1933 Act File No. 33-38550
1940 Act File No. 811-6269
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 5 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 5 X
CASH TRUST SERIES II
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on July 31, 1994 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on pursuant to paragraph (a) of Rule 485.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on July 15, 1994; or
intends to file the Notice required by that Rule on or about ; or
during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.
Copies to:
Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin, L.L.P.
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222
CROSS REFERENCE SHEET
This amendment to the Registration Statement of CASH TRUST SERIES II,
which consists of 2 portfolios, (1) Municipal Cash Series II; and (2) and
Treasury Cash Series II, is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1-2) Cover Page.
Item 2. Synopsis (1-2) Financial Highlights.
Item 3. Condensed Financial
Information (1-2) Performance Information.
Item 4. General Description of
Registrant (1-2) General Information;
(1-2) Investment Information;
(1-2) Investment Objective;
(1-2) Investment Policies;
(1-2) Investment Limitations;
Item 5. Management of the Fund (1-2) Cash Trust Series II
Information; (1-2) Management of Cash
Trust Series II;
(1-2) Distribution of Fund Shares; (1-
2) Administration of the Fund;
(1-2) Distribution Plan.
Item 6. Capital Stock and Other
Securities (1-2) Dividends;(1-2) Capital Gains;
(1-2) Shareholder Information;
(1-2) Voting Rights;
(1-2) Massachusetts Partnership Law;
(1-2) Tax Information;(1-2) Federal
Income Tax;(1-2) Pennsylvania
Corporate and Personal Property Taxes;
(1-2) State and Local Taxes.
Item 7. Purchase of Securities Being
Offered (1-2) Net Asset Value;(1-2) Investing
in the Fund;(1-2) Share Purchases; (1-
2) Minimum Investment Required;(1-2)
What Shares Cost; Subaccounting
Services;(1-2) Systematic Investment
Program;
(1-2) Certificates and Confirmations.
Item 8. Redemption or Repurchase (1-2) Redeeming Shares;(1-2) Through A
Financial Institution;(1-2) Directly
from the Fund;(1-2) Systematic
Withdrawal Program;
(1-2) Accounts with Low Balances.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page (1-2) Cover Page.
Item 11. Table of Contents (1-2) Table of Contents.
Item 12. General Information and
History (1-2) General Information About the
Fund.
Item 13. Investment Objectives and
Policies (1-2) Investment Objectives and
Policies.
Item 14. Management of the Fund (1-2) Cash Trust Series II Management.
Item 15. Control Persons and Principal
Holders of Securities Not Applicable.
Item 16. Investment Advisory and Other
Services (1-2) Investment Advisory Services; (1-
2) Administrative Services.
Item 17. Brokerage Allocation (1-2) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not Applicable.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered (1-2) Purchasing Shares;
(1-2) Determining Net Asset Value;
(1-2) Redeeming Shares.
Item 20. Tax Status (1-2) Tax Status.
Item 21. Underwriters (1-2) Distribution Plan.
Item 22. Calculation of Performance
Data (1-2) Yield; (1-2) Effective Yield;
(1) Tax-Equivalent Yield; (1-2)
Performance Comparisons.
Item 23. Financial Statements (1-2) Financial Statements
MUNICIPAL CASH SERIES II
(A PORTFOLIO OF CASH TRUST SERIES II)
PROSPECTUS
Municipal Cash Series II (the "Fund") is a non-diversified portfolio of Cash
Trust Series II (the "Trust"), an open-end management investment company (a
mutual fund). The investment objective of the Fund is to provide current income
exempt from federal regular income tax consistent with stability of principal by
investing primarily in short-term municipal securities.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE; THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
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 BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated July 31,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference in this
prospectus. You may request a copy of the Statement of Additional Information
free of charge by calling 1-800-235-4669. To obtain other information or to make
inquiries about the Fund, contact your financial institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated July 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Variable Rate Demand Notes 4
Participation Interests 4
Municipal Leases 4
Ratings 4
Credit Enhancement 5
Demand Features 5
Restricted and Illiquid Securities 5
When-Issued and Delayed
Delivery Transactions 5
Municipal Securities 5
Temporary Investments 6
Investment Risks 6
Non-Diversification 6
Investment Limitations 7
Regulatory Compliance 7
CASH TRUST SERIES II INFORMATION 8
- ------------------------------------------------------
Management of Cash Trust Series II 8
Board of Trustees 8
Investment Adviser 8
Advisory Fees 8
Adviser's Background 8
Distribution of Fund Shares 9
Distribution Plan 9
Other Payments to Financial Institutions 9
Administration of the Fund 10
Administrative Services 10
Custodian 10
Transfer Agent and Dividend
Disbursing Agent 10
Legal Counsel 10
Independent Auditors 10
NET ASSET VALUE 10
- ------------------------------------------------------
INVESTING IN THE FUND 11
- ------------------------------------------------------
Share Purchases 11
Through a Financial Institution 11
Directly from the Distributor 11
Minimum Investment Required 11
What Shares Cost 11
Conversion to Federal Funds 12
Subaccounting Services 12
Systematic Investment Program 12
Certificates and Confirmations 12
Dividends 12
Capital Gains 13
REDEEMING SHARES 13
- ------------------------------------------------------
Through a Financial Institution 13
Receiving Payment 13
By Check 13
By Wire 13
Directly from the Fund 13
By Mail 13
Checkwriting 14
Debit Card 14
Systematic Withdrawal Program 14
Accounts with Low Balances 15
SHAREHOLDER INFORMATION 15
- ------------------------------------------------------
Voting Rights 15
Massachusetts Partnership Law 15
TAX INFORMATION 15
- ------------------------------------------------------
Federal Income Tax 15
Pennsylvania Corporate and
Personal Property Taxes 17
Other State and Local Taxes 17
PERFORMANCE INFORMATION 17
- ------------------------------------------------------
FINANCIAL STATEMENTS 18
- ------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 33
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)...........
None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).................................................
None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds as applicable)..................................................
None
Redemption Fee (as a percentage of amount redeemed, if applicable)....................
None
Exchange Fee..........................................................................
None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)......................................................
0.22%
12b-1 Fee.............................................................................
0.20%
Other Expenses........................................................................
0.37%
Total Fund Operating Expenses(2).................................................
0.79%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.50%.
(2) The Total Fund Operating Expenses would have been 1.07% absent the voluntary
waiver of a portion of the management fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "CASH TRUST SERIES II INFORMATION." WIRE-TRANSFERRED REDEMPTIONS
OF LESS THAN $5,000 MAY BE SUBJECT TO ADDITIONAL FEES.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10
years
- -------------------------------------------------------- ------ ------- ------- --
- ------
<S> <C> <C> <C>
<C>
You would pay the following expenses on a $1,000 invest-
ment assuming (1) 5% annual return and (2) redemption
at the end of each time period........................ $8 $25 $44
$ 98
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
MUNICIPAL CASH SERIES II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 33.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------------------
1994 1993 1992 1991*
-------- -------- ------- -------
<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 0.02 0.04 0.01
- -------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------
Dividends to shareholders from net
investment income (0.02) (0.02) (0.04) (0.01)
- ------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
- ------------------------------------------- ------ ------ ------ ------
TOTAL RETURN** 1.99 % 2.29 % 3.72 % 1.19 %
- -------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------
Expenses 0.79 % 0.77 % 0.74 % 0.47
%(a)
- -------------------------------------------
Net investment income 1.97 % 2.23 % 3.56 % 4.68
%(a)
- -------------------------------------------
Expense waiver/reimbursement(b) 0.28 % 0.50 % 0.50 % 0.39
%(a)
- -------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------
Net assets, end of period (000 omitted) $131,770 $104,563 $65,628 $34,048
- -------------------------------------------
</TABLE>
* Reflects operations for the period from February 13, 1991 (date of initial
public investment) to May 31, 1991.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated November 14, 1990. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. This prospectus relates only to the
short-term municipal securities portfolio of the Trust, known as Municipal Cash
Series II. The Fund is designed for customers of financial institutions such as
banks, fiduciaries, custodians of public funds, investment advisers and
broker/dealers, as a convenient means of accumulating an interest in a
professionally managed non-diversified portfolio limited to money market
instruments maturing in thirteen months or less. A minimum initial investment of
$25,000 is required. Subsequent investments must be in amounts of at least $500.
The Fund may not be a suitable investment for retirement plans since it invests
in municipal securities.
The Fund attempts to stabilize the value of a share at $1.00. Fund shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax consistent with stability of principal.
(Federal regular income tax does not include the federal individual alternative
minimum tax or the federal alternative minimum tax for corporations.) The
investment objective cannot be changed without approval of shareholders. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.
Interest income of the Fund that is exempt from federal regular income tax
retains its tax-free status when distributed to the Fund's shareholders.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing primarily in a
non-diversified portfolio of municipal securities (as defined below) with
remaining maturities of thirteen months or less. The average maturities of these
securities, computed on a dollar-weighted basis, will be 90 days or less.
Unless indicated otherwise, the investment policies of the Fund may be changed
by the Trustees without the approval of shareholders. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued by
or on behalf of states, territories and possessions of the United States,
including the District of Columbia, and any political subdivision or financing
authority of any of these, the income from which is, in the opinion of qualified
legal counsel, exempt from federal regular income tax ("Municipal Securities").
Examples of Municipal Securities include, but are not limited to:
- tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
- bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
- municipal commercial paper and other short-term notes;
- variable rate demand notes;
- municipal bonds (including bonds having serial maturities and
pre-refunded bonds) and leases;
- construction loan notes insured by the Federal Housing Administration and
financed by the Federal or Government National Mortgage Associations; and
- participation, trust and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
Municipal Securities that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase at
its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the securities
to trade at par. The interest rate may float or be adjusted at regular
intervals (ranging from daily to annually), and is normally based on a
municipal interest index or a published interest rate or interest rate
index. Most variable rate demand notes allow the Fund to demand the
repurchase of the security on not more than seven days prior notice. Other
notes only permit the Fund to tender the security at the time of each
interest rate adjustment or at other fixed intervals. See "Demand
Features." The Fund treats variable rate demand notes as maturing on the
later of the date of the next interest adjustment or the date on which the
Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Municipal
Securities from financial institutions such as commercial and investment
banks, savings and loan associations, and insurance companies. These
interests may take the form of participations, beneficial interests in a
trust, partnership interests or any other form of indirect ownership that
allows the Fund to treat the income from the investment as exempt from
federal income tax. The Fund invests in these participation interests in
order to obtain credit enhancement or demand features that would not be
available through direct ownership of the underlying Municipal Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities, and may be considered to be illiquid. They may take the
form of a lease, an installment purchase contract, a conditional sales
contract, or a participation interest in any of the above.
RATINGS. The Municipal Securities in which the Fund invests must either be rated
in one of the two highest short-term rating categories by one or more nationally
recognized statistical rating organizations ("NRSROs") or be of comparable
quality to securities having such ratings. A NRSRO's two highest rating
categories are determined without regard for sub-categories and gradations. For
example, securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's Corporation
("S&P"), MIG1 or MIG2 by Moody's Investors Service, Inc. ("Moody's"), or FIN-1+,
FIN-1 and FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all considered to
be rated in one of the two highest short-term rating categories. The Fund will
follow applicable regulations in determining whether a security rated by more
than one NRSRO can be treated as being in one of the two highest short-term
rating categories; currently, such
securities must be rated by two NRSROs in one of their two highest categories.
See "Regulatory Compliance."
CREDIT ENHANCEMENT. Certain of the Funds acceptable investments have been credit
enhanced by a guaranty, letter of credit or insurance. The Fund typically
evaluates the credit quality and ratings of credit enhanced securities based
upon the financial condition and ratings of the party providing the credit
enhancement (the "credit enhancer"), rather than the issuer. However, credit
enhanced securities will not be treated as having been issued by the credit
enhancer for diversification purposes, unless the Fund has invested more than
10% of its assets in securities issued, guaranteed or otherwise credit enhanced
by the credit enhancer, in which case the securities will be treated as having
been issued both by the issuer and the credit enhancer. The bankruptcy,
receivership or default of the credit enhancer will adversely affect the quality
and marketability of the underlying security.
The Fund may have more than 25% of its total assets invested in securities
credit enhanced by banks.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The Fund uses these arrangements to provide the Fund with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies but which are subject
to restrictions on resale under federal securities laws. Under criteria
established by the Board of Trustees, certain restricted securities are
considered liquid. To the extent that restricted securities are found to be
illiquid, the Fund will limit their purchase, together with other securities
considered to be illiquid, including municipal leases, to 10% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase short-term
municipal securities on a when-issued or delayed delivery basis. In when-issued
and delayed delivery transactions, the Fund relies on the seller to complete the
transaction. The seller's failure to complete the transaction may cause the Fund
to miss a price or yield considered to be advantageous.
MUNICIPAL SECURITIES. Municipal Securities are generally issued to finance
public works, such as airports, bridges, highways, housing, hospitals, mass
transportation projects, schools, streets, and water and sewer works. They are
also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.
Municipal Securities include industrial development bonds issued by or on behalf
of public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned
corporations. The availability of this financing encourages these corporations
to locate within the sponsoring communities and thereby increases local
employment.
The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
TEMPORARY INVESTMENTS. As a matter of investment policy which cannot be changed
without approval of shareholders, the Fund invests its assets so that at least
80% of its annual interest income is exempt from federal regular income tax.
However, from time to time on a temporary basis, or when the investment adviser
determines that market conditions call for a temporary defensive posture, the
Fund may invest in short-term tax-exempt or taxable temporary investments. These
temporary investments include: obligations issued by or on behalf of municipal
or corporate issuers having the same quality characteristics as municipal
securities purchased by the Fund; marketable obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities; instruments issued by a
U.S. branch of a domestic bank or other deposit institutions having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment; repurchase agreements (arrangements in which the organization
selling the Fund a temporary investment agrees at the time of sale to repurchase
it at a mutually agreed upon time and price); and prime commercial paper rated
A-1 by Standard & Poor's Corporation, Prime-1 by Moody's, or F-1 by Fitch and
other short-term credit instruments.
Although the Fund is permitted to make taxable temporary investments, there is
no current intention of generating income subject to federal regular income tax.
INVESTMENT RISKS
Yields on Municipal Securities depend on a variety of factors, including: the
general conditions of the short-term municipal note market and of the municipal
bond market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue. The ability of the Fund to achieve its
investment objective also depends on the continuing ability of the issuers of
Municipal Securities and demand features, or the guarantors of either, to meet
their obligations for the payment of interest and principal when due.
Litigation or legislation could affect the validity of certain municipal
securities or their tax-free interest. For example, litigation challenging the
validity of systems of financing public education has been initiated or
adjudicated in a number of states. The Fund will not investigate such
legislation or litigation unless it deems it necessary to do so. To the extent
that litigation or legislation has an adverse effect on the ratings ascribed to
a particular municipal security, there is some protection to the Fund's
shareholders from the Fund's policy of buying only high-rated securities.
NON-DIVERSIFICATION
The Fund is a non-diversified portfolio of an investment company. As such, there
is no limit on the percentage of assets which can be invested in any single
issuer. An investment in the Fund, therefore,
will entail greater risk than would exist in a diversified investment company
because the higher percentage of investments among fewer issuers may result in
greater fluctuation in the total market value of the Fund's portfolio. Any
economic, political, or regulatory developments affecting the value of the
securities in the Fund's portfolio will have a greater impact on the total value
of the portfolio than would be the case if the portfolio were diversified among
more issuers.
The Fund will attempt to minimize the risks associated with a non-diversified
portfolio so as not to impair its ability to stabilize its net asset value at
$1.00 per share by limiting, with respect to 75% of the Fund's total assets,
investments in one issuer to not more than 10% of the value of its total assets.
The total amount of the remaining 25% of the value of the Fund's total assets
could be invested in a single issuer if the investment adviser believes such a
strategy to be prudent. In addition, the Fund intends to comply with Subchapter
M of the Internal Revenue Code. This undertaking requires among other things,
that the aggregate value of all investments in any one issuer (except U.S.
government obligations, cash, and cash items) which exceed 5% of the Fund's
total assets not exceed 50% of the value of its total assets.
INVESTMENT LIMITATIONS
The Fund will not:
- borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge up
to 10% of the value of those assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder approval.
The following limitations, however, can be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations become effective.
The Fund will not:
- with respect to securities comprising 75% of its total assets, invest
more than 10% of its total assets in the securities of any one issuer
(other than cash or securities issued or guaranteed by the government of
the United States or its agencies or instrumentalities); nor
- invest more than 5% of the value of its total assets in securities of
issuers (or in the alternative, guarantors, where applicable) that have
records of less than three years of continuous operations.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its 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, as amended. In particular, the Fund
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. The Fund will also determine the effective maturity of its
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may change these operational policies to reflect changes in the laws and
regulations without the approval of its shareholders.
CASH TRUST SERIES II INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF CASH TRUST SERIES II
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees of
the Board of Trustees are responsible for managing the business affairs of the
Trust and for exercising all of the powers of the Trust except those reserved
for the shareholders. The Executive Committee of the Board of Trustees handles
the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Federated Advisers, the Fund's
investment adviser, subject to direction by the Trustees. The adviser
continually conducts investment research and supervision for the Fund and is
responsible for the purchase or sale of portfolio instruments, for which it
receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .50 of 1% of the Fund's average daily net assets. The adviser
may voluntarily choose to waive a portion of its fee or reimburse the Fund
for certain operating expenses. The adviser can terminate this voluntary
waiver of its advisory fee at any time and at its sole discretion. This
does not include reimbursement to the Fund of any expenses incurred by
shareholders who use the transfer agent's subaccounting facilities. The
adviser has also undertaken to reimburse the Fund for operating expenses in
excess of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Mary Jo Ochson has been the Fund's portfolio manager since November, 1990
(date of Fund's inception). Ms. Ochson joined Federated Investors in 1982
and has been a Vice President of the Fund's investment adviser since 1988.
Ms. Ochson served as an Assistant Vice President of the investment adviser
from 1984 until 1988. Ms. Ochson is a Chartered Financial Analyst and
received her M.B.A. in Finance from the University of Pittsburgh.
Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined risk averse investment
philosophy serve approxi-
mately 3,500 client institutions nationwide. Through these same client
institutions, individual shareholders also have access to this same level
of investment expertise.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. According to the provisions of a distribution plan adopted
pursuant to Investment Company Act Rule 12b-1, the distributor may select
financial institutions such as banks, fiduciaries, custodians for public funds,
investment advisers and brokers/dealers to provide distribution and/or
administrative services as agents for their clients or customers. Administrative
services may include, but are not limited to the following functions: providing
office space, equipment, telephone facilities, and various clerical,
supervisory, computer and other personnel as necessary or beneficial to
establish and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries regarding the Fund; assisting
clients in changing dividend options; account designations, and addresses; and
providing such other services as the Fund reasonably requests.
The distributor will pay financial institutions a fee based upon shares of the
Fund owned by their clients or customers. The schedules of such fees and the
basis upon which such fees will be paid will be determined from time to time by
the Board of Trustees of the Trust, provided that for any period the total
amount of fees representing an expense to the Trust shall not exceed an annual
rate of .20 of 1% of the average net asset value of shares of the Fund held
during the period by clients or customers of financial institutions. The current
annual rate of such fees is .20 of 1%. Any fees paid by the distributor with
respect to shares of the Fund pursuant to the distribution plan will be
reimbursed by the Trust from the assets of the Fund in accordance with the
previously agreed schedule of fees.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above or should Congress relax current restrictions on depository institutions,
the Board of Trustees will consider appropriate changes in the administrative
services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as brokers or dealers pursuant to state law.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Distribution Plan, certain financial
institutions may be compensated by the adviser or its affiliates for the
continuing investment of customers' assets in certain funds, including the Fund,
advised by those entities. These payments will be made directly by the
distributor or adviser from their assets, and will not be made from the assets
of the Fund or by the assessment of a sales load on shares.
