities on a delayed-delivery basis. The settlement dates of these
transactions shall be determined by the mutual agreement of the parties.
Selling Short
The Fund will not sell any securities short.
Pledging Assets
The Fund will not mortgage, pledge or hypothecate 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 10% of
the value of the total assets at the time of the pledge.
Borrowing Money and Issuing Senior Securities
The Fund will not borrow money, except as a temporary measure for extraordinary
or emergency purposes, and then (a) only in amounts not in excess of five
percent (5%) of the value of its total assets or (b) in an amount up to
one-third of the value of its total assets, including the amount borrowed, in
order to meet redemption requests without immediately selling any portfolio
securities (any such borrowings under this section will not be collateralized).
Lending
The Fund will not make loans to other persons provided, however, that the
purchasing or holding of bonds, debentures, notes and Certificates of
Indebtedness or other debt securities of the U.S. Government or its agencies or
instrumentalities shall not be prohibited. In addition, the Fund may enter into
repurchase agreements covering U.S. Government securities with banks and other
financial institutions as permitted by its investment objective and policies.
Acquiring Securities
The Fund will not acquire voting securities except as part of a merger,
consolidation, reorganization or acquisition of assets.
Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.
Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.
Diversification
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized by
such U.S. government securities; and securities of other investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in the securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.
Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.
The above limitations cannot be changed by the Board unless authorized by the
"vote of a majority of its outstanding voting securities," as defined by the
Investment Company Act of 1940. The following limitations, however, may be
changed by the Board without shareholder approval. Shareholders will be notified
before any material change in these limitations becomes effective.
Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.
Restricted Securities
The Fund may invest in securities subject to restrictions or resale under the
federal securities laws.
For purposes of the diversification limitation, 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." In
addition, the Fund complies with the diversification requirements of Rule 2a-7
(the "Rule"), which are more rigorous.
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.
For purposes of the commodities limitation, investments in transactions
involving futures contracts and options, forward currency contracts, swap
transactions and other financial contracts that settle by payment of cash are
not deemed to be investments in commodities.
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 the Rule, which regulates money market mutual
funds. The Fund will determine the effective maturity of its investments
according to the Rule. The Fund may change these operational policies to reflect
changes in the laws and regulations without the approval of its shareholders.
DETERMINING MARKET VALUE OF SECURITIES
The Board has 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 Board 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 Board will decide what, if any, steps should be taken if there is a
difference of more than 0.5 of 1% between the two values. The Board will take
any steps it considers 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.
How is the Fund Sold?
Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.
SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.
SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.
Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.
Subaccounting Services
Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.
Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.
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.
Account and Share Information
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote.
All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or class are
entitled to vote.
Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.
As of January 7, 2000, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Shares: Canab Company, Hammond, IN, owned
approximately 43,993,342 shares (7.90%); Frepath Company, Fremont, NE,
42,143,510 (7.56%); and National City, Cleveland, OH, owned approximately
28,276,236 shares (5.08%).
Tax Information
FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.
Who Manages and Provides Services to the Fund?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. Effective February 1, 2000, the
Trust will be comprised of 40 funds. The Federated Fund Complex is comprised of
43 investment companies, whose investment advisers are affiliated with the
Fund's Adviser.
As of January 7, 2000, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding shares.
<TABLE>
<CAPTION>
Name
Birth Date Aggregate
Total Compensation
Address Principal Occupations Compensation From
Trust and Fund
Position With Trust for Past Five Years From Fund
Complex
<S> <C> <C> <C>
John F. Donahue*#+ Chief Executive Officer and Director or Trustee $ 0 $0 for the Trust and 43
Birth Date: July 28, 1924 of the Federated Fund Complex; Chairman and other investment
Federated Investors Tower Trustee, Federated Investment Management companies in the Fund
1001 Liberty Avenue Company; Chairman and Director, Federated Complex
Pittsburgh, PA Investors, Inc., Federated Investment Counseling
CHAIRMAN AND TRUSTEE and Federated Global Investment
Management
Corp.; Chairman, Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund $ 909.23 $116,760.63 for the Trust
Birth Date: February 3, 1934 Complex; Director, Member of Executive and 43 other investment
15 Old Timber Trail Committee, Children's Hospital of Pittsburgh; companies in the Fund
Pittsburgh, PA Director, Robroy Industries, Inc. (coated steel Complex
TRUSTEE conduits/computer storage equipment);formerly:
Senior Partner, Ernst & Young LLP; Director,
MED
3000 Group, Inc. (physician practice
management); Director, Member of Executive
Committee, University of Pittsburgh.
John T. Conroy, Jr. Director or Trustee of the Federated Fund $1,000.31 $128,455.37 for the Trust
Birth Date: June 23, 1937 Complex; President, Investment Properties and 43 other investment
Grubb & Ellis/Investment Properties Corporation; Senior Vice President, John R. Wood companies in the Fund
Corporation 3201 and Associates, Inc., Realtors; Partner or Complex
Tamiami Trail North Trustee in private real estate ventures in
Naples, FL Southwest Florida; formerly: President, Naples
TRUSTEE Property Management, Inc. and Northgate Village
Development Corporation.