Furthermore, the distributor may offer to pay a fee from its own assets to
financial institutions as financial assistance for providing substantial
marketing and sales support. The support may include
sponsoring sales, educational and training seminars for their employees,
providing sales literature, and engineering computer software programs that
emphasize the attributes of the Fund. Such assistance will be predicated upon
the amount of shares the financial institution sells or may sell, and/or upon
the type and nature of sales or marketing support furnished by the financial
institution. Any payments made by the distributor may be reimbursed by the
Fund's investment adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Trust.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of the Federated Funds as specified
below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
- --------------------- ------------------------------------
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 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 Administrative Services may choose voluntarily to receive a portion of
its fee.
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,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Fund, and
dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, and Dickstein, Shapiro & Morin, L.L.P. Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche, Boston, Massachusetts.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing its portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Fund, of
course, cannot guarantee that its net asset value will always remain at $1.00
per share.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange is open for
business. Shares of the Fund may be purchased through a financial institution
which has a sales agreement with the distributor or directly from the
distributor, Federated Securities Corp. The Fund reserves the right to reject
any purchase request.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase shares of
the Fund. Orders through a financial institution are considered received when
the Fund receives payment by wire or converts payment by check from the
financial institution into federal funds. It is the financial institution's
responsibility to transmit orders promptly.
DIRECTLY FROM THE DISTRIBUTOR. An investor may place an order to purchase shares
directly from the distributor. To do so: complete and sign the new account form
available from the Fund; enclose a check made payable to Municipal Cash Series
II; and mail both to Municipal Cash Series II, P.O. Box 8604, Boston, MA
02266-8604.
The order is considered received after the check is converted by the transfer
agent's bank, State Street Bank and Trust Company ("State Street Bank"), into
federal funds. This is generally the next business day after State Street Bank
receives the check.
To purchase shares of the Fund by wire, call the Fund. All information needed
will be taken over the telephone, and the order is considered received when
State Street Bank receives payment by wire. Federal funds should be wired as
follows: Federated Services Company, c/o State Street Bank and Trust Company,
Boston, Massachusetts 02266-8604; Attention: EDGEWIRE; For Credit to: Municipal
Cash Series II; Fund Number (this number can be found on the account statement
or by contacting the Fund); Group Number or Order Number; Nominee or Institution
Name; ABA Number 011000028. Shares cannot be purchased by wire on Columbus Day,
Veterans' Day, or Martin Luther King Day.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000, unless the investment is
in a retirement plan, in which case the minimum initial investment is $1,000.
Subsequent investments must be in amounts of at least $500. An institutional
investor's minimum investment will be calculated by averaging all accounts it
maintains with the Fund. The Fund may not be a suitable investment for
retirement plans since it invests in municipal securities.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order is
received. There is no sales load imposed by the Fund.
The net asset value is determined at 12:00 noon (Eastern time), 3:00 p.m.
(Eastern time), and 4:00 p.m. (Eastern time), Monday through Friday, except on:
(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no shares are tendered for redemption and no orders to
purchase shares are received; or (iii) the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. State Street Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts. However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent reserves the right to charge a fee based on the level of
subaccounting services rendered. Financial institutions holding Fund 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 provided which may be related
to the ownership of Fund shares. This prospectus should, therefore, be read
together with any agreement between the customer and the financial institution
with regard to the services provided, the fees charged for those services, and
any restrictions and limitations imposed.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $500. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Fund shares. A shareholder may apply for participation in this
program through his financial institution or directly through the Fund.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.
Monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Shares purchased by wire before
3:00 p.m. (Eastern time) earn dividends that day. Shares purchased by check
begin earning dividends on the next business day after the check is converted by
the transfer agent into federal funds. Unless shareholders request cash payments
on an application or by writing to Federated Securities Corp., dividends are
automatically reinvested on payment dates in additional shares of the Fund.
CAPITAL GAINS
Capital gains, if any, could result in an increase in dividends. Capital losses
could result in a decrease in dividends. If, for some extraordinary reason, the
Fund realizes net long-term capital gains, it will distribute them at least once
every 12 months.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemptions can be made through a financial
institution or directly from the Fund. Redemption requests must be received in
proper form.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem shares of the Fund by calling his financial institution
(such as a bank or an investment dealer) to request the redemption. Shares will
be redeemed at the net asset value next determined after the Fund receives the
redemption request from the financial institution. The financial institution is
responsible for promptly submitting redemption requests and providing proper
written redemption instructions to the Fund. The financial institution may
charge customary fees and commissions for this service. If, at any time, the
Fund shall determine it necessary to terminate or modify this method of
redemption, shareholders will be promptly notified.
Before a financial institution may request redemption by telephone on behalf of
a shareholder, an authorization form permitting the Fund to accept redemption
requests by telephone must first be completed. Telephone redemption instructions
may be recorded. In the event of drastic economic or market changes, a
shareholder may experience difficulty in redeeming by telephone. If such a case
should occur, another method of redemption, such as "By Mail," should be
considered.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
RECEIVING PAYMENT. Pursuant to instructions from the financial institution,
redemptions will be made by check or by wire.
BY CHECK. Normally, a check for the proceeds is mailed within one business
day, but in no event more than seven days, after receipt of a proper
redemption request. Dividends are paid up to and including the day that a
redemption request is processed.
BY WIRE. Proceeds for redemption requests received before 12:00 noon
(Eastern time) will be wired the same day but will not be entitled to that
day's dividend. Redemption requests received after 12:00 noon (Eastern
time) will receive that day's dividends and will be wired the following
business day.
DIRECTLY FROM THE FUND
BY MAIL. Any shareholder may redeem Fund shares by sending a written request to
Federated Services Company. The written request should include the shareholder's
name, the Fund name, the
account number, and the share or dollar amount requested. If share certificates
have been issued, they must be properly endorsed and should be sent by
registered or certified mail with the written request. Shareholders should
contact the Fund for assistance in redeeming by mail.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a redemption
request is processed.
Individual shareholders requesting a redemption of $50,000 or more, a redemption
of any amount to be sent to an address other than that on record with the Fund,
or a redemption payable other than to the shareholder of record must have
signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member firm of the New York, American, Boston, Midwest, or Pacific
Stock Exchanges;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Trust and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Trust and its transfer agent reserve the right
to amend these standards at any time without notice.
CHECKWRITING. At the shareholder's request, Federated Services Company will
establish a checking account for redeeming Fund shares. The cost for providing
this service will be $10.00 per year. With a Fund checking account, shares may
be redeemed simply by writing a check. The redemption will be made at the net
asset value on the date that Federated Services Company presents the check to
the Fund. A check may not be written to close an account. If a shareholder
wishes to redeem shares and have the proceeds available, a check may be written
and negotiated through the shareholder's bank. Checks should never be sent to
the transfer agent to redeem shares. Cancelled checks are sent to the
shareholder each month. For further information, contact the Fund.
DEBIT CARD. At the shareholder's request, a debit card is available. A fee may
be charged for this service. For further information, contact Federated
Securities Corp.
SYSTEMATIC WITHDRAWAL PROGRAM
If a shareholder's account has a value of at least $25,000, a Systematic
Withdrawal Program may be established whereby automatic redemptions are made
from the account and transferred electronically to any commercial bank, savings
bank, or credit union that is an Automated Clearing House ("ACH") member.
Depending upon the amount of the withdrawal payments and the amount of dividends
paid with respect to Fund Shares, redemptions may reduce, and eventually
deplete, the shareholder's investment in the Fund. For this reason, payments
under this program should not be considered as yield or income on the
shareholder's investment in the Fund. A shareholder may apply for participation
in this program through his financial institution.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$25,000 due to shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER 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 each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operation and for the election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument that the Trust or its
Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for obligations of
the Trust, the Trust is required 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 cannot meet its obligations to indemnify shareholders and pay
judgments against them from its assets.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
other portfolios of the Trust will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on some municipal bonds are included in
calculating the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.
The alternative minimum tax, up to 28% of alternative minimum taxable income for
individuals and 20% for corporations, applies when it exceeds the regular tax
for the taxable year. Alternative minimum taxable income is equal to the regular
taxable income of the taxpayer increased by certain "tax preference" items not
included in regular taxable income and reduced by only a portion of the
deductions allowed in the calculation of the regular tax.
The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons, and other public facilities, private
activity bonds provide benefits to private parties. The Fund may purchase all
types of municipal bonds, including private activity bonds. Thus, should it
purchase any such bonds, a portion of the Fund's dividends may be treated as a
tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund which
represent interest on municipal bonds will become subject to the 20% corporate
alternative minimum tax because the dividends are included in a corporation's
"adjusted current earnings." The corporate alternative minimum tax treats 75% of
the excess of a taxpayer's pre-tax "adjusted current earnings" over the
taxpayer's alternative minimum taxable income as a tax preference item.
"Adjusted current earnings" is based upon the concept of a corporation's
"earnings and profits." Since "earnings and profits" generally includes the full
amount of any Fund dividend, and alternative minimum taxable income does not
include the portion of the Fund's dividend attributable to municipal bonds which
are not private activity bonds, the difference will be included in the
calculation of the corporation's alternative minimum tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Fund:
- the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
- Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
OTHER STATE AND LOCAL TAXES
Distributions representing net interest received on tax-exempt municipal
securities are not necessarily free from income taxes of any state or local
taxing authority. State laws differ on this issue and shareholders are urged to
consult their own tax advisers.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its yield, effective yield and
tax-equivalent yield.
The yield of the Fund represents the annualized rate of income earned on an
investment in the Fund over a seven-day period. It is the annualized dividends
earned during the period on the investment shown as a percentage of the
investment. The effective yield is calculated similarly to the yield but, when
annualized, the income earned by an investment in the Fund is assumed to be
reinvested daily. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment. The
tax-equivalent yield of the Fund is calculated similarly to the yield, but is
adjusted to reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming a specific tax rate.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
MUNICIPAL CASH SERIES II
PORTFOLIO OF INVESTMENTS
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ------------------------------------------------------- --------- --------
- ----
<C> <S> <C> <C>
SHORT TERM MUNICIPAL SECURITIES--99.0%
- ---------------------------------------------------------------------
ALABAMA--5.3%
-------------------------------------------------------
$1,000,000 Abbeville and Mobile, AL, IDB Monthly VRDNs (Great
Southern Wood Preserving Co.)/(SouthTrust Bank of
Alabama LOC)/(Subject to AMT) A-1 $
1,000,000
-------------------------------------------------------
1,000,000 Birmingham, AL, IDA Weekly VRDNs (Altec Industries,
Inc.)/(Wachovia Bank of GA LOC)/(Subject to AMT) P-1
1,000,000
-------------------------------------------------------
3,000,000 Homewood, AL, IDB Weekly VRDNs (Mountain Brook,
Ltd.)/(SouthTrust Bank of Alabama LOC) P-1
3,000,000
-------------------------------------------------------
1,645,000 Mobile, AL, Downtown Redevelop Authority, 2.70% Annual
TOBs (Series 1992)/(Mitchell Project)/(Trust Company
Bank LOC)/(Subject to AMT), Mandatory Tender 12/1/94 P-1
1,645,000
-------------------------------------------------------
305,000 Muscle Shoals, AL, IDB Weekly VRDNs (Whitesell
Manufacturing)/(SouthTrust Bank of Alabama LOC)/
(Subject to AMT) P-1
305,000
------------------------------------------------------- --------
- ----
Total
6,950,000
------------------------------------------------------- --------
- ----
</TABLE>
<TABLE>
<C> <S> <C> <C>
ARKANSAS--0.8%
-------------------------------------------------------
1,000,000 City of Springdale, AR, Weekly VRDNs, (Newlywed Food
Project)/(Mellon Bank, Pittsburgh, LOC)/(Subject to
AMT) A-1
1,000,000
------------------------------------------------------- --------
- ----
CALIFORNIA--6.3%
-------------------------------------------------------
5,000,000 California School Cash Reserve Program Authority, 3.40%
TANs (Series 1993A)/(California School Boards Pooled
Loan Program), 7/5/94 SP-1+
5,002,259
-------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ------------------------------------------------------- --------- --------
- ----
<C> <S> <C> <C>
SHORT TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------
CALIFORNIA--CONTINUED
-------------------------------------------------------
$2,400,000 Riverside County, CA, IDA Weekly VRDNs (1991 Series
A)/(Golden West Homes Project)/(Wells Fargo Bank N.A.,
San Francisco LOC)/(Subject to AMT) VMIG-1 $
2,400,000
-------------------------------------------------------
1,000,000 Sacramento County, CA, Housing Authority, 3.10% TOBs
(Series 1992-A)/(Shadewood Apartments Project)/(General
Electric Capital Corp. LOC)/(Subject to AMT), Mandatory
Tender 12/1/94 A-1+
1,000,000
------------------------------------------------------- --------
- ----
Total
8,402,259
------------------------------------------------------- --------
- ----
COLORADO--2.2%
-------------------------------------------------------
3,000,000 Denver, (City & County), CO, Weekly VRDNs (Series
1992F)/(Bank of Montreal LOC)/(Subject to AMT) A-1+
3,000,000
------------------------------------------------------- --------
- ----
ILLINOIS--5.4%
-------------------------------------------------------
2,345,000 Illinois Development Finance Corp., Weekly VRDNs
(Olympic Steel)/(National City Bank, Cleveland LOC)/
(Subject to AMT) P-1
2,345,000
-------------------------------------------------------
4,720,000 Illinois HDA Weekly VRDNs (Series PT-7)/(Dai-Ichi
Kangyo Bank, Ltd. LOC)/(Subject to AMT) VMIG-1
4,720,000
------------------------------------------------------- --------
- ----
Total
7,065,000
------------------------------------------------------- --------
- ----
INDIANA--3.7%
-------------------------------------------------------
3,785,000 Avilla, IN, IDR Weekly VRDNs (Group Dekko
International, Inc.)/(Bank One, Indianapolis LOC) P-1
3,785,000
-------------------------------------------------------
1,070,000 Lawrence, IN, EDA Monthly VRDNs (H & H Steel)/
(Bank One, Indianapolis N.A. LOC)/(Subject to AMT) P-1
1,070,000
------------------------------------------------------- --------
- ----
Total
4,855,000
------------------------------------------------------- --------
- ----
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ------------------------------------------------------- --------- --------
- ----
<C> <S> <C> <C>
SHORT TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------
KENTUCKY--3.9%
-------------------------------------------------------
$1,000,000 Kentucky Pollution Abatement and Water Resources Daily
VRDNs (Toyota Motors Co. Guaranty)/(Subject to AMT) A-1+ $
1,000,000
-------------------------------------------------------
2,100,000 Kentucky Pollution Abatement and Water Resources Daily
VRDNs (Toyota Motors Co. Guaranty)/(Subject to AMT) A-1+
2,100,000
-------------------------------------------------------
2,000,000 Scottsville, KY, IDA, 3.50% Semi-Annual TOBs (Sumitomo
Electric Wiring Systems)/(Sumitomo Bank, Ltd. LOC),
Optional Tender 11/1/94 A-1
2,000,000
------------------------------------------------------- --------
- ----
Total
5,100,000
------------------------------------------------------- --------
- ----
LOUISIANA--2.1%
-------------------------------------------------------
2,750,000 East Baton Rouge, LA, SFM 2.90% Quarterly TOBs (Series
1994)/(Escrowed in Treasuries), Mandatory Tender
6/30/94 NR(1)
2,750,000
------------------------------------------------------- --------
- ----
MARYLAND--2.6%
-------------------------------------------------------
3,450,000 Anne Arundel County, MD, 2.60% CP (Series 1988)/
(Baltimore Gas & Electric Co.-Guaranty)/(Subject to
AMT), Mandatory Tender 7/20/94 VMIG-1
3,450,000
------------------------------------------------------- --------
- ----
MASSACHUSETTS--3.0%
-------------------------------------------------------
1,300,000 New Bedford, MA, 3.75% BANs (Fleet National Bank BPA),
8/12/94 P-1
1,302,390
-------------------------------------------------------
1,825,000 Worcester, MA, 3.25% BANs (Subject to AMT), 8/24/94 NR(4)
1,825,340
-------------------------------------------------------
845,000 Worcester, MA, 3.99% BANs (Lot B)/(Subject to AMT),
8/24/94 NR(4)
845,458
------------------------------------------------------- --------
- ----
Total
3,973,188
------------------------------------------------------- --------
- ----
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ------------------------------------------------------- --------- --------
- ----
<C> <S> <C> <C>
SHORT TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------
MINNESOTA--4.0%
-------------------------------------------------------
2,245,000 Minneapolis/St. Paul HS Finance Board Revenue Bond
(Series 88A), 2.80% Quarterly TOBs (Minn/St. Paul
Family Housing Program Phase V1)/(GNMA Collateralized)/
(Subject to AMT)/(Meridian Bank BPA), Optional Tender
8/1/94 NR(1)
2,245,000
-------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ------------------------------------------------------- --------- --------
- ----
<C> <S> <C> <C>
SHORT TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------
MINNESOTA--CONTINUED
-------------------------------------------------------
$1,500,000 Minnesota State Higher Education Coordinating Board
Weekly VRDNs (Student Loan Program)/(Subject to AMT) VMIG-1 $
1,500,000
-------------------------------------------------------
1,460,000 Plymouth, MN, Weekly VRDNs (Nuaire, Inc.)/(Norwest Bank
Minnesota LOC)/(Subject to AMT) P-1
1,460,000
------------------------------------------------------- --------
- ----
Total
5,205,000
------------------------------------------------------- --------
- ----
NEVADA--1.9%
-------------------------------------------------------
2,500,000 State of Nevada Department of Commerce, IDA Weekly
VRDNs (Smithey-Oasis Co. Project)/(Mellon Bank N.A.
LOC) P-1
2,500,000
------------------------------------------------------- --------
- ----
NEW HAMPSHIRE--6.7%
-------------------------------------------------------
4,500,000 New Hampshire Business Finance Authority, 2.95% (Annual
TOBs Pollution Control Revenue Bonds)/(New England
Power Co. Guaranty)/(Subject to AMT), Mandatory Tender
7/1/94 A-1
4,500,000
-------------------------------------------------------
2,300,000 New Hampshire HEFA Weekly VRDNs (Series 1994)/
(Colby-Sawyer College Issue)/(BayBank, MA LOC),
7/1/2014 P-2
2,300,000
-------------------------------------------------------
2,000,000 New Hampshire, IDA, 3.05% Semi-Annual TOBs (United
Illuminating Co.)/(Barclays Bank PLC LOC)/(Subject to
AMT), Mandatory Tender 9/1/94 A-1+
2,000,000
------------------------------------------------------- --------
- ----
Total
8,800,000
------------------------------------------------------- --------
- ----
NEW JERSEY--1.5%
-------------------------------------------------------
1,975,000 Pennsuaken Township, NJ, 4.00% BANs, 1/10/95 NR
1,976,736
------------------------------------------------------- --------
- ----
NEW YORK--1.5%
-------------------------------------------------------
2,000,000 Longwood Central School District, NY, 3.25% TANs,
6/30/94 NR
2,000,230
------------------------------------------------------- --------
- ----
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ------------------------------------------------------- --------- --------
- ----
<C> <S> <C> <C>
SHORT TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------
NORTH CAROLINA--2.7%
-------------------------------------------------------
$1,680,000 Burke Co., NC, IDA PCR Weekly VRDNs (Norwalk Furniture
& Hickory Furniture Corp.)/(Branch Banking & Trust
LOC)/(Subject to AMT) P-1 $
1,680,000
-------------------------------------------------------
1,000,000 Halifax County, NC, Industrial Facilities & Pollution
Control Financing Authority Daily VRDNs (Series 1993)/
(Westmoreland-LG&E Partners)/(Credit Suisse LOC)/
(Subject to AMT) A-1+
1,000,000
-------------------------------------------------------
850,000 Orange County, NC, Industrial Facilities & PCA Weekly
VRDNs (Mebene Packaging Corp.)/(First Union National
Bank LOC)/(Subject to AMT) A-1
850,000
------------------------------------------------------- --------
- ----
Total
3,530,000
------------------------------------------------------- --------
- ----
OKLAHOMA--4.1%
-------------------------------------------------------
1,400,000 Broken Arrow, OK, EDA Weekly VRDNs (Blue Bell
Creameries, Inc.)/(Banque Nationale de Paris LOC) VMIG-1
1,400,000
-------------------------------------------------------
4,000,000 Southeastern OK, Industries Authority, Weekly VRDNs
Solid Waste Revenue Bonds (Weyerhauser, Inc. Guaranty)/
(Subject to AMT) A-1
4,000,000
------------------------------------------------------- --------
- ----
Total
5,400,000
------------------------------------------------------- --------
- ----
PENNSYLVANIA--8.0%
-------------------------------------------------------
1,600,000 Allegheny County, PA, IDA, PCR, 3.35% CP (USX, Inc.)/
(Long Term Credit Bank of Japan, Ltd. LOC), Mandatory
Tender 8/11/94 A-2
1,600,000
-------------------------------------------------------
5,000,000 Clinton County, PA, IDA Solid Waste Disposal Revenue
Bonds, 2.90% Annual TOBs (Series 1992A)/(International
Paper Co. Guaranty)/(Subject to AMT), Option Tender
1/15/95 A-2
5,000,000
-------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ------------------------------------------------------- --------- --------
- ----
<C> <S> <C> <C>
SHORT TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
-------------------------------------------------------
$1,950,000 Pennsylvania, EDA Weekly VRDNs (Series G1)/
(Cyrogenics, Inc.)/(PNB, Pittsburgh LOC)/(Subject to
AMT) P-1 $
1,950,000
-------------------------------------------------------
800,000 Pennsylvania, EDA Weekly VRDNs (Series F)/(Respironics,
Inc.)/(Pittsburgh National Bank LOC)/(Subject to AMT) P-1
800,000
-------------------------------------------------------
1,225,000 Philadelphia, PA, IDA, 3.00% Annual TOBs (Economy Inn
Project)/(Bank of Tokyo, Ltd. LOC), 7/1/94 P-1
1,225,000
------------------------------------------------------- --------
- ----
Total
10,575,000
------------------------------------------------------- --------
- ----
SOUTH CAROLINA--4.6%
-------------------------------------------------------
6,000,000 South Carolina Ports Authority Weekly VRDNs (Series
1994)/(South Carolina National Bank LOC)/(Subject to
AMT) A-1+
6,000,000
------------------------------------------------------- --------
- ----
TENNESSEE--1.4%
-------------------------------------------------------
1,000,000 Cocke County, TN, IDR Weekly VRDNs (GCI Inc.)/(Sanwa
Bank Ltd. LOC)/(Subject to AMT) P-1
1,000,000
-------------------------------------------------------
900,000 Paris City, TN, IDB Weekly VRDNs (Plumley-Mareigo,
Ltd.)/(Citizens Fidelity Bank LOC)/(Subject to AMT) P-1
900,000
------------------------------------------------------- --------
- ----
Total
1,900,000
------------------------------------------------------- --------
- ----
TEXAS--12.2%
-------------------------------------------------------
3,000,000 Brazos River, TX, PCR 3.35% Reference Bonds (Series
1994B)/(Texas Utilities Electric Co.)/(Canadian
Imperial Bank of Commerce, LOC)/(Subject to AMT),
Mandatory Tender 9/15/94 A-1+
3,000,000
-------------------------------------------------------
3,130,000 Brazos River, TX, Harbor Navigation District, 3.05%
(Dow Chemical Co.-Guaranty)/(Subject to AMT), Mandatory
Tender 8/26/94 P-1
3,130,000
-------------------------------------------------------
3,000,000 Galveston, TX, IDC Weekly VRDNs (Series 1993)/(National
Westminster Bank, PLC LOC)/(Subject to AMT) A-1+
3,000,000
-------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ------------------------------------------------------- --------- --------
- ----
<C> <S> <C> <C>
SHORT TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------
TEXAS--CONTINUED
-------------------------------------------------------
$1,900,000 Harris County, TX, IDA Weekly VRDNs (Precision General,
Inc.)/(Morgan Guaranty Trust Co., New York LOC)/
(Subject to AMT) A-1+ $
1,900,000
-------------------------------------------------------
4,000,000 Harris County, TX, IDC 3.40% CP (Series 1987)/(Exxon
Corp.-Guaranty)/(Subject to AMT), Mandatory Tender
10/18/94 P-1
4,000,000
-------------------------------------------------------
1,000,000 Lubbock, TX, IDC Daily VRDNs (McLand Co., Inc.)/
(Nations Bank of Florida & Nations Bank of North
Carolina N.A. LOCs)/(Subject to AMT) A-1
1,000,000
------------------------------------------------------- --------
- ----
Total
16,030,000
------------------------------------------------------- --------
- ----
UTAH--1.5%
-------------------------------------------------------
2,000,000 Tooele County, UT, 3.30%, Waste Management (Union
Pacific Corp.-Guaranty)/(Subject to AMT), Mandatory
Tender 10/17/94 A-1
2,000,000
------------------------------------------------------- --------
- ----
VIRGINIA--7.0%
-------------------------------------------------------
500,000 Greensville County, VA, IDA Weekly VRDNs (Purdue Farms,
Inc.)/(Morgan Guaranty Trust Co., New York
LOC)/(Subject to AMT) A-1+
500,000
-------------------------------------------------------
1,555,000 Richmond, VA, Redevelopment and Housing Authority
Weekly VRDNs (Series B-6)/(Tobacco Row)/(Bayerische
Landesbank, Munich LOC)/(Subject to AMT) A-1+
1,555,000
-------------------------------------------------------
3,200,000 Richmond, VA, Redevelopment and Housing Authority
Weekly VRDNs (Series B)/(Tobacco Row)/(Bayerische
Landesbank, Munich, LOC)/(Subject to AMT) VMIG1
3,200,000
-------------------------------------------------------
4,000,000 Virginia State Housing Development Authority, 2.80%
Annual TOBs (1993 Series I)/(Subject to AMT), Mandatory
Tender 11/4/94 A-1+
4,000,000
------------------------------------------------------- --------
- ----
Total
9,255,000
------------------------------------------------------- --------
- ----
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
- ---------- ------------------------------------------------------- --------- --------
- ----
<C> <S> <C> <C>
SHORT TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------
WISCONSIN--6.6%
-------------------------------------------------------
$3,150,000 Germantown, WI, IDA Weekly VRDNs (Zenith Sintered
Products Inc.)/(Bank One, Milwaukee LOC)/(Subject to
AMT) P-1 $
3,150,000
-------------------------------------------------------
2,100,000 Plover Village, WI, Weekly VRDNs (Series 1994)/(Sirco
Manufacturing, Inc.)/(Norwest Bank, Minneapolis LOC)/
(Subject to AMT) P-1
2,100,000
-------------------------------------------------------
2,000,000 Plymouth, WI, IDA Weekly VRDNs (Great Lakes Cheese
of Wisconsin Project)/(Rabobank Nederland LOC)/
(Subject to AMT) P-1
2,000,000
-------------------------------------------------------
1,440,000 West Allis, WI, IDR 3.50% Semi-Annual TOBs (Renaisance
Faire Limited Partnership Project)/(American National
Bank, Chicago LOC)/(Subject to AMT), Optional Tender
7/1/94 P-1
1,440,000
------------------------------------------------------- --------
- ----
Total
8,690,000
------------------------------------------------------- --------
- ----
TOTAL INVESTMENTS, AT AMORTIZED COST (NOTE 2A)
$130,407,413+
------------------------------------------------------- --------
- ----
</TABLE>
+ Also represents cost for federal tax purposes.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($131,769,686)
at May 31, 1994.
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMT -- Alternative Minimum Tax
BANs -- Bond Anticipation Notes
BPA -- Bond Purchase Agreement
CP -- Commercial Paper
EDA -- Economic Development Authority
GNMA -- Government National Mortgage Association
HDA -- Hospital Development Authority
HEFA -- Health and Education Facilities Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDC -- Industrial Development Corporation
IDR -- Industrial Development Revenue
LOC -- Letter of Credit
PCA -- Pollution Control Authority
PCR -- Pollution Control Revenue
SFM -- Single Family Mortgage
TANs -- Tax Anticipation Notes
TOBs -- Tender Option Bonds
VRDNs -- Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES II
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------
Investments, at amortized cost and value (Note 2A)
$130,407,413
- -------------------------------------------------------------------------------
Cash
570,753
- -------------------------------------------------------------------------------
Interest receivable
895,102
- -------------------------------------------------------------------------------
Receivable for fund shares sold
18,129
- -------------------------------------------------------------------------------
Deferred expenses (Note 2E)
40,006
- ------------------------------------------------------------------------------- ----------
- --
Total assets
131,931,403
- -------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------
Dividends payable $102,014
- --------------------------------------------------------------------
Accrued expenses 59,703
- -------------------------------------------------------------------- --------
Total liabilities
161,717
- ------------------------------------------------------------------------------- ----------
- --
NET ASSETS, for 131,769,686 shares of beneficial interest outstanding
$131,769,686
- ------------------------------------------------------------------------------- ----------
- --
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($131,769,686 / 131,769,686 shares of beneficial interest outstanding)
$1.00
- ------------------------------------------------------------------------------- ----------
- --
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES II
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest income (Note 2B)
$3,465,232
- ----------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------
Investment advisory fee (Note 4) $ 626,848
- ---------------------------------------------------------------------
Distribution fees (Note 4) 250,282
- ---------------------------------------------------------------------
Trustees' fees 4,071
- ---------------------------------------------------------------------
Administrative personnel and services fees (Note 4) 246,535
- ---------------------------------------------------------------------
Custodian and portfolio accounting fees 53,871
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees (Note 4) 26,374
- ---------------------------------------------------------------------
Fund share registration costs 75,629
- ---------------------------------------------------------------------
Auditing fees 14,615
- ---------------------------------------------------------------------
Legal fees 10,312
- ---------------------------------------------------------------------
Printing and postage 11,686
- ---------------------------------------------------------------------
Insurance premiums 7,094
- ---------------------------------------------------------------------
Miscellaneous 9,253
- --------------------------------------------------------------------- ----------
Total expenses 1,336,570
- ---------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 346,147
- --------------------------------------------------------------------- ----------
Net expenses
990,423
- ---------------------------------------------------------------------------------- -------
- ---
Net investment income
$2,474,809
- ---------------------------------------------------------------------------------- -------
- ---
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES II
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-----------------------------
- ---
1994 1993
--------------- ----------
- ---
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------
Net investment income $ 2,474,809 $
2,674,468
- ------------------------------------------------------------- --------------- ----------
- ---
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2B)--
- -------------------------------------------------------------
Dividends to shareholders from net investment income (2,474,809)
(2,674,468)
- ------------------------------------------------------------- --------------- ----------
- ---
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- -------------------------------------------------------------
Proceeds from sale of shares 1,279,506,572
787,537,022
- -------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 2,011,384
2,050,356
- -------------------------------------------------------------
Cost of shares redeemed (1,254,311,439)
(750,651,239)
- ------------------------------------------------------------- --------------- ----------
- ---
Change in net assets from Fund share transactions 27,206,517
38,936,139
- ------------------------------------------------------------- --------------- ----------
- ---
Change in net assets 27,206,517
38,936,139
- -------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------
Beginning of period 104,563,169
65,627,030
- ------------------------------------------------------------- --------------- ----------
- ---
End of period $ 131,769,686 $
104,563,169
- ------------------------------------------------------------- --------------- ----------
- ---
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES II
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Cash Trust Series II (the "Trust") is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The Trust
consists of two portfolios, one diversified and one non-diversified. The
Financial statements included herein present only those of the non-diversified
portfolio, Municipal Cash Series II (the "Fund"). The financial statements of
the other portfolio 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.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Investment
Company Act of 1940.
B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount are amortized as required by the
Internal Revenue Code, as amended ("Code"). Distributions to shareholders are
recorded on the ex-dividend date.
C. 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 tax-exempt income.
Accordingly, no provision for federal tax is necessary.
D. 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 in the settlement date.
E. DEFERRED EXPENSES--The costs incurred by the Fund with respect to the
registration of its shares in its first fiscal year, excluding the initial
expenses of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from the
Fund's commencement date.
F. OTHER--Investment transactions are accounted for on the trade date.
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At May
31, 1994, capital paid in aggregated $131,769,686. Transactions in Fund shares
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
----------------------------
- ----
1994 1993
- -------------------------------------------------------------- -------------- ----------
- ----
<S> <C> <C>
Shares sold 1,279,506,572
787,537,022
- --------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 2,011,384
2,050,356
- --------------------------------------------------------------
Shares redeemed (1,254,311,439)
(750,651,239)
- -------------------------------------------------------------- -------------- ----------
- ----
Net change resulting from fund share transactions 27,206,517
38,936,139
- -------------------------------------------------------------- -------------- ----------
- ----
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser
("Adviser"), receives for its services an annual investment advisory fee equal
to 0.50 of 1% of the Fund's average daily net assets. Adviser may voluntarily
choose to waive a portion of its fee. Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE-- Federated Administrative Services ("FAS") provides the Fund
with administrative personnel and services. Prior to March 1, 1994, these
services were provided at approximate cost. Effective March 1, 1994, the fee is
based on the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during any fiscal year shall by at least $125,000 per portfolio and
$30,000 per each additional class of shares.
DISTRIBUTION FEE--The Fund has adopted a Distribution Plan (the "Plan") pursuant
to Rule 12b-1 under the Investment Company Act of 1940. Under the terms of the
Plan the Fund will reimburse Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's shares. The Plan provides that the Fund may
incur distribution expenses up to 0.20 of 1% of the average daily net assets of
the shares, annually, to reimburse the distributor.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. The fee
is based on the size, type and number of accounts and transactions made by
shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses ($18,628) and start-up
administrative service expenses ($82,502) were borne initially by FAS. The Fund
has agreed to reimburse FAS at an annual rate of .005 of 1% of average daily net
assets and .01 of 1% of average daily net assets for organizational and start-up
administrative expenses, respectively, until expenses initially borne by FAS are
fully reimbursed or the expiration of five years after January 25, 1991 the date
the Fund's portfolio first
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
became effective, whichever occurs earlier. For the year ended May 31, 1994, the
Fund paid FAS $6,204 and $12,409, respectively, pursuant to this agreement.
During the year ended May 31, 1994, the Fund engaged in purchase and sale
transactions with other affiliated funds pursuant to Rule 17a-7 of the
Investment Company Act of 1940 amounting to $420,200,000 and $471,247,120,
respectively. These purchases and sales were conducted on an arms length basis
and transacted for cash consideration only, at independent current market prices
and without brokerage commissions, fees or other remuneration.
Certain of the Officers and Directors of the Fund are Officers and Directors or
Trustees of the above companies.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees of
CASH TRUST SERIES II and
Shareholders of MUNICIPAL CASH SERIES II:
We have audited the accompanying statement of assets and liabilities of
Municipal Cash Series II (one of the portfolios comprising Cash Trust Series
II), including the portfolio of investments, as of May 31, 1994, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended May 31, 1994 and 1993 and the financial highlights
(see page 2 of the prospectus) for each of the years in the four-year period
ended May 31, 1994. 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 audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
May 31, 1994 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Municipal Cash
Series II as of May 31, 1994, 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
Boston, Massachusetts
July 8, 1994
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Fund
Municipal Cash Series II Federated Investors Tower
Pittsburgh, Pennsylvania 15222-
3779
- ---------------------------------------------------------------------------------------------
- ---
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-
3779
- ---------------------------------------------------------------------------------------------
- ---
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-
3779
- ---------------------------------------------------------------------------------------------
- ---
Custodian
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266-8604
- ---------------------------------------------------------------------------------------------
- ---
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-
3779
- ---------------------------------------------------------------------------------------------
- ---
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------
- ---
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------
- ---
Independent Auditors
Deloitte & Touche 125 Summer Street
Boston, Massachusetts 02110-1617
- ---------------------------------------------------------------------------------------------
- ---
</TABLE>
MUNICIPAL CASH SERIES II
(A PORTFOLIO OF CASH TRUST SERIES II)
PROSPECTUS
A Non-Diversified Portfolio of
Cash Trust Series II, An Open-End
Management Investment Company
July 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
147552103
0111205A (7/94)
MUNICIPAL CASH SERIES II
(A PORTFOLIO OF CASH TRUST SERIES II)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
Municipal Cash Series II
(the "Fund") dated July 31, 1994. This Statement is not a prospectus itself. To
receive a copy of the
prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated July 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
When-Issued and Delayed
Delivery Transactions 1
Temporary Investments 1
Investment Limitations 2
CASH TRUST SERIES II MANAGEMENT 4
- ---------------------------------------------------------------
Officers and Trustees 4
The Funds 5
Fund Ownership 6
Trustee Liability 6
INVESTMENT ADVISORY SERVICES 6
- ---------------------------------------------------------------
Adviser to the Fund 6
Advisory Fees 6
ADMINISTRATIVE SERVICES 7
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 7
- ---------------------------------------------------------------
PURCHASING SHARES 7
- ---------------------------------------------------------------
DISTRIBUTION OF FUND SHARES 7
- ---------------------------------------------------------------
Distribution Plan 7
Shareholder Servicing Arrangements 8
DETERMINING NET ASSET VALUE 8
- ---------------------------------------------------------------
Use of the Amortized Cost Method 8
REDEEMING SHARES 9
- ---------------------------------------------------------------
Redemption in Kind 9
TAX STATUS 9
- ---------------------------------------------------------------
The Fund's Tax Status 9
YIELD 10
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TAX-EQUIVALENT YIELD 10
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Tax-Equivalency Table 10
EFFECTIVE YIELD 11
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 11
- ---------------------------------------------------------------
APPENDIX 12
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in Cash Trust Series II (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of Trust dated
November 14, 1990.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide current income which is exempt
from federal regular income tax consistent with stability of principal.
This investment objective cannot be changed without approval of shareholders.
The investment policies described below may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
TYPES OF INVESTMENTS
The Fund invests primarily in debt obligations issued by or on behalf of states,
territories and possessions of the United States, including the District of
Columbia, and any political subdivision or financing authority of any of these,
the income from which is, in the opinion of qualified legal counsel, exempt from
federal regular income tax ("Municipal Securities"). The Fund invests primarily
in municipal securities with remaining maturities of thirteen months or less at
the time of purchase by the Fund.
When determining whether a Municipal Security presents minimal credit risks, the
investment adviser considers the creditworthiness of: 1) the issuer of a
Municipal Security, 2) the issuer of a demand feature if the Fund has the
unconditional right to demand payment for the Municipal Securities, or 3) any
guarantor of payment by either of those issuers.
The Fund is not required to sell a municipal security if the security's rating
is reduced below the required minimum subsequent to the Fund's purchase of the
security. The investment adviser considers this event, however, in its
determination of whether the Fund should continue to hold the security in its
portfolio. If ratings made by Moody's Investors Service, Inc., Standard & Poor's
Corporation and Fitch Investors Service, Inc. change because of changes in those
organizations or in their rating systems, the Fund will try to use comparable
ratings as standards in accordance with the investment policies described in the
Fund's prospectus.
MUNICIPAL LEASES
The Fund may purchase Municipal Securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or
the nature of the appropriation for the lease. In particular, lease
obligations may be subject to periodic appropriation. If the entity does
not appropriate funds for future lease payments, the entity cannot be
compelled to make such payments. Furthermore, a lease may provide that
the participants cannot accelerate lease obligations upon default. The
participants would only be able to enforce lease payments as they became
due. In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, and not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or expenses, other than normal transaction costs, are incurred. However,
liquid assets of the Fund sufficient to make payment for the securities to be
purchased are segregated on the Fund's records at the trade date. These
securities are marked to market daily and maintained until the transaction has
been settled. The Fund may engage in these transactions to an extent that would
cause the segregation of an amount up to 20% of the total value of its assets.