Nicholas P. Constantakis Director or Trustee of the Federated Fund $ 447.50 $73,191.21 for the
Birth Date: September 3, 1939 Complex; Director, Michael Baker Corporation Trust and
175 Woodshire Drive (engineering, construction, operations and 37 other investment
Pittsburgh, PA technical services); formerly: Partner, Andersen companies
TRUSTEE Worldwide SC. in the Fund Complex
John F. Cunningham Director or Trustee of some of the Federated $ 557.01 $93,190.48 for the
Birth Date: March 5, 1943 Fund Complex; Chairman, President and Chief Trust and
353 El Brillo Way Executive Officer, Cunningham & Co., Inc. 37 other investment
Palm Beach, FL (strategic business consulting); Trustee companies
TRUSTEE Associate, Boston College; Director, Iperia in the Fund Complex
Corp. (communications/software); formerly:
Director, Redgate Communications and
EMC
Corporation (computer storage systems).
Previous Positions: Chairman of the Board and
Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer,
Wang Laboratories; Director, First National Bank
of Boston; Director, Apollo Computer, Inc.
J. Christopher Donahue+ President or Executive Vice President of the $ 0 $0 for the Trust and 30
Birth Date: April 11, 1949 Federated Fund Complex; Director or Trustee of other investment
Federated Investors Tower some of the Funds in the Federated Fund Complex; companies in the Fund
1001 Liberty Avenue President, Chief Executive Officer and Director, Complex
Pittsburgh, PA Federated Investors, Inc.; President and
PRESIDENT AND TRUSTEE Trustee, Federated Investment Management
Company and Federated Investment Counseling;
President and Director, Federated Global
Investment Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder
Services Company; Director, Federated Services
Company.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund $ 909.23 $116,760.63 for the Trust
Birth Date: October 11, 1932 Complex; Professor of Medicine, University of and 43 other investment
3471 Fifth Avenue Pittsburgh; Medical Director, University of companies in the Fund
Suite 1111 Pittsburgh Medical Center - Downtown; Complex
Pittsburgh, PA Hematologist, Oncologist and
Internist,
TRUSTEE University of Pittsburgh Medical Center; Member,
National Board of Trustees, Leukemia Society of
America.
Peter E. Madden Director or Trustee of the Federated Fund $ 776.50 $109,153.60 for the Trust
Birth Date: March 16, 1942 Complex; formerly: Representative, Commonwealth and 43 other investment
One Royal Palm Way of Massachusetts General Court; President, State companies in the Fund
100 Royal Palm Way Street Bank and Trust Company and State Street Complex
Palm Beach, FL
Corporation.
TRUSTEE Previous Positions: Director, VISA USA and
VISA
International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.
Charles F. Mansfield, Jr. Director or Trustee of some of the Federated $ 578.85 $102,573.91 for the Trust
Birth Date: April 10, 1945 Fund Complex; Executive Vice President, Legal and 40 other investment
80 South Road and External Affairs, Dugan Valve Contess, Inc. companies in the Fund
Westhampton Beach, NY (marketing, communications, technology and Complex
TRUSTEE consulting); formerly Management Consultant.
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young &
Company (now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.
John E. Murray, Jr., J.D., S.J.D.# Director or Trustee of the Federated Fund $1,000.31 $128,455.37 for the Trust
Birth Date: December 20, 1932 Complex; President, Law Professor, Duquesne and 43 other investment
President, Duquesne University University; Consulting Partner, Mollica & companies in the Fund
Pittsburgh, PA Murray; Director, Michael Baker Corp. Complex
TRUSTEE (engineering, construction, operations and
technical services).
Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.
Marjorie P. Smuts Director or Trustee of the Federated Fund $ 909.23 $116,760.63 for the Trust
Birth Date: June 21, 1935 Complex; Public Relations/Marketing/Conference and 43 other investment
4905 Bayard Street Planning. companies in the Fund
Pittsburgh, PA Previous Positions: National Spokesperson, Complex
TRUSTEE Aluminum Company of America; television
producer; business owner.
John S. Walsh Director or Trustee of some of the Federated $ 557.01 $94,536.85 for the Trust
Birth Date: November 28, 1957 Fund Complex; President and Director, Heat and 39 other investment
2007 Sherwood Drive Wagon, Inc. (manufacturer of construction companies in the Fund
Valparaiso, IN temporary heaters); President and Director, Complex
TRUSTEE Manufacturers Products, Inc. (distributor of
portable construction heaters); President,
Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh &
Kelly, Inc. (heavy highway contractor);
formerly: Vice President, Walsh & Kelly, Inc.
Edward C. Gonzales Trustee or Director of some of the Funds in the $ 0 $0 for the Trust and 42
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive other investment
Federated Investors Tower Vice President and Treasurer of some of the company in the
1001 Liberty Avenue Funds in the Federated Fund Complex; Vice Fund Complex
Pittsburgh, PA Chairman, Federated Investors, Inc.; Vice
EXECUTIVE VICE PRESIDENT President, Federated Investment Management
Company, Federated Investment Counseling,
Federated Global Investment Management Corp. and
Passport Research, Ltd.; Executive Vice
President and Director, Federated Securities
Corp.; Trustee, Federated Shareholder Services
Company.