TEMPORARY INVESTMENTS
The Fund may also invest in high quality temporary investments for defensive
purposes and to maintain liquidity.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers,
and other recognized financial institutions sell U.S. government
securities or certificates of deposit to the Fund and agree at the time
of sale
- --------------------------------------------------------------------------------
to repurchase them at a mutually agreed upon time and price. The Fund or
its custodian will take possession of the securities subject to
repurchase agreements and these securities will be marked to market
daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. In the event that such a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody
of the Fund's portfolio securities subject to repurchase agreements, a
court of competent jurisdiction would rule in favor of the Fund and allow
retention or disposition of such securities. The Fund may only enter into
repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are deemed by the Fund's
adviser to be creditworthy pursuant to guidelines established by the
Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This
transaction is similar to borrowing cash. In a reverse repurchase
agreement the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Fund will repurchase
the portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate.
The use of reverse repurchase agreements may enable the Fund to avoid
selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but the ability to enter into reverse repurchase
agreements does not ensure that the Fund will be able to avoid selling
portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated on the Fund's records at the trade date. These
securities are marked to market daily and maintained until the
transaction is settled.
From time to time, such as when suitable municipal securities are not available,
the Fund may invest a portion of its assets in cash. Any portion of the Fund's
assets maintained in cash will reduce the amount of assets in municipal
securities and thereby reduce the Fund's yield.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements in amounts up to
one third of the value of its total assets, including the amount
borrowed. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while
borrowings in excess of 5% of the value of its total assets are
outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In these cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
10% of the value of total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may acquire
publicly or non-publicly issued municipal securities or temporary
investments or enter into repurchase agreements, in accordance with its
investment objective, policies, limitations or Declaration of Trust.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate including limited
partnership interests, although it may invest in municipal securities of
issuers whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or interests in real estate.
- --------------------------------------------------------------------------------
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of the value of its total assets would be invested in any one
industry or in industrial development bonds or other securities, the
interest upon which is paid from revenues of similar types of projects.
However, the Fund may invest as temporary investments 25% or more of the
value of its assets in cash or cash items, securities issued or
guaranteed by the U.S. government, its agencies, or instrumentalities, or
instruments secured by these money market instruments, such as repurchase
agreements.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
securities subject to restrictions on resale under the Securities Act of
1933, except for certain restricted securities which meet the criteria
for liquidity as established by the Trustees.
INVESTING IN ANY ONE ISSUER
With respect to securities comprising 75% of its assets, the Fund will
not invest more than 10% of its total assets in the securities of any one
issuer.
Under this limitation, each governmental subdivision, including states
and the District of Columbia, territories, possessions of the United
States, or their political subdivisions, agencies, authorities,
instrumentalities, or similar entities, will be considered a separate
issuer if its assets and revenues are separate from those of the
governmental body creating it and the security is backed only by its own
assets and revenues.
Industrial development bonds, backed only by the assets and revenues of a
nongovernmental user, are considered to be issued solely by that user. If
in the case of an industrial development bond or governmental-issued
security, a governmental or some other entity guarantees the security,
such guarantee would be considered a separate security issued by the
guarantor as well as the other issuer, subject to limited exclusions
allowed by the Investment Company Act of 1940.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement more than seven days after notice, and certain restricted
securities not determined by the Trustees to be liquid.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies
except as part of a merger, consolidation, reorganization or other
acquisition.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
industrial development bonds where the principal and interest are the
responsibility of companies (or in the alternative, guarantors, where
applicable) with less than three years of continuous operations,
including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together own
more than 5% of the issuer's securities.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases although it may invest in
the securities of issuers which invest in or sponsor such programs.
- --------------------------------------------------------------------------------
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 violation of such
restriction.
The Fund does not expect to borrow money, pledge securities or invest in
restricted securities in excess of 5% of the value of its net assets during the
coming fiscal year.
For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings and loan having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items."
CASH TRUST SERIES II MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Advisers,
Federated Investors, Federated Securities Corp., Federated Services Company,
Federated Administrative Services, and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
John F. Donahue*+ Chairman and Chairman and Trustee, Federated Investors; Chairman and Trustee, Federated
Federated Investors Trustee Advisers, Federated Management, and Federated Research; Director, AEtna Life
Tower and Casualty Company; Chief Executive Officer and Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds; formerly, Director, The Standard Fire
Insurance Company. Mr. Donahue is the
father of J. Christopher Donahue, Vice
President and Trustee of the Trust.
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice President, John R.
Wood/IPC Commercial Wood and Associates, Inc., Realtors; President, Northgate Village
Department Development Corporation; General Partner or Trustee in private real estate
John R. Wood and Associates, ventures in Southwest Florida; Director, Trustee or Managing General Partner
Inc., Realtors of the Funds; formerly, President, Naples Property Management, Inc.
3255 Tamiami Trail, North
Naples, FL
- ---------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc.;
One PNC Plaza- Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
23rd Floor Chairman and Director, PNC Financial Corp and Director, Ryan Homes, Inc.
Pittsburgh, PA
- ---------------------------------------------------------------------------------------------
J. Christopher Donahue* Vice President President and Trustee, Federated Investors; President and Trustee, Federated
Federated Investors and Trustee Advisers, Federated Management, and Federated Research; Trustee, Federated
Tower Services Company, President and Trustee, Federated Administrative Services,
Pittsburgh, PA President or Vice President of the Funds; Director, Trustee or Managing
General Partner of some of the Funds. Mr. Donahue is the son of John F.
Donahue, Chairman and Trustee of the Trust.
- ---------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Concord, MA Cross of Massachusetts, Inc.
- --------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals, Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee or Managing General Partner of the Funds.
Pittsburgh, PA
- ---------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat 'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
- ---------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts; Director,
225 Franklin Street Trustee or Managing General Partner of the Funds; formerly, President, State
Boston, MA Street Bank & Trust Company and State Street Boston Corporation and Trustee,
Lahey Clinic Foundation, Inc.
- ---------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Eat 'N Park Restaurants, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice Chairman, Horizon Financial,
F.A.
- ---------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace, RAND Corporation, Online Computer Library
Learning Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak Management
University of Pittsburgh Center; Director, Trustee, or Managing General Partner of the Funds;
Pittsburgh, PA President Emeritus, University of Pittsburgh; formerly, Chairman, National
Advisory Council for Environmental Policy
& Technology.
- ---------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds. Pittsburgh, PA
- ---------------------------------------------------------------------------------------------
Richard B. Fisher President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Director, Federated Securities Corp.; President or Vice President of the
Tower Funds; Director or Trustee of some of the Funds.
Pittsburgh, PA
- ---------------------------------------------------------------------------------------------
Edward C. Gonzales Vice President Vice President, Treasurer and Trustee, Federated Investors; Vice President
Federated Investors and Treasurer and Treasurer, Federated Advisers, Federated Management, and Federated
Tower Research; Executive Vice President, Treasurer and Director, Federated
Pittsburgh, PA Securities Corp.; Chairman, Treasurer, and Trustee, Federated Administrative
Services; Trustee or Director of some of the Funds; Vice President and
Treasurer of the Funds.
- ---------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel and Trustee, Federated Investors;
Federated Investors and Secretary Vice President, Secretary and Trustee, Federated Advisers, Federated
Tower Management, and Federated Research; Trustee, Federated Services Company;
Pittsburgh, PA Executive Vice President, Secretary and Trustee, Federated Administrative
Services, Director and Executive Vice President, Federated Securities Corp.;
Vice President and Secretary of the Funds.
- ---------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Fund or the Trust
as defined in the Investment Company Act of 1940.
+ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
THE FUNDS
"The Funds", and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport
- --------------------------------------------------------------------------------
Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated Growth Trust; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Intermediate Government Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Intermediate Government Trust;
Federated Short-Term U.S. Government Trust; Federated Stock Trust; Federated
Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority Funds; Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S.
Government Securities, Inc.; Government Income Securities, Inc.; High Yield Cash
Trust; Insight Institutional Series, Inc.; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Term Trust, Inc.-1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain Funds;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; New York Municipal Cash Trust; 111
Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of July 3, 1994, the following shareholders of record owned 5% or more of the
outstanding shares of the Fund: Administaff Inc., Kingwood, Texas, owned
approximately 9,793,285 shares (8.9%); KAW&Co., Charleston, West Virginia, owned
approximately 12,076,078 shares (11%); and Jerral W. Jones, Irving, Texas, owned
approximately 13,275,706 shares (12%).
TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All of the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife, and his
son, J. Christopher Donahue. John F. Donahue, Chairman and Trustee of Federated
Advisers, is Chairman and Trustee of Federated Investors, and Chairman and
Trustee of the Trust. J. Christopher Donahue, President and Trustee of Federated
Advisers, is President and Trustee of Federated Investors, President and Trustee
of Federated Administrative Services, Trustee, Federated Services Company, and
Vice President and Trustee of the Trust. John W. McGonigle, Vice President,
Secretary and Trustee of Federated Advisers, is Trustee, Vice President,
Secretary, and General Counsel of Federated Investors, Executive Vice President,
Secretary, and Trustee of Federated Administrative Services, Director and
Executive Vice President of Federated Securities Corp., Trustee, Federated
Services Company, and Vice President and Secretary of the Trust.
The adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.
For the years ended May 31, 1994, 1993, and 1992, the Fund's adviser earned
$626,848, $599,682, and $322,465, respectively, of which $346,147, $599,389, and
$322,465 were voluntarily waived.
STATE EXPENSE LIMITATION
The adviser has undertaken to comply with the expense limitation
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
- --------------------------------------------------------------------------------
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes and extraordinary expenses) exceed
2 1/2% per year of the first $30 million of average net assets, 2% per
year of the next $70 million of average net assets, and 1 1/2% per year
of the remaining average net assets, the adviser will reimburse the Fund
for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this expense
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Fund's administrator.
(For purposes of this Statement of Additional Information, Federated
Administrative Services and Federated Administrative Services, Inc., may
hereinafter collectively be referred to as, the "Administrators".) For the
fiscal year ended May 31, 1994, the Administrators collectively earned $246,535.
For the fiscal years ended May 31, 1993, and 1992, Federated Administrative
Services, Inc., earned $240,232, and $162,176, respectively. Dr. Henry J.
Gailliot, an officer of Federated Advisers, the adviser to the Fund, holds
approximately 20% of the outstanding common stock and serves as a director of
Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services, Inc., and Federated
Administrative Services.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Board of Trustees.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the adviser
and may include:
- - advice as to the advisability of investing in securities;
- - security analysis and reports;
- - economic studies;
- - industry studies;
- - receipt of quotations for portfolio evaluations; and
- - similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales load on days the New
York Stock Exchange is open for business. The procedure for purchasing shares of
the Fund is explained in the prospectus under "Investing in the Fund."
DISTRIBUTION OF FUND SHARES
- --------------------------------------------------------------------------------
DISTRIBUTION PLAN
The Trust has adopted a Plan pursuant to Rule 12b-1 under the Investment Company
Act of 1940. The Plan permits the payment of fees to brokers for distribution
and administrative services and to administrators for administrative services.
- --------------------------------------------------------------------------------
The Plan is designed to (i) stimulate brokers to provide distribution and
administrative support services to the Fund and its shareholders and (ii)
stimulate administrators to render administrative support services to the Fund
and its shareholders. The administrative services are provided by a
representative who has knowledge of the shareholder's particular circumstances
and goals, and include, but are not limited to: communicating account openings;
communicating account closings; entering purchase transactions; entering
redemption transactions; providing or arranging to provide accounting support
for all transactions, wiring funds and receiving funds for Fund share purchases
and redemptions, confirming and reconciling all transactions, reviewing the
activity in Fund accounts, and providing training and supervision of broker
personnel; posting and reinvesting dividends to Fund accounts or arranging for
this service to be performed by the Fund's transfer agent; and maintaining and
distributing current copies of prospectuses and shareholder reports to the
beneficial owners of shares of the Fund and prospective shareholders.
By adopting the Plan, the Board of Trustees expects that the Fund will be able
to achieve a more predictable flow of cash for investment purposes and to meet
redemptions. This will facilitate more efficient portfolio management and assist
the Fund in seeking to achieve its investment objectives. By identifying
potential investors whose needs are served by the Fund's objectives, and
properly servicing these accounts, the Fund may be able to curb sharp
fluctuations in rates of redemptions and sales.
Other benefits which the Fund hopes to achieve through the Plan include, but are
not limited to, the following: (1) an efficient and effective administrative
system; (2) a more efficient use of shareholder assets by having them rapidly
invested in the Fund, through an automatic transfer of funds from a demand
deposit account to an investment account, with a minimum of delay and
administrative detail; and (3) an efficient and reliable shareholder records
system and prompt responses to shareholder requests and inquiries concerning
their accounts.
For the years ended May 31, 1994, 1993 and 1992, brokers and administrators
(financial institutions) received fees in the amount of $250,282, $239,445, and
$128,676, respectively pursuant to the distribution plan.
SHAREHOLDER SERVICING ARRANGEMENTS
For the fiscal years ended May 31, 1994, 1993, and 1992, the distributor paid
$185,995, $250,297, and $139,925, respectively, to brokers and administrators
(financial institutions) as an administrative fee.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the value of a share at $1.00. The days on which
net asset value is calculated by the Fund are described in the prospectus.
USE OF THE AMORTIZED COST METHOD
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.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions of 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.
Under the Rule, the Fund is permitted to purchase instruments which are subject
to demand features or standby commitments. As defined by the Rule, a demand
feature entitles the Fund to receive the principal amount of the instrument from
the issuer or a third party on (1) no more than 30 days' notice or (2) at
specified intervals not exceeding one year on no more than 30 days' notice. A
standby commitment entitles the Fund to achieve same day settlement and to
receive an exercise price equal to the amortized cost of the underlying
instrument plus accrued interest at the time of exercise.
MONITORING PROCEDURES
The Trustees' 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% 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.
- --------------------------------------------------------------------------------
INVESTMENT RESTRICTIONS
The Rule requires that the Fund limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risk and
have received the requisite rating from one or more nationally recognized
statistical rating organizations. If the instruments are not rated, the
Trustees must determine that they are of comparable quality. The Rule
also requires the Fund to maintain a dollar-weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per share. In addition, no
instrument with a remaining maturity of more than 397 days can be
purchased by the Fund.
Should the disposition of a portfolio security result in a
dollar-weighted average portfolio maturity of more than 90 days, the Fund
will invest its available cash to reduce the average maturity to 90 days
or less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations. This policy may, from time to time,
result in high portfolio turnover. Under the amortized cost method of valuation,
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 indicated daily yield on shares of the
Fund computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although State Street Bank does not charge
for telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
Although the Trust intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio. To the extent available,
such securities will be readily marketable.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Trust is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's net
asset value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
can incur certain transaction costs.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
- - derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- - derive less than 30% of its gross income from the sale of securities held less
than three months;
- - invest in securities within certain statutory limits; and
- - distribute to its shareholders at least 90% of its net income earned during
the year.
YIELD
- --------------------------------------------------------------------------------
The Fund calculates its yield daily, based upon the seven days ending on the day
of the calculation, called the "base period." This yield is computed by:
- - determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares;
- - dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
- - multiplying the base period return by 365/7.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
the performance will be reduced for those shareholders paying those fees.
The Fund's yield for the seven-day period ended May 31, 1994 was 2.41%.
TAX-EQUIVALENT YIELD
- --------------------------------------------------------------------------------
The tax-equivalent yield of the Fund is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that the Fund would have had to earn to
equal its actual yield, assuming a 28% tax rate (the maximum effective federal
rate for individuals) and assuming that income is 100% tax-exempt.
The Fund's tax-equivalent yield for the seven-day period ended May 31, 1994 was
3.35%.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in the Fund's portfolio
generally remains free from federal regular income tax,* and is often free from
state and local taxes as well. As the table below indicates, a "tax-free"
investment is an attractive choice for investors, particularly in times of
narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1994
MULTISTATE MUNICIPAL FUND
<TABLE>
<CAPTION>
15.00% 28.00% 31.00%
---------- --------------- -------------
<S> <C> <C> <C>
Joint Return:.................................... $1-38,000 $38,001-91,850 Over $91,851
Single Return:................................... $1-22,750 $22,751-55,100 Over 55,101
</TABLE>
Tax-Exempt Yield Taxable Yield
Equivalent
<TABLE>
<S> <C> <C> <C>
2.50% 2.94% 3.47% 3.62%
3.00 3.53 4.17 4.35
3.50 4.12 4.86 5.07
4.00 4.71 5.56 5.80
4.50 5.29 6.25 6.52
5.00 5.88 6.94 7.25
5.50 6.47 7.64 7.97
6.00 7.06 8.33 8.70
6.50 7.65 9.03 9.42
7.00 8.24 9.72 10.14
7.50 8.82 10.42 10.87
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent.
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of the Trust.
* Some portion of the Trust's income may be subject to the federal alternative
minimum tax and state and local taxes.
EFFECTIVE YIELD
- --------------------------------------------------------------------------------
The Fund's effective yield is computed by compounding the unannualized base
period return by:
- - adding 1 to the base period return;
- - raising the sum to the 365/7th power; and
- - subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended May 31, 1994 was
2.44%.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
- - portfolio quality;
- - average portfolio maturity;
- - type of instruments in which the portfolio is invested;
- - changes in interest rates on money market instruments;
- - changes in Fund expenses; and
- - the relative amount of Fund cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
- - LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in the "short-term
municipal bond funds" category in advertising and sales literature.
Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment in the
Fund based on the monthly reinvestment of dividends over a specified period of
time.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD AND POOR'S CORPORATION MUNICIPAL BOND RATINGS
<TABLE>
<S> <C>
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Corporation. 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 higher 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.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated categories.
NR NR indicates that no public rating has been requested, that there is insufficient information
on which to base a rating, or that S&P does not rate a particular type of obligation as a
matter of policy.
Plus (+) or minus (-): The ratings from AA to "BBB" may be modified by the addition of a plus
or minus sign to show relative standing within the major rating categories.
</TABLE>
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATINGS
<TABLE>
<S> <C>
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.
BAA Bonds which are rated BAA are considered medium grade obligations, (i.e., they are neither
highly protected nor poorly secured.) Interest payments and principal security appear
adequate for the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as well.
NR Not rated by Moody's.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating classification from AA
through BAA in its corporate or municipal bond rating system. The modifier 1 indicates that
the security ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
</TABLE>
STANDARD & POOR'S CORPORATION MUNICIPAL NOTE RATINGS
<TABLE>
<S> <C>
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 (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
</TABLE>
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM LOAN RATINGS
<TABLE>
<S> <C>
MIG1/VMIG1 This designation denotes best quality. There is a present strong protection by established
cash flows, superior liquidity support or demonstrated broadbased access to the market for
refinancing.
MIG2/VMIG2 This designation denotes high quality. Margins of protection are ample although not so large
as in the preceding group.
</TABLE>
- --------------------------------------------------------------------------------
FITCH INVESTOR'S SERVICE, INC. SHORT-TERM DEBT RATINGS
<TABLE>
<S> <C>
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. Issuers carrying this rating have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as the F-1+ and F-1 categories.
</TABLE>
STANDARD AND POOR'S CORPORATION COMMERCIAL PAPER RATINGS
<TABLE>
<S> <C>
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.
</TABLE>
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
<TABLE>
<S> <C>
PRIME-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.
PRIME-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.