John W. McGonigle Executive Vice President and Secretary of the $ 0 $0 for the Trust and 43
Birth Date: October 26, 1938 Federated Fund Complex; Executive Vice other investment
Federated Investors Tower President, Secretary and Director, Federated companies in the Fund
1001 Liberty Avenue Investors, Inc.; Trustee, Federated Investment Complex
Pittsburgh, PA Management Company and Federated Investment
EXECUTIVE VICE PRESIDENT AND Counseling; Director, Federated Global
SECRETARY Investment Management Corp., Federated Services
Company and Federated Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice $ 0 $0 for the Trust and 43
Birth Date: June 17, 1954 President - Funds Financial Services Division, other investment
Federated Investors Tower Federated Investors, Inc.; formerly: various companies in the Fund
1001 Liberty Avenue management positions within Funds Financial Complex
Pittsburgh, PA Services Division of Federated Investors, Inc.
TREASURER
Richard B. Fisher President or Vice President of some of the Funds $ 0 $0 for the Trust and 41
Birth Date: May 17, 1923 in the Federated Fund Complex; Director or other investment
Federated Investors Tower Trustee of some of the Funds in the Federated companies in the Fund
1001 Liberty Avenue Fund Complex; Executive Vice President, Complex
Pittsburgh, PA Federated Investors, Inc.; Chairman and
VICE PRESIDENT Director, Federated Securities Corp.
William D. Dawson, III Chief Investment Officer of this Fund and $ 0 $0 for the Trust and 42
Birth Date: March 3, 1949 various other Funds in the Federated Fund other investment
Federated Investors Tower Complex; Executive Vice President, Federated companies in the Fund
1001 Liberty Avenue Investment Counseling, Federated Global Complex
Pittsburgh, PA Investment Management Corp., Federated
CHIEF INVESTMENT OFFICER Investment Management Company and Passport
Research, Ltd.; Registered Representative,
Federated Securities Corp.; Portfolio
Manager, Federated Administrative Services;
Vice President, Federated Investors, Inc.;
formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio
Management Services Division; Senior Vice
President, Federated Investment Management
Company and Passport Research, Ltd.
Deborah A. Cunningham Deborah A. Cunningham is Vice President of the $ 0 $0 for the Trust and 6
Birth Date: September 15, 1959 Trust. Ms. Cunningham joined Federated in 1981 other investment
Federated Investors Tower and has been a Senior Portfolio Manager and a companies in the Fund
1001 Liberty Avenue Senior Vice President of the Fund's Adviser Complex
Pittsburgh, PA since 1997. Ms. Cunningham served as a Portfolio
VICE PRESIDENT Manager and a Vice President of the Fund's
Adviser from 1993 through 1996. Ms. Cunningham
is a Chartered Financial Analyst and received
her M.B.A. in Finance from Robert Morris College.
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. $ 0 $0 for the Trust and 7
Birth Date: September 12, 1953 Ms. Ochson joined Federated in 1982 and has been other investment
Federated Investors Tower a Senior Portfolio Manager and a Senior Vice companies in the Fund
1001 Liberty Avenue President of the Fund's Adviser since 1996. From Complex
Pittsburgh, PA 1988 through 1995, Ms. Ochson served as a
VICE PRESIDENT Portfolio Manager and a Vice President of the
Fund's Adviser. Ms. Ochson is a Chartered
Financial Analyst and received her M.B.A. in
Finance from the University of Pittsburgh.
</TABLE>
* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940.
# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.
The Adviser is a wholly owned subsidiary of Federated.
The Adviser shall not be liable to the Fund or any Fund shareholder 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 Fund.
The Adviser must waive the portion of its advisory fee that increases the Fund's
aggregate annual operating expenses above 0.45% of its average daily net assets.
The Fund's operating expenses include the advisory fee but exclude interest,
taxes, brokerage commissions, expenses of registering the Fund and its shares
under federal and state laws, expenses of withholding taxes, and extraordinary
expenses.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.
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. 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. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:
<TABLE>
<CAPTION>
Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated Funds
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.
CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTs
The independent public accountant for the Fund, Deloitte & Touche LLP, plans and
performs its audit so that it may provide an opinion as to whether the Fund's
financial statements and financial highlights are free of material misstatement.
FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>
For the Year Ended November 30 1999 1998
1997
<S> <C> <C> <C>
Advisory Fee Earned $2,353,621 $2,624,751
$2,876,062
Advisory Fee Reduction $ 665,987 $ 721,130 $
859,298
Administrative Fee $ 443,658 $ 494,765 $
542,857
Shareholder Services Fee $ 294,202 $ 328,094
</TABLE>
If the Fund's expenses are capped at a particular level, the cap does not
include reimbursement to the Fund of any expenses incurred by shareholders who
use the transfer agent's subaccounting facilities.
How Does the Fund Measure Performance?
The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.
AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year and ten-year periods ended
November 30, 1999.
Yield and Effective Yield are given for the 7-day period ended November 30,
1999.
<TABLE>
<CAPTION>
7-Day Period 1 Year 5 Years
10 Years
<S> <C> <C>
<C> <C>
Total Return 4.75%
5.17% 5.02%
Yield 5.21%
Effective Yield 5.35%
</TABLE>
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares 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 NAV 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, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
YIELD AND EFFECTIVE YIELD
The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated 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 effective yield is calculated by compounding the unannualized base-
period return by: adding one to the base-period return, raising the sum to the
365/7th power; and subtracting one from the result.
To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
. references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
. charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
. discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Fund; and
. information about the mutual fund industry from sources such as the
Investment Company Institute.
The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:
. 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.
. 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.
. Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
Who is Federated Investors, Inc.?
Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.
FEDERATED FUNDS OVERVIEW
Municipal Funds
In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.
Equity Funds
In the equity sector, Federated has more than 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
Corporate Bond Funds
In the corporate bond sector, as of December 31, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.
Government Funds
In the government sector, as of December 31, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.8 billion in government funds within these
maturity ranges.
Money Market Funds
In the money market sector, Federated 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime and 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion, $13.1 billion and 115
million respectively.
The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.
FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:
Institutional Clients
Federated meets the needs of approximately 1,160 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of purposes, 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
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.
Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.
Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--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 Sales Division, Federated Securities Corp.
Addresses
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Custodian
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
PART C. OTHER INFORMATION.
Item 23 Exhibits:
(a) (i) Conformed copy of Declaration of Trust of the Registrant; (12)
(ii) Conformed copy of Amendment No. 1 to the Declaration of Trust of the
Registrant; (12)
(iii)Conformed copy of Amendment No. 2 to the Declaration of Trust of the
Registrant; (17)
(iv) Conformed copy of Amendment No. 3 to the Declaration of Trust of the
Registrant; (17)
(v) Conformed copy of Amendment No. 4 to the Declaration of Trust of the
Registrant; (17)
(vi) Conformed copy of Amendment No. 5 to the Declaration of Trust of the
Registrant; (17)
(vii)Conformed copy of Amendment No. 6 to the Declaration of Trust of the
Registrant; (17)
(viii) Conformed copy of Amendment No. 8 to the Declaration of Trust of the
Registrant; (10)
(ix) Conformed copy of Amendment No. 9 to the Declaration of Trust of the
Registrant; (15)
(x) Conformed copy of Amendment No. 10 to the Declaration of Trust of the
Registrant; (16)
(xi) Conformed copy of Amendment No. 11 to the Declaration of Trust of the
Registrant; (21)
(xii)Conformed copy of Amendment No. 12 to the Declaration of Trust of the
Registrant; (21)
(xiii) Conformed copy of Amendment No. 13 to the Declaration of Trust of
the Registrant; (23)
(b) (i) Copy of By-Laws of the Registrant; (12)
(ii) Copy of Amendment No. 1 to By-Laws of the
Registrant; (17)
(iii) Copy of Amendment No. 2 to By-Laws of the Registrant; (17)
(iv) Copy of Amendment No. 3 to By-Laws of the Registrant; (17)
(v) Copy of Amendment No. 4 to By-Laws of the Registrant; (17)
(c) See Appendix.
<PAGE>
(d) (i) Conformed copy of Investment Advisory
Contract of the Registrant; (12) (ii) Conformed
copy of Exhibit A to the Investment Advisory
Contract of the
Registrant; (12)
(iii) Conformed copy of Exhibit B to the
Investment Advisory Contract of the
Registrant; (12)
(iv) Conformed copy of Exhibit D to the
Investment Advisory Contract of the
Registrant; (12)
(v) Conformed copy of Exhibit E to the
Investment Advisory Contract of the
Registrant; (12)
(vi) Conformed copy of Exhibit G to the
Investment Advisory Contract of the
Registrant; (12)
(vii) Conformed copy of Exhibit H to the
Investment Advisory Contract of the
Registrant; (21)
(viii) Conformed copy of Exhibit I to the
Investment Advisory Contract of the
Registrant; (21)
(ix) Conformed copy of Exhibit J to the
Investment Advisory Contract of the
Registrant; (21)
(x) Conformed copy of Exhibit K to the
Investment Advisory Contract of the
Registrant; (21)
(xi) Conformed copy of Exhibit L to the
Investment Advisory Contract of the
Registrant; (21)
(xii) Conformed copy of Exhibit M to the
Investment Advisory Contract of the
Registrant; (21)
(xiii) Conformed copy of Exhibit N to the
Investment Advisory Contract of the
Registrant; (21)
(xiv) Conformed copy of Exhibit O to the
Investment Advisory Contract of the
Registrant; (21)
(xv) Conformed copy of Exhibit P to the
Investment Advisory Contract of the
Registrant; (21)
(xvi) Conformed copy of Exhibit Q to the
Investment Advisory Contract of the
Registrant; (21)
(xvii) Conformed copy of Exhibit R to the
Investment Advisory Contract of the
Registrant; (21)
(xviii) Conformed copy of Exhibit S to the
Investment Advisory Contract of the
Registrant; (23)
(e) (i) Conformed copy of Distributor's Contract of
the Registrant; (7) (ii) Conformed copy of
Exhibit A to the Distributor's Contract of the
Registrant; (21)
(iii) Conformed copy of Exhibit C to the
Distributor's Contract of the
Registrant; (21)
(iv) Conformed copy of Exhibit D to the
Distributor's Contract of the
Registrant; (15)
<PAGE>
(v) Conformed copy of Exhibit F to the
Distributor's Contract of the
Registrant; (16)
(vi) Conformed copy of Exhibit G to the
Distributor's Contract of the
Registrant; (21)
(vii) Conformed copy of Exhibit H to the
Distributor's Contract of the
Registrant; (21)
(viii) Conformed copy of Exhibit I to the
Distributor's Contract of the
Registrant; (21)
(ix) Conformed copy of Exhibit J to the
Distributor's Contract of the
Registrant; (23)
(x) Conformed copy of Distributor's
Contract of the Registrant
(Liberty U.S.Government Money
Market Trust - Class B Shares); (23)
(xi) The Registrant hereby incorporates
the conformed copy of the specimen
Mutual Funds Sales and Service
Agreement; Mutual Funds Service
Agreement; and Plan Trustee/ Mutual
Funds Service Agreement from Item
24(b)(6) of the Cash Trust Series
II Registration Statement on Form
N-1A filed with the Commission on
July 24, 1995.