</TABLE>
0111205B (7/94)
TREASURY CASH SERIES II
(A PORTFOLIO OF CASH TRUST SERIES II)
PROSPECTUS
Treasury Cash Series II (the "Fund") is a diversified portfolio of Cash Trust
Series II (the "Trust"), an open-end management investment company (a mutual
fund). The investment objective of the Fund is to invest in short-term U.S.
Treasury obligations to provide current income consistent with stability of
principal and liquidity.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE; THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
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 BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated July 31,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference in this
prospectus. You may request a copy of the Statement of Additional Information
free of charge by calling 1-800-235-4669. To obtain other information or to make
inquiries about the Fund, contact your financial institution.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated July 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Repurchase Agreements 3
When-Issued and Delayed
Delivery Transactions 4
Investment Limitations 4
CASH TRUST SERIES II INFORMATION 4
- ------------------------------------------------------
Management of Cash Trust Series II 4
Board of Trustees 4
Investment Adviser 4
Advisory Fees 4
Adviser's Background 5
Distribution of Fund Shares 5
Distribution Plan 5
Other Payments to
Financial Institutions 6
Administration of the Fund 6
Administrative Services 6
Custodian 6
Transfer Agent and
Dividend Disbursing Agent 7
Legal Counsel 7
Independent Auditors 7
NET ASSET VALUE 7
- ------------------------------------------------------
INVESTING IN THE FUND 7
- ------------------------------------------------------
Share Purchases 7
Through a Financial Institution 7
Directly from the Distributor 7
Minimum Investment Required 8
What Shares Cost 8
Conversion to Federal Funds 8
Subaccounting Services 8
Systematic Investment Program 8
Certificates and Confirmations 9
Dividends 9
Capital Gains 9
REDEEMING SHARES 9
- ------------------------------------------------------
Through a Financial Institution 9
Receiving Payment 10
By Check 10
By Wire 10
Directly from the Fund 10
By Mail 10
Checkwriting 10
Debit Card 11
Systematic Withdrawal Program 11
Accounts with Low Balances 11
SHAREHOLDER INFORMATION 11
- ------------------------------------------------------
Voting Rights 11
Massachusetts Partnership Law 11
TAX INFORMATION 12
- ------------------------------------------------------
Federal Income Tax 12
State and Local Taxes 12
Pennsylvania Corporate and
Personal Property Taxes 12
PERFORMANCE INFORMATION 13
- ------------------------------------------------------
FINANCIAL STATEMENTS 14
- ------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 22
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price).....................................................................
None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................................
None
Contingent Deferred Sales Charge (as a percentage of original purchase price
or redemption proceeds as applicable)......................................
None
Redemption Fee (as a percentage of amount redeemed, if applicable)...........
None
Exchange Fee.................................................................
None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1).............................................
0.45%
12b-1 Fee....................................................................
0.20%
Other Expenses...............................................................
0.24%
Total Fund Operating Expenses(2)........................................
0.89%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.50%.
(2) The Total Fund Operating Expenses would have been 0.94% absent the voluntary
waiver of a portion of the management fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "CASH TRUST SERIES II INFORMATION." WIRE-TRANSFERRED REDEMPTIONS
OF LESS THAN $5,000 MAY BE SUBJECT TO ADDITIONAL FEES.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years
10 years
- ---------------------------------------------------------- ------ ------- ------- -
- -------
<S> <C> <C> <C>
<C>
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2)
redemption at the end of each time period. ............. $9 $28 $49
$110
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
TREASURY CASH SERIES II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Independent Auditors' Report on page 22.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------------------------------
1994 1993 1992 1991*
------ ------ ------ ------
<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 0.04 0.02
- ------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------
Dividends to shareholders from net
investment income (0.02) (0.03) (0.04)
(0.02)
- ------------------------------------------------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------ ------ ------ ------ ------
TOTAL RETURN** 2.47% 2.64% 4.41%
2.06%
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------
Expenses 0.89% 0.78% 0.73%
0.47%(a)
- ------------------------------------------------
Net investment income 2.42% 2.55% 4.34%
5.71%(a)
- ------------------------------------------------
Expense waiver/reimbursement (b) 0.05% 0.19% 0.57%
0.37%(a)
- ------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------
Net assets, end of period (000 omitted) $229,882 $310,648 $104,371
$70,798
- ------------------------------------------------
</TABLE>
* Reflects operations for the period from February 9, 1991 (date of initial
public investment), to May 31, 1991.
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charges, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated November 14, 1990. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. This prospectus relates only to the Trust's
short-term U.S. Treasury obligations portfolio, known as Treasury Cash Series
II. The Fund is designed for customers of financial institutions such as banks,
fiduciaries, custodians of public funds, investment advisers and broker/dealers,
as a convenient means of accumulating an interest in a professionally managed,
diversified portfolio limited to money market instruments maturing in thirteen
months or less. A minimum initial investment of $25,000 is required, except for
qualified retirement plans which have a minimum initial investment of $1,000.
Subsequent investments must be in amounts of at least $500.
The Fund attempts to stabilize the value of a share at $1.00. Fund shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income consistent
with stability of principal and liquidity. The investment objective cannot be
changed without approval of shareholders. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing its assets in U.S.
Treasury obligations which are issued by the U.S. government, and are fully
guaranteed as to payment of principal and interest by the United States. From
time to time, the Fund's assets may be substantially invested in U.S. Treasury
obligations which are the subject of repurchase agreements (see "Repurchase
Agreements," below). Unless indicated otherwise, the investment policies of the
Fund may be changed by the Trustees without approval of shareholders.
Shareholders will be notified before any material change in these policies
becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests only in U.S. Treasury obligations
maturing in thirteen months or less and in repurchase agreements fully
collateralized by U.S. Treasury obligations. The average maturity of the U.S.
Treasury obligations in the Fund's portfolio, computed on a dollar-weighted
basis, will be 90 days or less.
REPURCHASE AGREEMENTS. Certain securities in which the Fund may invest may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. Treasury obligations to the Fund and agree at the time of
sale to repurchase them at a mutually agreed upon time and price. To the extent
that the original seller does not repurchase the securities from the Fund, the
Fund could receive less than the repurchase price on any sale of such
securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase U.S.
Treasury obligations on a when-issued or delayed delivery basis. In when-issued
and delayed delivery transactions, the Fund relies on the seller to complete the
transaction. The seller's failure to complete the transaction may cause the Fund
to miss a price or yield considered to be advantageous.
INVESTMENT LIMITATIONS
The Fund will not:
- borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge up
to 10% of the value of those assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder approval.
The following limitation, however, can be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
The Fund will not:
- invest more than 10% of its net assets in illiquid securities, including
repurchase agreements providing for settlement in more than seven days
after notice.
CASH TRUST SERIES II INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF CASH TRUST SERIES II
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the business affairs of the Trust and for exercising
all of the powers of the Trust except those reserved for the shareholders. The
Executive Committee of the Board of Trustees handles the Board's
responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Federated Advisers, the Fund's
investment adviser, subject to direction by the Trustees. The adviser
continually conducts investment research and supervision for the Fund and is
responsible for the purchase or sale of portfolio instruments, for which it
receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .50 of 1% of the Fund's average daily net assets. The adviser
may voluntarily choose to waive a portion of its fee or reimburse the Fund
for certain operating expenses. The adviser can terminate this voluntary
waiver of its advisory fee at any time and at its sole discretion. This
does not include reimbursement to the Fund of any expenses incurred by
shareholders who use the transfer agent's subaccounting facilities. The
adviser has also undertaken to reimburse the Fund for operating expenses in
excess of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Susan M. Nason has been the Fund's portfolio manager since February, 1991.
Ms. Nason joined Federated Investors in 1987 and has been a Vice President
of the Fund's investment adviser since 1993. Ms. Nason served as an
Assistant Vice President of the investment adviser from 1990 until 1992,
and from 1987 until 1990 she acted as an investment analyst. Ms. Nason is a
Chartered Financial Analyst and received her M.B.A. in Finance from
Carnegie Mellon University.
Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. According to the provisions of a distribution plan adopted
pursuant to Investment Company Act Rule 12b-1, the distributor may select
financial institutions such as banks, fiduciaries, custodians for public funds,
investment advisers and brokers/dealers to provide distribution and/or
administrative services as agents for their clients or customers. Administrative
services may include, but are not limited to the following functions: providing
office space, equipment, telephone facilities, and various clerical,
supervisory, computer and other personnel as necessary or beneficial to
establish and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries regarding the Fund; assisting
clients in changing dividend options; account designations, and addresses; and
providing such other services as the Fund reasonably requests.
The distributor will pay financial institutions a fee based upon shares of the
Fund owned by their clients or customers. The schedules of such fees and the
basis upon which such fees will be paid will be determined from time to time by
the Board of Trustees of the Trust, provided that for any period the total
amount of fees representing an expense to the Trust shall not exceed an annual
rate of .20 of 1% of the average net asset value of shares of the Fund held
during the period by clients or customers of financial institutions. The current
annual rate of such fees is .20 of 1%. Any fees paid by the distributor
with respect to shares of the Fund pursuant to the distribution plan will be
reimbursed by the Trust from the assets of the Fund in accordance with the
previously agreed schedule of fees.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above or should Congress relax current restrictions on depository institutions,
the Board of Trustees will consider appropriate changes in the administrative
services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as brokers or dealers pursuant to state law.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Distribution Plan, certain financial
institutions may be compensated by the adviser or its affiliates for the
continuing investment of customers' assets in certain funds, including the Fund,
advised by those entities. These payments will be made directly by the
distributor or adviser from their assets, and will not be made from the assets
of the Fund or by the assessment of a sales load on shares.
Furthermore, the distributor may offer to pay a fee from its own assets to
financial institutions as financial assistance for providing substantial
marketing and sales support. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's investment
adviser or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Trust.
Federated Administrative Services, provides these at an annual rate which
relates to the average aggregate daily net assets of the Federated Funds as
specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET ASSETS
MAXIMUM ADMINISTRATIVE FEE OF THE FEDERATED FUNDS
- ------------------------------ ------------------------------------
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 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 Administrative Services may choose voluntarily to waive a portion of
its fee.
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,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Fund, and
dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, and Dickstein, Shapiro & Morin, L.L.P., Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche, Boston, Massachusetts.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Fund, of
course, cannot guarantee that its net asset value will always remain at $1.00
per share.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange is open for
business. Shares of the Fund may be purchased through a financial institution
which has a sales agreement with the distributor or directly from the
distributor, Federated Securities Corp. The Fund reserves the right to reject
any purchase request.
THROUGH A FINANCIAL INSTITUTION. An investor may call his financial institution
(such as a bank or an investment dealer) to place an order to purchase shares of
the Fund. Orders through a financial institution are considered received when
the Fund receives payment by wire or converts payment by check from the
financial institution into federal funds. It is the financial institution's
responsibility to transmit orders promptly.
DIRECTLY FROM THE DISTRIBUTOR. An investor may place an order to purchase shares
directly from the distributor. To do so: complete and sign the new account form
available from the Fund; enclose a check made payable to Treasury Cash Series
II; and mail both to Treasury Cash Series II, P.O. Box 8604, Boston, MA
02266-8604.
The order is considered received after the check is converted by the transfer
agent's bank, State Street Bank and Trust Company ("State Street Bank"), into
federal funds. This is generally the next business day after State Street Bank
receives the check.
To purchase shares of the Fund by wire, call the Fund. All information needed
will be taken over the telephone, and the order is considered received when
State Street Bank receives payment by wire. Federal funds should be wired as
follows: Federated Services Company, c/o State Street Bank and Trust Company,
Boston, Massachusetts 02266-8604; Attention: EDGEWIRE; For Credit to: Treasury
Cash Series II; Fund Number (this number can be found on the account statement
or by contacting the
Fund); Group Number or Order Number; Nominee or Institution Name; ABA 011000028.
Shares cannot be purchased by wire on Columbus Day, Veterans' Day, or Martin
Luther King Day.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000, unless the investment is
in a retirement plan, in which case the minimum initial investment is $1,000.
Subsequent investments must be in amounts of at least $500. An institutional
investor's minimum investment will be calculated by averaging all accounts it
maintains with the Fund.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order is
received. There is no sales load imposed by the Fund.
The net asset value is determined at 12:00 noon (Eastern time), 3:00 p.m.
(Eastern time), and 4:00 p.m. (Eastern time), Monday through Friday, except on:
(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no shares are tendered for redemption and no orders to
purchase shares are received; or (iii) the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. State Street Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts. However,
certain financial institutions may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent reserves the right to charge a fee based on the level of
subaccounting services rendered. Financial institutions holding Fund 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 provided which may be related
to the ownership of Fund shares. This prospectus should, therefore, be read
together with any agreement between the customer and the financial institution
with regard to the services provided, the fees charged for those services, and
any restrictions and limitations imposed.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $500. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Fund shares. A shareholder may apply for participation in this
program through his financial institution.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.
Monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Shares purchased by wire before
3:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends on the next business day after the check is
converted by the transfer agent into federal funds. Unless shareholders request
cash payments on an application or by writing to Federated Securities Corp.
dividends are automatically reinvested on payment dates in additional shares of
the Fund.
CAPITAL GAINS
Capital gains, if any, could result in an increase in dividends. Capital losses
could result in a decrease in dividends. If for some extraordinary reason, the
Fund realizes net long-term capital gains, it will distribute them at least once
every 12 months.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemptions can be made through a financial
institution or directly from the Fund. Redemption requests must be received in
proper form.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem shares of the Fund by calling his financial institution
(such as a bank or an investment dealer) to request the redemption. Shares will
be redeemed at the net asset value next determined after the Fund receives the
redemption request from the financial institution. The financial institution is
responsible for promptly submitting redemption requests and providing proper
written redemption instructions to the Fund. The financial institution may
charge customary fees and commissions for this service. If at any time the Fund
shall determine it necessary to terminate or modify this method of redemption,
shareholders will be promptly notified.
Before a financial institution may request redemption by telephone on behalf of
a shareholder an authorization form permitting the Fund to accept the redemption
request must first be completed. Telephone redemption instructions may be
recorded. In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption, such as "By Mail", should be considered.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
RECEIVING PAYMENT. Pursuant to instructions from the financial institution,
redemptions will be made by check or by wire.
BY CHECK. Normally a check for the proceeds is mailed within one business
day, but in no event more than seven days, after receipt of a proper
redemption request. Dividends are paid up to and including the day that a
redemption request is processed.
BY WIRE. Proceeds for redemption requests received before 12:00 noon
(Eastern time) will be wired the same day but will not be entitled to that
day's dividend. Redemption requests received after 12:00 noon (Eastern
time) will receive that day's dividends and will be wired the following
business day.
DIRECTLY FROM THE FUND
BY MAIL. Any shareholder may redeem Fund shares by sending a written request to
Federated Services Company. The written request should include the shareholder's
name, the Fund name, the account number, and the share or dollar amount
requested. If share certificates have been issued, they must be properly
endorsed and should be sent by registered or certified mail with the written
request. Shareholders should contact the Fund for assistance in redeeming by
mail.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request. Dividends are paid up to and including the day that a redemption
request is processed.
Individual shareholders requesting a redemption of $50,000 or more, a redemption
of any amount to be sent to an address other than that on record with the Fund,
or a redemption payable other than to the shareholder of record must have
signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member firm of the New York, American, Boston, Midwest, or Pacific
Stock Exchanges;
- a savings bank or savings and loan association whose deposits are insured
by the Saving Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Trust and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Trust and its transfer agent reserve the right
to amend these standards at any time without notice.
CHECKWRITING. At the shareholder's request, Federated Services Company will
establish a checking account for redeeming Fund shares. A fee is charged for
this service. With a Fund checking account, shares may be redeemed simply by
writing a check. The redemption will be made at the net asset value on the date
that Federated Services Company presents the check to the Fund. A check may not
be written to close an account. If a shareholder wishes to redeem shares and
have the proceeds available, a check may be written and negotiated through the
shareholder's bank. Checks should never be sent to
the transfer agent to redeem shares. Cancelled checks are sent to the
shareholder each month. For further information, contact the Fund.
DEBIT CARD. At the shareholder's request, a debit card is available. A fee may
be charged for this service. For further information, contact Federated
Securities Corp.
SYSTEMATIC WITHDRAWAL PROGRAM
If a shareholder's account has a value of at least $25,000, a Systematic
Withdrawal Program may be established whereby automatic redemptions are made
from the account and transferred electronically to any commercial bank, savings
bank, or credit union that is an Automated Clearing House ("ACH") member.
Depending upon the amount of the withdrawal payments and the amount of dividends
paid with respect to Fund shares, redemptions may reduce, and eventually
deplete, the shareholder's investment in the Fund. For this reason, payments
under this program should not be considered as yield or income on the
shareholder's investment in the Fund. A shareholder may apply for participation
in this program through his financial institution.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$25,000 due to shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER 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 each fund in the
Trust have equal voting rights except that only shares of the Fund are entitled
to vote on matters affecting only the Fund. As a Massachusetts business trust,
the Trust is not required to hold annual shareholder meetings. Shareholder
approval will be sought only for certain changes in the Trust's or the Fund's
operation and for the election of Trustees under certain circumstances. As of
July 3, 1994, The Bank of Guam, Agana, Guam, owned approximately 75,916,874
shares (32%) of the Fund, and therefore, may, for certain purposes, be deemed to
control the Fund and be able to affect the outcome of certain matters presented
for a vote of shareholders.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust. To
protect shareholders, the Trust has filed legal
documents with Massachusetts that expressly disclaim the liability of
shareholders for such acts or obligations of the Trust. These documents require
notice of this disclaimer to be given in each agreement, obligation, or
instrument that the Trust or its Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for obligations of
the Trust, the Trust is required 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 cannot meet its obligations to indemnify shareholders and pay
judgments against them from its assets.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
other portfolios of the Trust will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional shares.
STATE AND LOCAL TAXES
The Fund intends to limit its investments to U.S. Treasury obligations paying
interest which, if owned directly by shareholders of the Fund, would be exempt
from state and personal income tax. However, under the laws of some states, the
net investment income distributed by the Fund may be taxable to shareholders.
State laws differ on this issue, and shareholders are urged to consult their own
tax advisers regarding the status of their accounts under state and local tax
laws.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES. In the opinion of Houston,
Houston & Donnelly, counsel to the Fund:
- the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
- Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its yield and effective yield.
The yield of the Fund represents the annualized rate of income earned on an
investment in the Fund over a seven-day period. It is the annualized dividends
earned during the period on the investment, shown as a percentage of the
investment. The effective yield is calculated similarly to the yield, but, when
annualized, the income earned by an investment in the Fund is assumed to be
reinvested daily. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
From time to time the Fund may advertise its performance using certain financial
publications and/or compare its performance to certain indices.