(File Nos. 33-38550 and 811-6269).
(f) Not applicable;
(g) (i) Conformed copy of Custodian
Agreement of the Registrant; (8)
(ii) Conformed copy of Custodian Fee
Schedule; (17)
(h) (i) Conformed copy of Amended and
Restated Agreement for Fund
Accounting Services,
Administrative Services,
Transfer Agency Services and
Custody Services Procurement; (21)
(ii) Conformed copy of Amended and
Restated Shareholder Services
Agreement of the Registrant; (21)
(iii) Conformed copy of Principal
Shareholder Services Agreement
(Liberty U.S. Government Money
Market Trust - Class B Shares);(23)
(iv) Conformed copy of Shareholder
Services Agreement (Liberty U.S.
Government Money Market Trust -
Class B Shares); (23)
(v) Conformed copy of Shareholder
Services Agreement (Massachusetts
Municipal Cash Trust - Boston 1784
Fund Shares); (24)
+ All exhibits filed electronically.
<PAGE>
(vi) The responses described in Item
23(e)(xi) are hereby incorporated by
reference. (vii) The Registrant hereby
incorporates by reference the conformed copy
of the
Shareholder Services Sub-Contract
between Fidelity and Federated
Shareholder Services from Item
24(b)(9)(iii) of the Federated GNMA
Trust Registration Statement on
Form N-1A, filed with the
Commission on March 25, 1996 (File
Nos.
2-75670 and 811-3375).
(i) Conformed copy of Opinion and
Consent of Counsel as to legality of
shares being registered; (12)
(j) (i) Conformed copy of Consent of Arthur
Andersen LLP for:
(a) Automated Cash Management Trust; (22)
(b) Federated Short-Term U.S. Government Trust;
(19)
(c) Government Obligations Fund; (23)
(d) Government Obligations Tax-Managed
Fund; (23)
(e) Prime Obligations Fund; (23)
(f) Tax-Free Obligations Fund; (23)
(g) Treasury Obligations Fund; (23)
(h) Trust for Government Cash Reserves; (19)
(ii) Conformed copy of Consent of Ernst & Young LLP for:
(a) Automated Government Cash Reserves; (21)
(b) Automated Treasury Cash Reserves; (21)
(c) Municipal Obligations Fund; (23)
(d) Prime Cash Obligations Fund; (23)
(e) Prime Value Obligations Fund; (23)
(f) U.S. Treasury Cash Reserves; (21)
(g) Trust for U.S. Treasury Obligations; (22)
(h) All state specific municipal portfolios
of Money Market Obligations Trust,
formerly, Federated Municipal Trust. +
(iii) Conformed copy of Consent of Deloitte & Touche
LLP for:
(a) Automated Government Money Trust; (22)
(b) Liquid Cash Trust; (20)
(c) Money Market Management, Inc.; +
(d) Money Market Trust; +
(e) Federated Master Trust; Federated
Tax-Free Trust; Trust for Government
Cash Reserves; and Trust for Short-Term
U.S. Government Obligations. +
(k) Not applicable;
(l) Conformed copy of Initial Capital Understanding; (12)
<PAGE>
(m) (i) Conformed copy of Distribution Plan of
the Registrant; (16) (ii) Conformed copy of
Exhibit A to the Distribution Plan of the
Registrant; (16)
(iii) Conformed copy of Exhibit B to the
Distribution Plan of the Registrant;
(21)
(iv) The responses described in Item
23(e)(xi) are hereby incorporated by
reference.
(n) The Registrant hereby incorporates the
conformed copy of the specimen Multiple
Class Plan from Item 24(b)(18) of the World
Investment Series, Inc. Registration
Statement on Form N-1A, filed with the
Commission on January 26, 1996. (File Nos.
33-52149 and 811-07141).
(o) (i) Conformed copy of Power of Attorney of the
Registrant; (23)
(ii) Conformed copy of Power of Attorney of
Chief Investment Officer of the Registrant; (23)
(iii) Conformed copy of Power of Attorney of
Treasurer of the Registrant; (18)
(iv) Conformed copy of Power of Attorney of
Trustee of the Registrant; (23)
(v) Conformed copy of Power of Attorney of Trustee of
the Registrant; (23)
(vi) Conformed copy of Power of Attorney of Trustee of
the Registrant; (23)
Item 24. Persons Controlled by or Under Common Control with the Fund:
None
Item 25. Indemnification: (1)
<PAGE>
1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed October 20, 1989. (File Nos. 33-31602 and
811-5950).
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed May 6, 1994. (File Nos. 33-31602 and
811-5950).
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 8 on Form N-1A filed June 1, 1994. (File Nos. 33-31602 and
811-5950).
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed February 21, 1995. (File Nos. 33-31602
and 811-5950).
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 on Form N-1A filed September 29, 1995. (File Nos. 33-31602
and 811-5950).
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed September 23, 1996. (File Nos. 33-31602
and 811-5950).
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed September 23, 1997. (File Nos. 33-31602
and 811-5950).
17. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 24 on Form N-1A filed September 28, 1998. (File Nos. 33-31602
and 811-5950).
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 25 on Form N-1A filed February 12, 1999. (File Nos. 33-31602
and 811-5950).
19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed April 26, 1999. (File Nos. 33-31602 and
811-5950).
20. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 on Form N-1A filed May 25, 1999. (File Nos. 33-31602 and
811-5950).
21. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 33 on Form N-1A filed August 27, 1999. (File Nos. 33-31602
and 811-5950).
22. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 35 on Form N-1A filed September 28, 1999. (File Nos. 33-31602
and 811-5950).
23. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 36 on Form N-1A filed October 29, 1999. (File Nos. 33-31602
and 811-5950).
24. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 37 on Form N-1A filed November 17, 1999. (File Nos. 33-31602
and 811-5950).
<PAGE>
Item 26. Business and Other Connections of the Investment Adviser:
For a description of the other business of the investment adviser,
see the section entitled "Who Manages the Fund?" in Part A. The
affiliations with the Registrant of four of the Trustees and one
of the Officers of the investment adviser are included in Part B
of this Registration Statement under "Who Manages and Provides
Services to the Fund?" The remaining Trustee of the investment
adviser, his position with the investment adviser, and, in
parentheses, his principal occupation is: Mark D. Olson (Partner,
Wilson, Halbrook & Bayard), 107 W. Market Street, Georgetown,
Delaware 19947.
The remaining Officers of the investment adviser are:
Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden
Senior Vice Presidents: Joseph M. Balestrino
David A. Briggs
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
Jeffrey A. Kozemchak
Sandra L. McInerney
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
Randall S. Bauer
G. Andrew Bonnewell
Micheal W. Casey
Robert E. Cauley
Alexandre de Bethmann
B. Anthony Delserone, Jr.
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
James E. Grefenstette
Marc Halperin
Patricia L. Heagy
Susan R. Hill
William R. Jamison
Constantine J. Kartsonas
Robert M. Kowit
Richard J. Lazarchic
Steven Lehman
Marian R. Marinack
William M. Painter
Jeffrey A. Petro
Keith J. Sabol
Frank Semack
Aash M. Shah
Michael W. Sirianni, Jr.
Christopher Smith
Edward J. Tiedge
Leonardo A. Vila
Paige M. Wilhelm
George B. Wright
Assistant Vice Presidents: Arminda Aviles
Nancy J. Belz
Lee R. Cunningham, II
James H. Davis, II
Jacqueline A. Drastal
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
Gary E. Farwell
Eamonn G. Folan
John T. Gentry
John W. Harris
Nathan H. Kehm
John C. Kerber
Grant K. McKay
Christopher Matyszewski
Natalie F. Metz
Thomas Mitchell
Joseph M. Natoli
Trent Neville
Ihab Salib
Roberto Sanchez-Dahl, Sr.
James W. Schaub
John Sheehy
John Sidawi
Matthew K. Stapen
Diane Tolby
Timothy G. Trebilcock
Steven J. Wagner
Lori A. Wolff
Secretary: G. Andrew Bonnewell
Treasurer: Thomas R. Donahue
Assistant Secretaries: C. Grant Anderson
Karen M. Brownlee
Leslie K. Ross
Assistant Treasurer: Dennis McAuley, III
<PAGE>
The business address of each of the Officers of the investment
adviser is Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779. These individuals are also
officers of a majority of the investment advisers to the
investment companies in the Federated Fund Complex described in
Part B of this Registration Statement.
Item 27. Principal Underwriters:
(a) Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following
open-end investment companies, including the Registrant:
Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; 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 Core
Trust; 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 Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal 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.; Fixed Income
Securities, Inc.; ; Hibernia Funds; Independence One Mutual Funds; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Managed Series Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Regions Funds; RIGGS Funds;
SouthTrust Funds; Tax-Free Instruments Trust; The Planters Funds; The Wachovia
Funds; The Wachovia Municipal Funds; Vision Group of Funds, Inc.; World
Investment Series, Inc.; Blanchard Funds; Blanchard Precious Metals Fund, Inc.;
DG Investor Series; High Yield Cash Trust; Investment Series Trust; Star Funds;
Targeted Duration Trust; The Virtus Funds; Trust for Financial Institutions;
Federated Securities Corp. also acts as principal underwriter for the following
closed-end investment company: Liberty Term Trust, Inc.- 1999.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Richard B. Fisher Chairman, Chief Executive Vice President
Federated Investors Tower Officer, Chief Operating
1001 Liberty Avenue Officer
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Arthur L. Cherry Director --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales --
Federated Investors Tower and Director
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Director, Assistant Secretary --
Federated Investors Tower and Treasurer
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer and --
Federated Investors Tower Director
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Amy Michalisyn Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Larry Sebbens Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
<PAGE>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy S. Johnson Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dennis McAuley Assistant Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(c) Not applicable
</TABLE>
<PAGE>
Item 28. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and Rules 31a-1 through 31a-3
promulgated thereunder are maintained at one of the following
locations:
Registrant Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(Notices should be sent to the Agent for Service at the above address)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Federated Shareholder P.O. Box 8600
Services Company Boston, MA 02266-8600
("Transfer Agent and Dividend
Disbursing Agent")
Federated Services Company Federated Investors Tower
("Administrator") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Federated Investment Federated Investors Tower
Management Company 1001 Liberty Avenue
("Adviser") Pittsburgh, PA 15222-3779
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
("Custodian")
Item 29. Management Services: Not applicable.