TREASURY CASH SERIES II
PORTFOLIO OF INVESTMENTS
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- --------
- ----
<C> <C> <S> <C>
SHORT-TERM U.S. TREASURY OBLIGATIONS--22.4%
- ----------------------------------------------------------------------------------
* U.S. TREASURY BILLS--7.7%
----------------------------------------------------------------
$18,000,000 3.135%-4.815%, 7/28/94-5/4/95 $
17,677,302
----------------------------------------------------------------
U.S. TREASURY NOTES--14.7%
----------------------------------------------------------------
33,500,000 4.25%-8.00%, 7/15/94-2/15/95
33,704,881
---------------------------------------------------------------- --------
- ----
TOTAL SHORT-TERM U.S. TREASURY OBLIGATIONS
51,382,183
---------------------------------------------------------------- --------
- ----
REPURCHASE AGREEMENTS(A)--77.3%
- ----------------------------------------------------------------------------------
13,800,000 BZW Securities, Inc., 4.30%, dated 5/31/94, due 6/1/94
13,800,000
----------------------------------------------------------------
10,000,000 BT Securities, Inc., 4.30%, dated 5/31/94, due 6/1/94
10,000,000
----------------------------------------------------------------
</TABLE>
<TABLE>
<C> <C> <S> <C>
10,000,000 Carroll McEntee & McGinley, Inc., 4.30%, dated 5/31/94, due
6/1/94
10,000,000
----------------------------------------------------------------
10,000,000 Daiwa Securities America, Inc., 4.25%, dated 5/31/94, due 6/1/94
10,000,000
----------------------------------------------------------------
10,000,000 Dean Witter Reynolds, Inc., 4.30%, dated 5/31/94, due 6/1/94
10,000,000
----------------------------------------------------------------
10,000,000 Deutsche Bank Capital Corp., 4.30%, dated 5/31/94, due 6/1/94
10,000,000
----------------------------------------------------------------
10,000,000 Donaldson, Lufkin & Jenrette Securities Corp., 4.25%,
dated 5/31/94, due 6/1/94
10,000,000
----------------------------------------------------------------
10,000,000 Harris Trust & Savings Bank, 4.30%, dated 5/31/94, due 6/1/94
10,000,000
----------------------------------------------------------------
5,000,000 J.P. Morgan Securities, Inc., 4.27%, dated 5/31/94, due 6/1/94
5,000,000
----------------------------------------------------------------
10,000,000 Kidder Peabody & Co., Inc. 4.25%-4.28%, dated 5/31/94, due
6/1/94
10,000,000
----------------------------------------------------------------
10,000,000 Nations Bank Corp., 4.24%, dated 5/31/94, due 6/1/94
10,000,000
----------------------------------------------------------------
10,000,000 Nikko Securities Co., International, Inc., 4.25%, dated 5/31/94,
due 6/1/94
10,000,000
----------------------------------------------------------------
10,000,000 Nomura Securities International, Inc., 4.25%, dated 5/31/94,
due 6/1/94
10,000,000
----------------------------------------------------------------
10,000,000 Smith Barney, Harris Upham & Co., Inc., 4.35%, dated 5/31/94,
due 6/1/94
10,000,000
----------------------------------------------------------------
30,000,000 UBS Securities, Inc., 4.30%, dated 5/31/94, due 6/1/94
30,000,000
----------------------------------------------------------------
</TABLE>
TREASURY CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- --------
- ----
<C> <C> <S> <C>
REPURCHASE AGREEMENTS(A)--(CONTINUED)
- ----------------------------------------------------------------------------------
$ 5,000,000 ** Merrill Lynch Government Securities, Inc., 4.25%, dated 5/6/94,
due 8/4/94 $
5,000,000
----------------------------------------------------------------
4,000,000 ** UBS Securities, Inc., 4.30%, dated 5/19/94, due 6/9/94
4,000,000
---------------------------------------------------------------- --------
- ----
TOTAL REPURCHASE AGREEMENTS (NOTE 2B)
177,800,000
---------------------------------------------------------------- --------
- ----
TOTAL INVESTMENTS, AT AMORTIZED COST (NOTE 2A)
$229,182,183+
---------------------------------------------------------------- --------
- ----
</TABLE>
+ Also represents cost for federal tax purposes.
(a) Repurchase Agreements are fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio. The investments in
repurchase agreements are through participation in joint accounts with other
Federated funds.
* Each issue shows rate of discount at time of purchase.
** 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.
Note: The categories of investments are shown as a percentage of net assets
($229,882,352) at May 31, 1994.
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES II
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------
Investments in repurchase agreements $177,800,000
- -----------------------------------------------------------------
Investments in other securities 51,382,183
- ----------------------------------------------------------------- ------------
Total investments, at amortized cost and value (Notes 2A and 2B)
$229,182,183
- --------------------------------------------------------------------------------
Cash
286,908
- --------------------------------------------------------------------------------
Interest receivable
633,409
- --------------------------------------------------------------------------------
Deferred expenses (Note 2F)
50,486
- -------------------------------------------------------------------------------- ---------
- ---
Total assets
230,152,986
- --------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------
Dividends payable 173,375
- -----------------------------------------------------------------
Payable to distributor (Note 4) 45,108
- -----------------------------------------------------------------
Accrued expenses 52,151
- ----------------------------------------------------------------- ------------
Total liabilities
270,634
- -------------------------------------------------------------------------------- ---------
- ---
NET ASSETS for 229,882,352 shares of beneficial interest outstanding
$229,882,352
- -------------------------------------------------------------------------------- ---------
- ---
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($229,882,352 / 229,882,352 shares of beneficial interest outstanding)
$1.00
- -------------------------------------------------------------------------------- ---------
- ---
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES II
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest income (Note 2C)
$8,066,431
- ------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------
Investment advisory fee (Note 4) $1,217,479
- ----------------------------------------------------------------------
Distribution fees (Note 4) 485,826
- ----------------------------------------------------------------------
Trustees' fees 3,914
- ----------------------------------------------------------------------
Administrative personnel and services fees (Note 4) 310,344
- ----------------------------------------------------------------------
Custodian and portfolio accounting fees 133,202
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 4) 16,548
- ----------------------------------------------------------------------
Fund share registration costs 69,297
- ----------------------------------------------------------------------
Auditing fees 14,614
- ----------------------------------------------------------------------
Legal fees 9,525
- ----------------------------------------------------------------------
Printing and postage 6,816
- ----------------------------------------------------------------------
Taxes 359
- ----------------------------------------------------------------------
Insurance premiums 9,817
- ----------------------------------------------------------------------
Miscellaneous 8,857
- ---------------------------------------------------------------------- ----------
Total expenses 2,286,598
- ----------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 122,580
- ---------------------------------------------------------------------- ----------
Net expenses
2,164,018
- ------------------------------------------------------------------------------------ -----
- -----
Net investment income
$5,902,413
- ------------------------------------------------------------------------------------ -----
- -----
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES II
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
----------------------------
- ---
1994 1993
------------- -----------
- ---
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------
Net investment income $ 5,902,413 $
6,509,114
- -------------------------------------------------------------- ------------- -----------
- ---
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- --------------------------------------------------------------
Dividends to shareholders from net investment income (5,902,413)
(6,509,114)
- -------------------------------------------------------------- ------------- -----------
- ---
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- --------------------------------------------------------------
Proceeds from sale of shares 658,832,271
1,179,058,540
- --------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 4,890,179
5,132,853
- --------------------------------------------------------------
Cost of shares redeemed (744,488,408)
(977,913,742)
- -------------------------------------------------------------- ------------- -----------
- ---
Change in net assets from Fund share transactions (80,765,958)
206,277,651
- -------------------------------------------------------------- ------------- -----------
- ---
Change in net assets (80,765,958)
206,277,651
- --------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------
Beginning of period 310,648,310
104,370,659
- -------------------------------------------------------------- ------------- -----------
- ---
End of period $ 229,882,352 $
310,648,310
- -------------------------------------------------------------- ------------- -----------
- ---
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES II
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1994
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Cash Trust Series II (the "Trust") is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The Trust
consists of two portfolios, one diversified and one non-diversified. The
financial statements included herein present only those of the diversified
portfolio, Treasury Cash Series II (the "Fund"). The financial statements of the
other portfolio 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.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value its
portfolio
securities is in accordance with Rule 2a-7 under the Investment Company Act of 1940.
B. 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 in
support of repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase
agreement's underlying collateral to ensure the value at least equals the principal
amount of the repurchase agreement, including accrued interest.
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 adviser to
be
creditworthy pursuant to guidelines established by the Board of Trustees ("Trustees").
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount are amortized as required by the Internal Revenue Code,
as amended ("Code"). Distributions to shareholders are recorded on the ex-dividend date.
D. 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 taxable income. Accordingly, no provisions for federal tax are
necessary.
E. 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
</TABLE>
TREASURY CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering the
shares,
have been deferred and are being amortized using the straight-line method over a period
of five years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At May
31, 1994, capital paid-in aggregated $229,882,352. Transactions in Fund shares
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
----------------------------
- -
1994 1993
- -------------------------------------------------------------- ------------ -----------
- -
<S> <C> <C>
Shares sold 658,832,271
1,179,058,540
- --------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 4,890,179
5,132,853
- --------------------------------------------------------------
Shares redeemed (744,488,408)
(977,913,742)
- -------------------------------------------------------------- ------------ -----------
- -
Net change resulting from fund share transactions (80,765,958)
206,277,651
- -------------------------------------------------------------- ------------ -----------
- -
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser
("Adviser"), receives for its services an annual investment advisory fee equal
to 0.50 of 1% of the Fund's average daily net assets. Adviser may voluntarily
choose to waive a portion of its fee. Adviser can modify or terminate this
voluntary waiver, at any time at its sole discretion
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with administrative personnel and services. Prior to March 1, 1994, these
services were provided at approximate cost. Effective March 1, 1994, the fee is
based on the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period . The administrative fee
received during any fiscal year shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
DISTRIBUTION FEE--The Fund has adopted a Distribution Plan (the "Plan") pursuant
to Rule 12b-1 under the Investment Company Act of 1940. Under the terms of the
Plan the Fund will reimburse Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's shares. The Plan provides that the Fund may
incur distribution expenses up to 0.20 of 1% of the average daily net assets of
the shares, annually, to reimburse the distributor.
TREASURY CASH SERIES II
- --------------------------------------------------------------------------------
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. The fee
is based on the size, type and number of accounts and transactions made by
shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses ($20,484) and start-up
administrative service expenses ($53,519) were borne initially by FAS. The Fund
has agreed to reimburse FAS at an annual rate of .005 of 1% of average daily net
assets and .01 of 1% of average daily net assets for organizational and start-up
administrative expenses, respectively, until expenses initially borne by FAS are
fully reimbursed or the expiration of five years after January 25, 1991, the
date the Fund's portfolio first became effective, whichever occurs earlier. For
the year ended May 31, 1994, the Fund paid $4,228 and $21,006 respectively,
pursuant to this agreement. Organizational expenses and start-up administrative
service expenses have been fully reimbursed by the Fund as of May 31, 1994.
Certain of the Officers and Directors of the Fund are Officers and Directors or
Trustees of the above companies.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees of
CASH TRUST SERIES II and Shareholders of TREASURY CASH SERIES II:
We have audited the accompanying statement of assets and liabilities of Treasury
Cash Series II (one of the portfolios comprising Cash Trust Series II),
including the portfolio of investments, as of May 31, 1994, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended May 31, 1994 and 1993, and the financial highlights
(see page 2 of the Prospectus) for each of the years in the four-year period
ended May 31, 1994. 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 audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
May 31, 1994 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Treasury Cash Series
II as of May 31, 1994, 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
Boston, Massachusetts
July 8, 1994
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Fund
Treasury Cash Series II Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266-8604
- ---------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ---------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
- ---------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche 125 Summer Street
Boston, Massachusetts 02110-1617
- ---------------------------------------------------------------------------------------------
</TABLE>
TREASURY CASH SERIES II
(A PORTFOLIO OF CASH TRUST SERIES II)
PROSPECTUS
A Diversified Portfolio of
Cash Trust Series II, An Open-End
Management Investment Company
July 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
147552301
0111203A (7/94)
TREASURY CASH SERIES II
(A PORTFOLIO OF CASH TRUST SERIES II)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
Treasury Cash Series II (the "Fund")
dated July 31, 1994. This Statement is not a prospectus itself. To receive a
copy of the prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated July 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
Repurchase Agreements 1
When-Issued and Delayed
Delivery Transactions 1
Reverse Repurchase Agreements 1
Investment Limitations 1
CASH TRUST SERIES II MANAGEMENT 2
- ---------------------------------------------------------------
Officers and Trustees 2
The Funds 4
Fund Ownership 4
Trustee Liability 5
INVESTMENT ADVISORY SERVICES 5
- ---------------------------------------------------------------
Adviser to the Fund 5
Advisory Fees 5
ADMINISTRATIVE SERVICES 5
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 5
- ---------------------------------------------------------------
PURCHASING SHARES 6
- ---------------------------------------------------------------
DISTRIBUTION OF FUND SHARES 6
- ---------------------------------------------------------------
Distribution Plan 6
Shareholder Servicing Arrangements 7
DETERMINING NET ASSET VALUE 7
- ---------------------------------------------------------------
Use of the Amortized Cost Method 7
REDEEMING SHARES 8
- ---------------------------------------------------------------
Redemption in Kind 8
TAX STATUS 8
- ---------------------------------------------------------------
The Fund's Tax Status 8
Shareholders' Tax Status 8
YIELD 8
- ---------------------------------------------------------------
EFFECTIVE YIELD 9
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 9
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in Cash Trust Series II (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of Trust dated
November 14, 1990.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide current income consistent with
stability of principal and liquidity. The investment objective cannot be changed
without approval of shareholders. The investment policies described below may be
changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
TYPES OF INVESTMENTS
The Fund invests only in short-term U.S. Treasury obligations and in repurchase
agreements fully collateralized by U.S. Treasury obligations. The Fund may also
retain Fund assets in cash.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements and these securities will be marked to market. In the
event that such a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending court
action. The Fund believes that under the regular procedures normally in effect
for custody of the Fund's portfolio securities subject to repurchase agreements,
a court of competent jurisdiction would rule in favor of the Fund and allow
retention or disposition of such securities. The Fund will only enter into
repurchase agreements with banks and other recognized financial institutions,
such as broker/dealers which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to deliver the securities may cause the Fund to miss a price or
yield considered to be advantageous.
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated on the Fund's records at the trade date. These
securities are marked to market daily and maintained until the transaction is
settled. The Fund may engage in these transactions to an extent that would cause
the segregation of an amount up to 20% of the total value of its assets.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated on the Fund's records at the trade date. These securities are
marked to market daily and maintained until the transaction is settled.
The use of reverse repurchase agreements may enable the Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not ensure that
the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for
clearance of transactions.
- --------------------------------------------------------------------------------
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amounts
borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. The
Fund will not purchase any securities while borrowings in excess of 5% of
the value of its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In these cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
10% of the value of total assets of the Fund at the time of the
borrowing.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or
hold U.S. Treasury obligations, including repurchase agreements,
permitted by its investment objective, policies, and limitations or its
Declaration of Trust.
INVESTING IN RESTRICTED SECURITIES
The Fund will not purchase or sell securities which are restricted as to
resale under federal securities law.
The above limitations cannot be changed without shareholder approval. The
following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities including repurchase agreements providing for
settlement in more than seven days after notice.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies
except as part of a merger, consolidation, reorganization, or other
acquisition.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Fund does not expect to borrow money or pledge securities in excess of 5% of
the value of its net assets during the coming fiscal year.
CASH TRUST SERIES II MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Advisers,
Federated Investors, Federated Securities Corp., Federated Services Company,
Federated Administrative Services, and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
- ------------------
John F. Donahue*+ Chairman Chairman and Trustee, Federated
Investors; Chairman and
Federated Investors and Trustee Trustee, Federated Advisers, Federated
Management, and
Tower Federated Research; Director, AEtna Life
and Casualty
Pittsburgh, PA Company; Chief Executive Officer and
Director, Trustee, or
Managing General Partner of the Funds;
formerly, Director,
The Standard Fire Insurance Company. Mr.
Donahue is the
father of J. Christopher Donahue, Vice
President and
Trustee of the Trust.
- ---------------------------------------------------------------------------------------------
- ------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice-
Wood/IPC Commercial President, John R. Wood and Associates, Inc., Realtors;
Department President, Northgate Village Development Corporation;
John R. Wood and General Partner or Trustee in private real estate ventures
Associates, Inc., in Southwest Florida; Director, Trustee, or Managing
Realtors General Partner of the Funds; formerly, President, Naples
3255 Tamiami Trail, North Property Management, Inc.
Naples, FL
- ---------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael
One PNC Plaza- Baker, Inc.; Director, Trustee, or Managing General Partner
23rd Floor of the Funds; formerly, Vice Chairman and Director, PNC
Pittsburgh, PA Financial Corp and Director, Ryan Homes, Inc.
- ---------------------------------------------------------------------------------------------
J. Christopher Donahue* Vice President President and Trustee, Federated Investors; President and
Federated Investors and Trustee Trustee, Federated Advisers, Federated Management, and
Tower Federated Research; Trustee, Federated Services Company;
Pittsburgh, PA President and Trustee, Federated Administrative Services;
President or Vice President of the Funds; Director, Trustee
or Managing General Partner of some of the Funds. Mr.
Donahue is the son of John F. Donahue, Chairman and Trustee
of the Trust.
- ---------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.;
571 Hayward Mill Road Director, Trustee, or Managing General Partner of the
Concord, MA Funds; formerly, Director, Blue Cross of Massachusetts,
Inc.
- ---------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and
3471 Fifth Avenue Mon-
Suite 1111 tefiore Hospitals; Clinical Professor of Medicine and
Pittsburgh, PA Trustee,
University of Pittsburgh; Director, Trustee, or Managing
General
Partner of the Funds.
- ---------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director,
5916 Penn Mall Eat'N Park Restaurants, Inc., and Statewide Settlement
Pittsburgh, PA Agency, Inc.; Director, Trustee, or Managing General
Partner of the Funds; formerly, Counsel, Horizon Financial,
F.A., Western Region.
- ---------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachu-
225 Franklin Street setts; Director, Trustee, or Managing General Partner of
Boston, MA the Funds; formerly, President, State Street Bank & Trust
Company and State Street Boston Corporation and Trustee,
Lahey Clinic Foundation, Inc.
- ---------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman,
5916 Penn Mall Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the
Funds; formerly, Vice Chairman, Horizon Financial, F.A.
- ---------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant;
1202 Cathedral of Trustee, Carnegie Endowment for International Peace, RAND
Learning Corporation, Online Computer Library Center, Inc., and U.S.
University of Pittsburgh Space Foundation; Chairman, Czecho Slovak Management
Pittsburgh, PA Center; Director, Trustee, or Managing General Partner of
the Funds; President Emeritus, University of Pittsburgh,
formerly, Chairman, National Advisory Council for
Environmental Policy & Technology.
- ---------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee,
4905 Bayard Street or Managing General Partner of the Funds.
Pittsburgh, PA
- ---------------------------------------------------------------------------------------------
Richard B. Fisher President Executive Vice President and Trustee, Federated Investors;
Federated Investors Chairman and Director, Federated Securities Corp.;
Tower President or Vice President of the Funds; Director or
Pittsburgh, PA Trustee of some
of the Funds.
- ---------------------------------------------------------------------------------------------
Edward C. Gonzales Vice President Vice President, Treasurer and Trustee,Federated Investors;
Federated Investors and Treasurer Vice President and Treasurer, Federated Advisers, Federated
Tower Manage-
Pittsburgh, PA ment, and Federated Research; Executive Vice President,
Trea-
surer, and Director, Federated Securities Corp.; Chairman,
Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President
and Treasurer of the Funds.
- ---------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, Feder-
Federated Investors and Secretary ated Investors; Vice President, Secretary, and Trustee,
Tower Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research;
Trustee, Federated Services Company; Executive Vice
President, Secretary, and Trustee, Federated Administrative
Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the
Funds.
- ---------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
+ Members of Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board of Trustees between
meetings of the Board.
THE FUNDS
"The Funds," and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.;
High Yield Cash Trust; Insight Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc.-1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain
Funds; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash Trust;
111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of July 3, 1994, the following shareholders of record owned 5% or more of the
outstanding shares of the Fund:
Marine Bank of Springfield, Springfield, Illinois, owned approximately
31,853,506 shares (13%).
- --------------------------------------------------------------------------------
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are owned
by a trust, the trustees of which are John F. Donahue, his wife, and
his son, J. Christopher Donahue. John F. Donahue, Chairman and Trustee of
Federated Advisers, is Chairman and
Trustee of Federated Investors, and Chairman and Trustee of the Trust. J.