Item 30. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, MONEY MARKET OBLIGATIONS TRUST,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on the
28th day of January, 2000.
MONEY MARKET OBLIGATIONS TRUST
BY: /s/ Leslie K. Ross
Leslie K. Ross, Assistant Secretary
Attorney in Fact for John F. Donahue
January 28, 2000
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
NAME TITLE DATE
By: /s/ Leslie K. Ross
Leslie K. Ross Attorney In Fact January 28, 2000
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
J. Christopher Donahue* President and Trustee
Richard J. Thomas* Treasurer(Principal Financial and
Accounting Officer)
William D. Dawson, III* Chief Investment Officer
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
Nicholas P. Constantakis* Trustee
John F. Cunningham* Trustee
Lawrence D. Ellis, M.D.* Trustee
Peter E. Madden* Trustee
Charles F. Mansfield, Jr.* Trustee
John E. Murray, Jr., J.D., S.J.D.* Trustee
Marjorie P. Smuts* Trustee
John S. Walsh* Trustee
*By Power of Attorney
</TABLE>
<PAGE>
Appendix
Copy of Specimen Certificate for Shares of Beneficial Interest of:
(i) Alabama Municipal Cash Trust; (Response is incorporated by reference to
Post-Effective Amendment No. 21 on Form N-1A filed on December 29, 1993.
File Nos. 33-31259 and 811-5911).
(ii) Arizona Municipal Cash Trust; (Response is incorporated by reference to
Post-Effective Amendment No. 46 on Form N-1A filed on March 16, 1998. File
Nos. 33-31259 and 811-5911).
(iii)Automated Cash Management Trust - Institutional Service Shares and Cash II
Shares; (Response is incorporated by reference to Post-Effective Amendment
No. 8 on Form N-1A filed June 1, 1994. File Nos. 33-31602 and 811-5950).
(iv) Automated Government Money Trust; (Response is incorporated by reference to
Initial Registration Statement on Form N-1 filed on May 28, 1982. File Nos.
2-77822 and 811-3475).
(v) California Municipal Cash Trust - Institutional Shares and Institutional
Service Shares; (Response is incorporated by reference to Post-Effective
Amendment No. 45 on Form N-1A filed on December 19, 1997. File Nos.
33-31259 and 811-5911).
(vi) Connecticut Municipal Cash Trust; (Response is incorporated by reference to
Pre-Effective Amendment No. 1 on Form N-1A filed on October 31, 1989. File
Nos. 33-31259 and 811-5911).
(vii)Federated Master Trust; (Response is incorporated by reference to
Post-Effective Amendment No. 39 on Form N-1A filed January 23, 1996. File
Nos. 2-60111 and 811-2784).
(viii) Federated Short-Term U.S. Government Trust; (Response is incorporated by
reference to Post-Effective Amendment No. 1 on Form N-1A filed October 22,
1987. File Nos. 33-12322 and 811-5035).
(ix) Federated Tax-Free Trust; (Response is incorporated by reference to Initial
Registration Statement on Form S-5 filed December 27, 1978. File Nos.
2-63343 and 811-2891).
(x) Florida Municipal Cash Trust; (Response is incorporated by reference to
Post-Effective Amendment No. 30 on Form N-1A filed on September 19, 1994.
File Nos. 33-31259 and 811-5911).
(xi) Georgia Municipal Cash Trust; (Response is incorporated by reference to
Post-Effective Amendment No. 36 on Form N-1A filed on May 31, 1995. File
Nos. 33-31259 and 811-5911).
(xii)Liberty U.S. Government Money Market Trust; (Response is incorporated by
reference to Post-Effective Amendment No. 35 on Form N-1A filed April 25,
1996. File Nos. 2-65447 and 811-2956).
(xiii) Liquid Cash Trust; (Response is incorporated by reference to
Pre-Effective Amendment No. 3 on Form N-1A filed December 8, 1980. File
Nos. 2-67655 and 811-3057).
(xiv)Maryland Municipal Cash Trust; (Response is incorporated by reference to
Post-Effective Amendment No. 22 on Form N-1A filed on March 2, 1994. File
Nos. 33-31259 and 811-5911).
(xv) Massachusetts Municipal Cash Trust - Institutional Service Shares and
BayFunds Shares; (Response is incorporated by reference to Post-Effective
Amendment No. 21 on Form N-1A filed on December 29, 1993. File Nos.
33-31259 and 811-5911).
(xvi)Michigan Municipal Cash Trust - Institutional Shares and Institutional
Service Shares; (Response is incorporated by reference to Post-Effective
Amendment No. 45 on Form N-1A filed on December 19, 1997. File Nos.
33-31259 and 811-5911).