Christopher Donahue, President and Trustee of Federated Advisers, is President
and Trustee of Federated Investors, President and Trustee of Federated
Administrative Services, Trustee, Federated Services Company, and Vice President
and Trustee of the Trust. John W. McGonigle, Vice President, Secretary, and
Trustee of Federated Advisers, is Trustee, Vice President, Secretary, and
General Counsel of Federated Investors, Executive Vice President, Secretary, and
Trustee of Federated Administrative Services, Executive Vice President and
Director of Federated Securities Corp., Trustee, Federated Services Company, and
Vice President and Secretary of the Trust.
The adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.
For the years ended May 31, 1994, 1993, and 1992 the Fund's adviser earned
$1,217,479, $1,278,111, and $457,832, respectively, of which $122,580, $497,407,
and $457,832, respectively, were voluntarily waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitation
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1 1/2% per
year of the remaining average net assets, the adviser will reimburse the
Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited in any single fiscal year by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Fund's administrator.
(For purposes of this Statement of Additional Information, Federated
Administrative Services and Federated Administrative Services, Inc., may
hereinafter collectively be referred to as, the "Administrators".) For the
fiscal year ended May 31, 1994, the Administrators collectively earned $310,344.
For the fiscal years ended May 31, 1993, and 1992, Federated Administrative
Services, Inc., earned $333,357, and $225,319, respectively. Dr. Henry J.
Gailliot, an officer of Federated Advisers, the adviser to the Fund, holds
approximately 20% of the outstanding common stock and serves as a director of
Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services, Inc., and Federated
Administrative Services.
- --------------------------------------------------------------------------------
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Board of Trustees.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the adviser
and may include:
- - advice as to the advisability of investing in securities;
- - security analysis and reports;
- - economic studies;
- - industry studies;
- - receipt of quotations for portfolio evaluations; and
- - similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales load on days the New
York Stock Exchange is open for business. The procedure for purchasing shares of
the Fund is explained in the prospectus under "Investing in the Fund."
DISTRIBUTION OF FUND SHARES
- --------------------------------------------------------------------------------
DISTRIBUTION PLAN
The Trust has adopted a Plan pursuant to Rule 12b-1 under the Investment Company
Act of 1940. The Plan permits the payment of fees to brokers for distribution
and administrative services and to administrators for administrative services.
The Plan is designed to (i) stimulate brokers to provide distribution and
administrative support services to the Fund and its shareholders and (ii)
stimulate administrators to render administrative support services to the Fund
and its shareholders. The administrative services are provided by a
representative who has knowledge of the shareholder's particular circumstances
and goals, and include, but are not limited to: communicating account openings;
communicating account closings; entering purchase transactions; entering
redemption transactions; providing or arranging to provide accounting support
for all transactions, wiring funds and receiving funds for Fund share purchases
and redemptions, confirming and reconciling all transactions, reviewing the
activity in Fund accounts, and providing training and supervision of broker
personnel; posting and reinvesting dividends to Fund accounts or arranging for
this service to be performed by the Fund's transfer agent; and maintaining and
distributing current copies of prospectuses and shareholder reports to the
beneficial owners of shares of the Fund and prospective shareholders.
By adopting the Plan, the Board of Trustees expects that the Fund will be able
to achieve a more predictable flow of cash for investment purposes and to meet
redemptions. This will facilitate more efficient portfolio management and assist
the Fund in seeking to achieve its investment objectives. By identifying
potential investors whose needs are served by the Fund's objectives, and
properly servicing these accounts, the Fund may be able to curb sharp
fluctuations in rates of redemptions and sales.
Other benefits which the Fund hopes to achieve through the Plan include, but are
not limited to, the following: (1) an efficient and effective administrative
system; (2) a more efficient use of shareholder assets by having them rapidly
invested in the Fund, through an automatic transfer of funds from a demand
deposit account to an investment account, with a minimum of delay and
administrative detail; and (3) an efficient and reliable shareholder records
system and prompt responses to shareholder requests and inquiries concerning
their accounts.
- --------------------------------------------------------------------------------
For the years ended May 31, 1994, 1993 and 1992, brokers and administrators
(financial institutions) received fees in the amount of $485,826, $518,479 and
$182,880, respectively, pursuant to the distribution plan.
SHAREHOLDER SERVICING ARRANGEMENTS
For the fiscal years ended May 31, 1994, 1993 and 1992, the distributor paid
$378,108, $520,572, and $194,449, respectively, to brokers and administrators
(financial institutions) as an administrative fee.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the value of a share at $1.00. The days on which
net asset value is calculated by the Fund are described in the prospectus.
USE OF THE AMORTIZED COST METHOD
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.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with Rule 2a-7 (the "Rule") of the Investment Company
Act of 1940, as amended. 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.
Under the Rule, the Fund is permitted to purchase instruments which are subject
to demand features or standby commitments. As defined by the Rule, a demand
feature entitles the Fund to receive the principal amount of the instrument from
the issuer or a third party on (1) no more than 30 days' notice or (2) at
specified intervals not exceeding one year on no more than 30 days' notice. A
standby commitment entitles the Fund to achieve same day settlement and to
receive an exercise price equal to the amortized cost of the underlying
instrument plus accrued interest at the time of exercise.
MONITORING PROCEDURES
The Trustees' 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% 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.
INVESTMENT RESTRICTIONS
The Rule requires that the Fund limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risks and
have received the requisite rating from one or more nationally recognized
statistical rating organizations. If the instruments are not rated, the
Trustees must determine that they are of comparable quality. The Rule
also requires the Fund to maintain a dollar-weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per share. In addition, no
instrument with a remaining maturity of more than 397 days can be
purchased by the Fund.
Should the disposition of a portfolio security result in a
dollar-weighted average portfolio maturity of more than 90 days, the Fund
will invest its available cash to reduce the average maturity to 90 days
or less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations. This policy may, from time to time,
result in high portfolio turnover. Under the amortized cost method of valuation,
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 indicated daily yield on shares of the
Fund computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although State Street Bank does not charge
for telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
Although the Trust intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio. To the extent available,
such securities will be readily marketable.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Trust is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's net
asset value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
- - derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- - derive less than 30% of its gross income from the sale of securities held less
than three months;
- - invest in securities within certain statutory limits; and
- - distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash or
additional shares. No portion of any income dividend paid by the Fund is
eligible for the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If for
some extraordinary reason the Fund realizes net long-term capital gains,
it will distribute them at least once every 12 months.
YIELD
- --------------------------------------------------------------------------------
The Fund calculates its yield daily, based upon the seven days ending on the day
of the calculation, called the "base period." This yield is computed by:
- - determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares;
- - dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
- - multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
the performance will be reduced for those shareholders paying those fees.
The Fund's yield for the seven-day period ended May 31, 1994, was 3.30%.
EFFECTIVE YIELD
- --------------------------------------------------------------------------------
The Fund's effective yield is computed by compounding the unannualized base
period return by:
- - adding 1 to the base period return;
- - raising the sum to the 365/7th power; and
- - subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended May 31, 1994, was
3.36%.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
- - portfolio quality;
- - average portfolio maturity;
- - type of instruments in which the portfolio is invested;
- - changes in interest rates on money market instruments;
- - changes in Fund expenses; and
- - the relative amount of Fund cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
- - LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in the "short-term
U.S. government funds" category in advertising and sales literature.
- - SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
representative yields for selected securities, issued by the U.S. Treasury,
maturing in 30 days.
- - MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day compound (effective) yield.
From time to time, the Fund will quote its Money ranking in advertising and
sales literature.
- - MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment in the
Fund based on the monthly reinvestment of dividends over a specified period of
time.
0111203B (7/94)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part A)
(b) Exhibits:
(1) Copy of Declaration of Trust of the Registrant (1.);
(2) Copy of By-Laws of the Registrant (1.);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant (2.);
(5) Copy of Investment Advisory Contract of the Registrant
(1.);
(6) Copy of Distributor's Contract of the Registrant
(1.);
(i) Copy of Sales Agreement of the Registrant
(2.);
(7) Not applicable;
(8) Conformed copy of Custodian Agreement of the Registrant;+
(9) (i) Conformed copy of Fund Accounting, Shareholder
Recordkeeping, and Custody Services Procurement Agreement
of the Registrant;+
(ii) Conformed copy of Administratrive Services
Agreement;+
(iii) Conformed copy of Shareholder Services Plan;+
(iv) Conformed copy of Shareholder Services Agreement;+
(v) Copy of Shareholder Services Sub-Contract;+
(10) Copy of Opinion and Consent of Counsel as to legality
of shares being registered (2.);
(11) Conformed copy of Consent of the Independent
Auditor;+
(12) Not applicable;
(13) Copy of Initial Capital Understanding (2.);
(14) Not applicable;
(15) (i) Copy of Distribution Plan (1.);
(ii) Rule 12b-1 Agreement (1.);
(16) Schedule for Computation of Fund Performance Data
(3.);
(17) Power of Attorney (1.);
(18) Conformed copy of Opinion and Consent of Counsel as
to availability of Rule 485(b);+
_________________________________
+ Exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed January 4, 1991. (File Nos. 33-38550 and
811-6269)
2. Response is incorporated by reference to Registrant's Registration
Statement
on Form N-1A filed January 24, 1991. (File Nos. 33-38550 and 811-6269)
3. Response is incorporated by reference to Registrant's Registration
Statement
on Form N-1A filed July 25, 1991. (File Nos. 33-38550 and 811-6269)
Item 25. Persons Controlled by or Under Common Control with Registrant
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of July 3, 1994
Shares of Beneficial Interest
Municipal Cash Series II 277
Treasury Cash Series II 212
Item 27. Indemnification: (2.)
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of the investment adviser,
see the section entitled "Trust Information - Management of the
Trust" 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
"Trust Management - Officers and Trustees." The remaining
Trustee of the investment adviser, his position with the
investment adviser, and, in parentheses, his principal occupation
is: George P. Warren, Jr., (President, Organization Services,
Inc.), 103 Springer Building, 341 Silverside Road, Wilmington,
Delaware 19810.
The remaining Officers of the investment adviser are: Mark L.
Mallon, William D. Dawson, III, J. Thomas Madden, Executive Vice
President; Henry J. Gailliot, Senior Vice President-Economist;
Peter R. Anderson, J. Alan Minteer, and Gary J. Madich, Senior
Vice Presidents; Randall A. Bauer, Jonathan C. Conley, Deborah A.
Cunningham, Mark E. Durbiano, Roger A. Early, Kathleen M. Foody-
Malus, Thomas M. Franks, Edward C. Gonzales, Jeff A. Kozemchak,
Marian R. Marinack, John w. McGonigle, Gregory M. Melvin, Susan
M. Nason, Mary Jo Ochson, Robert J. Ostrowski, Charles A. Ritter,
Christopher H. Wiles, Vice Presidents, Edward C. Gonzales,
Treasurer, and John W. McGonigle, Secretary. The business
address of each of the Officers of the investment adviser is
Federated Investors Tower, Pittsburgh, PA 15222-3779. These
individuals are also officers of a majority of the investment
advisers to the Funds listed in Part B of this Registration
Statement under "The Funds."
________________________
2. Response is incorporated by reference to Registrant's Registration Statement
on Form N-1A filed January 24, 1991. (File Nos. 33-38550 and 811-6269)
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following
open-end investment companies: Alexander Hamilton Funds;
American Leaders Fund, Inc.; Annuity Management Series; Automated
Cash Management Trust; Automated Government Money Trust;
BayFunds; The Biltmore Funds; The Biltmore Municipal Funds; The
Boulevard Funds; California Municipal Cash Trust; Cambridge
Series Trust; Cash Trust Series, Inc.; DG Investor Series; Edward
D. Jones & Co. Daily Passport Cash Trust; Federated ARMs Fund;
Federated Exchange Fund, Ltd.; Federated GNMA Trust; Federated
Government Trust; Federated Growth Trust; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust;
Federated Index Trust; Federated Intermediate Government Trust;
Federated Master Trust; Federated Municipal Trust; Federated
Short-Intermediate Government Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated U.S. Government Bond Fund; First Priority Funds;
First Union Funds; Fixed Income Securities, Inc.; Fortress
Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal
Income Fund, Inc.; Fortress Utility Fund, Inc.; Fountain Square
Funds; Fund for U.S. Government Securities, Inc.; Government
Income Securities, Inc.; High Yield Cash Trust; Independence One
Mutual Funds; Insight Institutional Series, Inc.; Insurance
Management Series; Intermediate Municipal Trust; International
Series Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond
Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S.
Government Money Market Trust; Liberty Utility Fund, Inc.; Liquid
Cash Trust; Managed Series Trust; Mark Twain Funds; Marshall
Funds, Inc.; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; The Monitor Funds;
Municipal Securities Income Trust; New York Municipal Cash Trust;
111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage
Funds; RIMCO Monument Funds; The Shawmut Funds; Short-Term
Municipal Trust; Signet Select Funds; SouthTrust Vulcan Funds;
Star Funds; The Starburst Funds; The Starburst Funds II; Stock
and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-
Free Instruments Trust; Tower Mutual Funds; Trademark Funds;
Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust
for U.S. Treasury Obligations; Vision Fiduciary Funds, Inc.;
Vision Group of Funds, Inc.; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for
the following closed-end investment company: Liberty Term Trust,
Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief President and
Federated Investors Tower Executive Officer, Chief Trustee
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Vice President and
Federated Investors Tower President, and Treasurer, Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John A. Staley, IV Executive Vice President --
Federated Investors Tower and Assistant Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James R. Ball Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. 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.
Cash Trust Series II Federated Investors Tower
Registrant Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors Tower
Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent and
Shareholder Servicing Agent
Federated Administrative
Services Federated Investors Tower
Administrator Pittsburgh, PA 15222-3779
Federated Advisers Federated Investors Tower
Adviser Pittsburgh, PA 15222-3779
State Street Bank and
Trust Company P.O. Box 8604
Custodian Boston, MA 02266-8604
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, CASH TRUST SERIES II, has
duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 28th day of July, 1994.
CASH TRUST SERIES II
BY: /s/Charles H. Field
Charles H. Field, Assistant Secretary
Attorney in Fact for John F. Donahue
July 28, 1994
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/Charles H. Field
Charles H. Field Attorney In Fact July 28, 1994
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Richard B. Fisher* President
Edward C. Gonzales* Vice President and Treasurer
(Principal Financial and
Accounting Officer)
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
J. Christopher Donahue* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit 11 under Form N-1A
Exhibit 23 under 601/Reg S-K
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 5 to
Registration Statement (No. 33-38550) of Cash Trust Series II of our
reports dated July 8, 1994, appearing in the Prospectuses of Municipal Cash
Series II and Treasury Cash Series II, which are a part of such
Registration Statement, and to the references to us under the heading,
"Financial Highlights" in such Prospectuses.
DELOITTE & TOUCHE
Boston, Massachusetts
July 27, 1994
Exhibit 18 under Form N-1A
Exhibit 5 under Item 601/Reg S-K
HOUSTON, HOUSTON & DONNELLY
ATTORNEYS AT LAW
2510 CENTRE CITY TOWER
WILLIAM McC. HOUSTON PITTSBURGH, PA. 15222
FRED CHALMERS HOUSTON, JR. __________
THOMAS J. DONNELLY
JOHN F. MECK (412) 471-5828 FRED CHALMERS HOUSTON
FAX (412) 471-0736 (1914 - 1971)
MARIO SANTILLI, JR.
THEODORE M. HAMMER
July 27, 1994
Cash Trust Series II
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
As counsel to Cash Trust Series II ("Trust") we have reviewed Post-
effective Amendment No. 5 to the Trust's Registration Statement to be filed
with the Securities and Exchange Commission under the Securities Act of 1933
(File No. 33-38550). The subject Post-effective Amendment will be filed
pursuant to Paragraph (b) of Rule 485 and become effective pursuant to said
Rule on July 31, 1994.
Our review also included an examination of other relevant portions of
the amended 1933 Act Registration Statement of the Trust and such other
documents and records deemed appropriate. On the basis of this review we are
of the opinion that Post-effective Amendment No. 5 does not contain
disclosures which would render it ineligible to become effective pursuant to
Paragraph (b) of Rule 485.
We hereby consent to the filing of this representation letter as a part
of the Trust's Registration Statement filed with the Securities and Exchange
Commission under the Securities Act of 1933 and as part of any application or
registration statement filed under the Securities Laws of the States of the
United States.
Very truly yours,
Houston, Houston & Donnelly
By:/s/ Thomas J. Donnelly
TJD:heh
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/RegS-K
CUSTODIAN CONTRACT
Between
FEDERATED INVESTMENT COMPANIES
and
STATE STREET BANK AND TRUST COMPANY
and
FEDERATED SERVICES COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It 1
2. Duties of the Custodian With Respect to Property
of the Funds Held by the Custodian 2
2.1 Holding Securities 2
2.2 Delivery of Securities 2
2.3 Registration of Securities 5
2.4 Bank Accounts 6
2.5 Payments for Shares 7
2.6 Availability of Federal Funds 7
2.7 Collection of Income 7
2.8 Payment of Fund Moneys 8
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased. 9
2.10 Payments for Repurchases or Redemptions
of Shares of a Fund 9
2.11 Appointment of Agents 10
2.12 Deposit of Fund Assets in Securities System 10
2.13 Segregated Account 12
2.14 Joint Repurchase Agreements 13
2.15 Ownership Certificates for Tax Purposes 13
2.16 Proxies 13
2.17 Communications Relating to Fund Portfolio Securities 13
2.18 Proper Instructions 14
2.19 Actions Permitted Without Express Authority 14
2.20 Evidence of Authority 15
2.21 Notice to Trust by Custodian Regarding Cash Movement. 15
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income 15
4. Records 16
5. Opinion of Funds' Independent Public Accountants/Auditors 16
6. Reports to Trust by Independent Public Accountants/Auditors 17
7. Compensation of Custodian 17
8. Responsibility of Custodian 17
9. Effective Period, Termination and Amendment 19
10. Successor Custodian 20
11. Interpretive and Additional Provisions 21
12. Massachusetts Law to Apply 22
13. Notices 22
14. Counterparts 22
15. Limitations of Liability 22
CUSTODIAN CONTRACT
This Contract between those INVESTMENT COMPANIES listed on Exhibit 1, as
it may be amended from time to time, (the "Trust"), which may be
Massachusetts business trusts or Maryland corporations or have such other
form of organization as may be indicated, on behalf of the portfolios
(hereinafter collectively called the "Funds" and individually referred to
as a "Fund") of the Trust, having its principal place of business at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company,
having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian", and FEDERATED
SERVICES COMPANY, a Delaware Business trust company, having its principal
place of business at Federated Investors Tower, Pittsburgh, Pennsylvania,
15222-3779, hereinafter called ("Company").
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the assets
of each of the Funds of the Trust. Except as otherwise expressly
provided herein, the securities and other assets of each of the
Funds shall be segregated from the assets of each of the other Funds
and from all other persons and entities. The Trust will deliver to
the Custodian all securities and cash owned by the Funds and all
payments of income, payments of principal or capital distributions
received by them with respect to all securities owned by the Funds
from time to time, and the cash consideration received by them for
shares ("Shares") of beneficial interest/capital stock of the Funds
as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of the Funds held or received by the
Funds and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.18), the Custodian shall from time to time employ one or more sub-
custodians upon the terms specified in the Proper Instructions,
provided that the Custodian shall have no more or less
responsibility or liability to the Trust or any of the Funds on
account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian.
2.Duties of the Custodian With Respect to Property of the Funds Held by
the Custodian
2.1Holding Securities. The Custodian shall hold and physically
segregate for the account of each Fund all non-cash property,
including all securities owned by each Fund, other than
securities which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities
System", or securities which are subject to a joint repurchase
agreement with affiliated funds pursuant to Section 2.14. The
Custodian shall maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory
thereof, and shall conduct periodic physical inspections of
certificates representing stocks, bonds and other securities
held by it under this Contract in such manner as the Custodian
shall determine from time to time to be advisable in order to
verify the accuracy of such inventory. With respect to
securities held by any agent appointed pursuant to Section 2.11
hereof, and with respect to securities held by any sub-custodian
appointed pursuant to Section 1 hereof, the Custodian may rely
upon certificates from such agent as to the holdings of such
agent and from such sub-custodian as to the holdings of such sub-
custodian, it being understood that such reliance in no way
relieves the Custodian of its responsibilities under this
Contract. The Custodian will promptly report to the Trust the
results of such inspections, indicating any shortages or
discrepancies uncovered thereby, and take appropriate action to
remedy any such shortages or discrepancies.