(xvii) Minnesota Municipal Cash Trust - Institutional Shares and Cash Series
Shares; (Response is incorporated by reference to Post-Effective Amendment
No. 21 on Form N-1A filed on December 29, 1993. File Nos. 33-31259 and
811-5911).
(xviii) New Jersey Municipal Cash Trust - Institutional Shares and Institutional
Service Shares; (Response is incorporated by reference to Post-Effective
Amendment No. 21 on Form N-1A filed on December 29, 1993. File Nos.
33-31259 and 811-5911).
(xix)North Carolina Municipal Cash Trust; (Response is incorporated by
reference to Post-Effective Amendment No. 21 on Form N-1A filed on December
29, 1993. File Nos. 33-31259 and 811-5911).
(xx) Ohio Municipal Cash Trust - Institutional Shares and Institutional Service
Shares; (Response is incorporated by reference to Post-Effective Amendment
No. 45 on Form N-1A filed on December 19, 1997. File Nos. 33-31259 and
811-5911).
(xxi)Ohio Municipal Cash Trust - Cash II Shares; (Response is incorporated by
reference to Post-Effective Amendment No. 21 on Form N-1A filed on December
29, 1993. File Nos. 33-31259 and 811-5911).
(xxii) Pennsylvania Municipal Cash Trust - Institutional Shares; (Response is
incorporated by reference to Post-Effective Amendment No. 35 on Form N-1A
filed on May 19,1995. File Nos. 33-31259 and 811-5911).
(xxiii) Pennsylvania Municipal Cash Trust - Institutional Service Shares and
Cash Series Shares; (Response is incorporated by reference to
Post-Effective Amendment No. 21 on Form N-1A filed on December 29, 1993.
File Nos. 33-31259 and 811-5911).
(xxiv) Tennessee Municipal Cash Trust - Institutional Shares and Institutional
Service Shares; (Response is incorporated by reference to Post-Effective
Amendment No. 42 on Form N-1A filed on February 29,1996. File Nos. 33-31259
and 811-5911).
(xxv)Treasury Obligations Fund - Institutional Capital Shares; (Response is
incorporated by reference to Post-Effective Amendment No. 22 on Form N-1A
filed September 23, 1997. File Nos. 33-31602 and 811-5950).
(xxvi) Trust for Government Cash Reserves; (Response is incorporated by
reference to Pre-Effective Amendment No. 1 on Form N-1A filed March 23,
1989. File Nos. 33-27178 and 811-5772).
(xxvii) Trust for Short-Term U.S. Government Securities; (Response is
incorporated by reference to Post-Effective Amendment No. 53 on Form N-1A
filed January 23, 1995. File Nos. 2-54929 and 811-2602).
(xxviii) Trust for U.S. Treasury Obligations; (Response is incorporated by
reference to Post-Effective Amendment No. 27 on Form N-1A filed November
27, 1994. (File Nos. 2-49591 and 811-2430).
(xxix) Virginia Municipal Cash Trust - Institutional Shares and Institutional
Service Shares; (Response is incorporated by reference to Post-Effective
Amendment No. 21 on Form N-1A filed on December 29, 1993. File Nos.
33-31259 and 811-5911).
Exhibit (j)(iii)(c) under Form N-1A
Exhibit (23) under Item 601/Reg. S-K
INDEPENDENT AUDITORS' CONSENT
To the Trustees and Shareholders of
Money Market Obligations Trust:
We consent to the use in Post-Effective Amendment No. 38 to Registration
Statement No. 33-31602 on Form N-1A of Money Market Obligations Trust of our
report dated February 12, 1999 relating to the financial statements of Money
Market Management, Inc. for the year ended December 31, 1998 appearing in the
Prospectus, which is a part of such Registration Statement, and to the reference
to us under the heading "Financial Highlights" in such Prospectus.
By: /s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Boston, Massachusetts
January 26, 2000
Exhibit (j)(iii)(d) under Form N-1A
Exhibit (23) under Item 601/Reg. S-K
INDEPENDENT AUDITORS' CONSENT
To the Trustees and Shareholders of
Money Market Obligations Trust:
We consent to the use in Post-Effective Amendment No. 38 to Registration
Statement No. 33-31602 on Form N-1A of Money Market Obligations Trust of our
report dated September 17, 1999 relating to the financial statements of Money
Market Trust for the year ended July 31, 1999 appearing in the Prospectus, which
is a part of such Registration Statement, and to the reference to us under the
heading "Financial Highlights" in such Prospectus.
By: /s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Boston, Massachusetts
January 26, 2000
Exhibit (j)(iii)(e) under Form N-1A
Exhibit (23) under Item 601/Reg. S-K
INDEPENDENT AUDITORS' CONSENT
To the Trustees and Shareholders of
Money Market Obligations Trust:
We consent to the use in Post-Effective Amendment No. 38 to Registration
Statement No. 33-31602 on Form N-1A of Money Market Obligations Trust of our
report dated January 14, 2000 relating to the financial statements of Federated
Master Trust, Federated Tax-Free Trust, Trust for Government Cash Reserves and
Trust for Short-Term U.S. Government Securities for the year ended November 30,
1999 appearing in the Prospectuses, which is a part of such Registration
Statement, and to the reference to us under the heading "Financial Highlights"
in such Prospectuses.
By: /s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Boston, Massachusetts
January 26, 2000