2.2Delivery of Securities. The Custodian shall release and deliver
securities owned by a Fund held by the Custodian or in a
Securities System account of the Custodian only upon receipt of
Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following
cases:
(1)Upon sale of such securities for the account of a Fund and
receipt of payment therefor;
(2)Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Trust;
(3)In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.12 hereof;
(4)To the depository agent in connection with tender or other
similar offers for portfolio securities of a Fund, in
accordance with the provisions of Section 2.17 hereof;
(5)To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(6)To the issuer thereof, or its agent, for transfer into the
name of a Fund or into the name of any nominee or
of the Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.11 or into the name
or nominee name of any sub-custodian appointed pursuant to
Section 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to
the Custodian;
(7)Upon the sale of such securities for the account of a Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery custom";
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's
own failure to act in accordance with the standard of
reasonable care or any higher standard of care imposed upon
the Custodian by any applicable law or regulation if such
above-stated standard of reasonable care were not part of
this Contract;
(8)For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
(9)In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
(10)For delivery in connection with any loans of portfolio
securities of a Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified
by the Trust, (b) certificated securities of a description
specified by the Trust, registered in the name of the Fund
or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer, or (c)
securities of a description specified by the Trust,
transferred through a Securities System in accordance with
Section 2.12 hereof;
(11)For delivery as security in connection with any borrowings
requiring a pledge of assets by a Fund, but only against
receipt of amounts borrowed, except that in cases where
additional collateral is required to secure a borrowing
already made, further securities may be released for the
purpose;
(12)For delivery in accordance with the provisions of any agree
ment among the Trust or a Fund, the Custodian and a broker-
dealer registered under the Securities Exchange Act of
1934, as amended, (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options
Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions for a Fund;
(13)For delivery in accordance with the provisions of any agree
ment among the Trust or a Fund, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations,
regarding account deposits in connection with transaction
for a Fund;
(14)Upon receipt of instructions from the transfer agent
("Transfer Agent") for a Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(15)For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Executive Committee of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth
the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian
(other than bearer securities) shall be registered in the name of
a particular Fund or in the name of any nominee of the Fund or
of any nominee of the Custodian which nominee shall be assigned
exclusively to the Fund, unless the Trust has authorized in
writing the appointment of a nominee to be used in common with
other registered investment companies affiliated with the Fund,
or in the name or nominee name of any agent appointed pursuant
to Section 2.11 or in the name or nominee name of any sub-
custodian appointed pursuant to Section 1. All securities
accepted by the Custodian on behalf of a Fund under the terms of
this Contract shall be in "street name" or other good delivery
form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the name of each Fund, subject only
to draft or order by the Custodian acting pursuant to the terms
of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from
or for the account of each Fund, other than cash maintained in a
joint repurchase account with other affiliated funds pursuant to
Section 2.14 of this Contract or by a particular Fund in a bank
account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940, as amended, (the "1940
Act"). Funds held by the Custodian for a Fund may be deposited
by it to its credit as Custodian in the Banking Department of
the Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each
such bank or trust company and the funds to be deposited with
each such bank or trust company shall be approved by vote of a
majority of the Board of Trustees/Directors ("Board") of the
Trust. Such funds shall be deposited by the Custodian in its
capacity as Custodian for the Fund and shall be withdrawable by
the Custodian only in that capacity. If requested by the Trust,
the Custodian shall furnish the Trust, not later than twenty
(20) days after the last business day of each month, an internal
reconciliation of the closing balance as of that day in all
accounts described in this section to the balance shown on the
daily cash report for that day rendered to the Trust.
2.5Payments for Shares. The Custodian shall make such arrangements
with the Transfer Agent of each Fund, as will enable the
Custodian to receive the cash consideration due to each Fund and
will deposit into each Fund's account such payments as are
received from the Transfer Agent. The Custodian will provide
timely notification to the Trust and the Transfer Agent of any
receipt by it of payments for Shares of the respective Fund.
2.6Availability of Federal Funds. Upon mutual agreement between the
Trust and the Custodian, the Custodian shall make federal funds
available to the Funds as of specified times agreed upon from
time to time by the Trust and the Custodian in the amount of
checks, clearing house funds, and other non-federal funds
received in payment for Shares of the Funds which are deposited
into the Funds' accounts.
2.7 Collection of Income.
(1)The Custodian shall collect on a timely basis all income and
other payments with respect to registered securities held
hereunder to which each Fund shall be entitled either by
law or pursuant to custom in the securities business, and
shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date
of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such
income, as collected, to each Fund's custodian account.
Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when
they become due and shall collect interest when due on
securities held hereunder. The collection of income due
the Funds on securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of the
Trust. The Custodian will have no duty or responsibility
in connection therewith, other than to provide the Trust
with such information or data as may be necessary to assist
the Trust in arranging for the timely delivery to the
Custodian of the income to which each Fund is properly
entitled.
(2)The Custodian shall promptly notify the Trust whenever income
due on securities is not collected in due course and will
provide the Trust with monthly reports of the status of
past due income unless the parties otherwise agree.
2.8Payment of Fund Moneys. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of each Fund in the
following cases only:
(1)Upon the purchase of securities, futures contracts or options
on futures contracts for the account of a Fund but only (a)
against the delivery of such securities, or evidence of
title to futures contracts, to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the 1940 Act to
act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of
the Fund or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer, (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set
forth in Section 2.12 hereof or (c) in the case of
repurchase agreements entered into between the Trust and
any other party, (i) against delivery of the securities
either in certificate form or through an entry crediting
the Custodian's account at the Federal Reserve Bank with
such securities or (ii) against delivery of the receipt
evidencing purchase for the account of the Fund of
securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase
such securities from the Fund;
(2)In connection with conversion, exchange or surrender of
securities owned by a Fund as set forth in Section 2.2 hereof;
(3)For the redemption or repurchase of Shares of a Fund issued
by the Trust as set forth in Section 2.10 hereof;
(4)For the payment of any expense or liability incurred by a
Fund, including but not limited to the following payments for
the account of the Fund: interest; taxes; management,
accounting, transfer agent and legal fees; and operating
expenses of the Fund, whether or not such expenses are to
be in whole or part capitalized or treated as deferred
expenses;
(5)For the payment of any dividends on Shares of a Fund declared
pursuant to the governing documents of the Trust;
(6)For payment of the amount of dividends received in respect of
securities sold short;
(7)For any other proper purpose, but only upon receipt of, in a
ddition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring
such purpose to be a proper purpose, and naming the person
or persons to whom such payment is to be made.
2.9Liability for Payment in Advance of Receipt of Securities Purchased.
In any and every case where payment for purchase of
securities for the account of a Fund is made by the Custodian in
advance of receipt of the securities purchased, in the absence
of specific written instructions from the Trust to so pay in
advance, the Custodian shall be absolutely liable to the Fund
for such securities to the same extent as if the securities had
been received by the Custodian.
2.10Payments for Repurchases or Redemptions of Shares of a Fund.
From such funds as may be available for the purpose of
repurchasing or redeeming Shares of a Fund, but subject to the
limitations of the Declaration of Trust/Articles of
Incorporation and any applicable votes of the Board of the Trust
pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for
payment to holders of shares of such Fund who have delivered to
the Transfer Agent a request for redemption or repurchase of
their shares including without limitation through bank drafts,
automated clearinghouse facilities, or by other means. In
connection with the redemption or repurchase of Shares of the
Funds, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders.
2.11Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other
bank or trust company which is itself qualified under the 1940
Act and any applicable state law or regulation, to act as a
custodian, as its agent to carry out such of the provisions of
this Section 2 as the Custodian may from time to time direct;
provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities
hereunder.
2.12Deposit of Fund Assets in Securities System. The Custodian may
deposit and/or maintain securities owned by the Funds in a
clearing agency registered with the Securities and Exchange
Commission ("SEC") under Section 17A of the Exchange Act, which
acts as a securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and certain
federal agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board and
SEC rules and regulations, if any, and subject to the following
provisions:
(1)The Custodian may keep securities of each Fund in a Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the Securities System which shall
not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
(2)The records of the Custodian with respect to securities of the
Funds which are maintained in a Securities System shall identify by
book-entry those securities belonging to each Fund;
(3)The Custodian shall pay for securities purchased for the account
of each Fund upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund. The
Custodian shall transfer securities sold for the account of a Fund
upon (i) receipt of advice from the Securities System that
payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account
of the Fund. Copies of all advices from the Securities System of
transfers of securities for the account of a
Fund shall identify the Fund, be maintained for the Fund
by the Custodian and be provided to the Trust at its request.
Upon request, the Custodian shall furnish the
Trust confirmation of each transfer to or from the account of a
Fund in the form of a written advice or notice and shall
furnish to the Trust copies of daily transaction
sheets reflecting each day's transactions in the Securities
System for the account of a Fund.
(4)The Custodian shall provide the Trust with any report obtained
by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for
safeguarding securities deposited in the Securities System;
(5)The Custodian shall have received the initial certificate,
required by Section 9 hereof;
(6)Anything to the contrary in this Contract notwithstanding,
the Custodian shall be liable
to the Trust for any loss or damage to a Fund resulting from use
of the Securities
System by reason of any negligence, misfeasance or misconduct of
the Custodian or any of its agents or of any of its or
their employees or from failure of the Custodian or
any such agent to enforce effectively such rights as it may
have against the Securities System; at the
election of the Trust, it shall be entitled to be subrogated
to the rights of the Custodian with respect to any claim against
the Securities System
or any other person which the Custodian may have as a
consequence of any such loss or
damage if and to the extent that a Fund has not been made
whole for any such loss or damage.
(7)The authorization contained in this Section 2.12 shall not
relieve the Custodian from using reasonable care and diligence
in making use of any Securities System.
2.13Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or
accounts for and on behalf of each Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the provisions of
any agreement among the Trust, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or
any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions for a Fund, (ii)
for purpose of segregating cash or government securities in
connection with options purchased, sold or written for a Fund or
commodity futures contracts or options thereon purchased or sold
for a Fund, (iii) for the purpose of compliance by the Trust or
a Fund with the procedures required by any release or releases
of the SEC relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
corporate purposes, but only, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board or of the Executive Committee
signed by an officer of the Trust and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be
proper corporate purposes.
2.14Joint Repurchase Agreements. Upon the receipt of Proper
Instructions, the Custodian shall deposit and/or maintain any assets of
a Fund and any affiliated funds which are subject to joint
repurchase transactions in an account established solely for
such transactions for the Fund and its affiliated funds. For
purposes of this Section 2.14, "affiliated funds" shall include
all investment companies and their portfolios for which
subsidiaries or affiliates of Federated Investors serve as
investment advisers, distributors or administrators in
accordance with applicable exemptive orders from the SEC. The
requirements of segregation set forth in Section 2.1 shall be
deemed to be waived with respect to such assets.
2.15Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of a Fund
held by it and in connection with transfers of securities.
2.16Proxies. The Custodian shall, with respect to the securities
held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered
otherwise than in the name of a Fund or a nominee of a Fund, all
proxies, without indication of the manner in which such proxies
are to be voted, and shall promptly deliver to the Trust such
proxies, all proxy soliciting materials and all notices relating
to such securities.
2.17Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in
connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by the
Custodian from issuers of the securities being held for the
Fund. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Trust all written information
received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Trust desires to
take action with respect to any tender offer, exchange offer or
any other similar transaction, the Trust shall notify the
Custodian in writing at least three business days prior to the
date on which the Custodian is to take such action. However,
the Custodian shall nevertheless exercise its best efforts to
take such action in the event that notification is received
three business days or less prior to the date on which action is
required.
2.18Proper Instructions. Proper Instructions as used throughout this
Section 2 means a writing signed or initialed by one or more
person or persons as the Board shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions
will be deemed to be Proper Instructions if (a) the Custodian
reasonably believes them to have been given by a person
previously authorized in Proper Instructions to give such
instructions with respect to the transaction involved, and (b)
the Trust promptly causes such oral instructions to be confirmed
in writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the Board of
the Trust accompanied by a detailed description of procedures
approved by the Board, Proper Instructions may include
communications effected directly between electro-mechanical or
electronic devices provided that the Board and the Custodian are
satisfied that such procedures afford adequate safeguards for a
Fund's assets.
2.19Actions Permitted Without Express Authority. The Custodian may
in its discretion, without express authority from the Trust:
(1)make payments to itself or others for minor expenses of hand
ling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Trust in such form that it
may be allocated to the affected Fund;
(2)surrender securities in temporary form for securities in
definitive form;
(3)endorse for collection, in the name of a Fund, checks, drafts
and other negotiable instruments; and
(4)in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and
property of each Fund except as otherwise directed by the
Trust.
2.20Evidence of Authority. The Custodian shall be protected in
acting upon any instructions, notice, request, consent, certificate
or other instrument or paper reasonably believed by it to be
genuine and to have been properly executed on behalf of a Fund.
The Custodian may receive and accept a certified copy of a vote
of the Board of the Trust as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or
(b) of any determination of or any action by the Board pursuant
to the Declaration of Trust/Articles of Incorporation as
described in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written
notice to the contrary.
2.21Notice to Trust by Custodian Regarding Cash Movement. The
Custodian will provide timely notification to the Trust of any
receipt of cash, income or payments to the Trust and the release
of cash or payment by the Trust.
3.Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of the Trust to keep
the books of account of each Fund and/or compute the net asset value
per share of the outstanding Shares of each Fund or, if directed in
writing to do so by the Trust, shall itself keep such books of
account and/or compute such net asset value per share. If so
directed, the Custodian shall also calculate daily the net income of
a Fund as described in the Fund's currently effective prospectus and
Statement of Additional Information ("Prospectus") and shall advise
the Trust and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the Trust
to do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The
calculations of the net asset value per share and the daily income
of a Fund shall be made at the time or times described from time to
time in the Fund's currently effective Prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as
will meet the obligations of the Trust and the Funds under the 1940
Act, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder, and specifically including identified cost
records used for tax purposes. All such records shall be the
property of the Trust and shall at all times during the regular
business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Trust and employees
and agents of the SEC. In the event of termination of this
Contract, the Custodian will deliver all such records to the Trust,
to a successor Custodian, or to such other person as the Trust may
direct. The Custodian shall supply daily to the Trust a tabulation
of securities owned by a Fund and held by the Custodian and shall,
when requested to do so by the Trust and for such compensation as
shall be agreed upon between the Trust and the Custodian, include
certificate numbers in such tabulations.
5. Opinion of Funds' Independent Public Accountants/Auditors.
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions
from each Fund's independent public accountants/auditors with
respect to its activities hereunder in connection with the
preparation of the Fund's registration statement, periodic reports,
or any other reports to the SEC and with respect to any other
requirements of such Commission.
6. Reports to Trust by Independent Public Accountants/Auditors.
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public
accountants/auditors for each Fund on the accounting system,
internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian for the
Fund under this Contract; such reports shall be of sufficient scope
and in sufficient detail, as may reasonably be required by the
Trust, to provide reasonable assurance that any material
inadequacies would be disclosed by such examination and, if there
are no such inadequacies, the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between Company and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in
carrying out the provisions of this Contract; provided, however,
that the Custodian shall be held to any higher standard of care
which would be imposed upon the Custodian by any applicable law or
regulation if such above stated standard of reasonable care was not
part of this Contract. The Custodian shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the
Trust) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice, provided that
such action is not in violation of applicable federal or state laws
or regulations, and is in good faith and without negligence.
Subject to the limitations set forth in Section 15 hereof, the
Custodian shall be kept indemnified by the Trust but only from the
assets of the Fund involved in the issue at hand and be without
liability for any action taken or thing done by it in carrying out
the terms and provisions of this Contract in accordance with the
above standards.
In order that the indemnification provisions contained in this
Section 8 shall apply, however, it is understood that if in any case
the Trust may be asked to indemnify or save the Custodian harmless,
the Trust shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further understood
that the Custodian will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents or
appears likely to present the probability of such a claim for
indemnification. The Trust shall have the option to defend the
Custodian against any claim which may be the subject of this
indemnification, and in the event that the Trust so elects it will
so notify the Custodian and thereupon the Trust shall take over
complete defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for which it
shall seek indemnification under this Section. The Custodian shall
in no case confess any claim or make any compromise in any case in
which the Trust will be asked to indemnify the Custodian except with
the Trust's prior written consent.
Notwithstanding the foregoing, the responsibility of the Custodian
with respect to redemptions effected by check shall be in accordance
with a separate Agreement entered into between the Custodian and the
Trust.
If the Trust requires the Custodian to take any action with respect
to securities, which action involves the payment of money or which
action may, in the reasonable opinion of the Custodian, result in
the Custodian or its nominee assigned to a Fund being liable for the
payment of money or incurring liability of some other form, the
Custodian may request the Trust, as a prerequisite to requiring the
Custodian to take such action, to provide indemnity to the Custodian
in an amount and form satisfactory to the Custodian.
Subject to the limitations set forth in Section 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee
from and against all taxes, charges, expenses, assessments, claims
and liabilities (including counsel fees) (referred to herein as
authorized charges) incurred or assessed against it or its nominee
in connection with the performance of this Contract, except such as
may arise from it or its nominee's own failure to act in accordance
with the standard of reasonable care or any higher standard of care
which would be imposed upon the Custodian by any applicable law or
regulation if such above-stated standard of reasonable care were not
part of this Contract. To secure any authorized charges and any
advances of cash or securities made by the Custodian to or for the
benefit of a Fund for any purpose which results in the Fund
incurring an overdraft at the end of any business day or for
extraordinary or emergency purposes during any business day, the
Trust hereby grants to the Custodian a security interest in and
pledges to the Custodian securities held for the Fund by the
Custodian, in an amount not to exceed 10 percent of the Fund's gross
assets, the specific securities to be designated in writing from
time to time by the Trust or the Fund's investment adviser. Should
the Trust fail to make such designation, or should it instruct the
Custodian to make advances exceeding the percentage amount set forth
above and should the Custodian do so, the Trust hereby agrees that
the Custodian shall have a security interest in all securities or
other property purchased for a Fund with the advances by the
Custodian, which securities or property shall be deemed to be
pledged to the Custodian, and the written instructions of the Trust
instructing their purchase shall be considered the requisite
description and designation of the property so pledged for purposes
of the requirements of the Uniform Commercial Code. Should the
Trust fail to cause a Fund to repay promptly any authorized charges
or advances of cash or securities, subject to the provision of the
second paragraph of this Section 8 regarding indemnification, the
Custodian shall be entitled to use available cash and to dispose of
pledged securities and property as is necessary to repay any such
advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the
other party, such termination to take effect not sooner than sixty
(60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.12 hereof
in the absence of receipt of an initial certificate of the Secretary
or an Assistant Secretary that the Board of the Trust has approved
the initial use of a particular Securities System as required in
each case by Rule 17f-4 under the 1940 Act; provided further,
however, that the Trust shall not amend or terminate this Contract
in contravention of any applicable federal or state regulations, or
any provision of the Declaration of Trust/Articles of Incorporation,
and further provided, that the Trust may at any time by action of
its Board (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or
(ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
appropriate banking regulatory agency or upon the happening of a
like event at the direction of an appropriate regulatory agency or
court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the
Trust, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed
and in the form for transfer, all securities then held by it
hereunder for each Fund and shall transfer to separate accounts of
the successor custodian all of each Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of
the Board of the Trust, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance
with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board shall have been delivered
to the Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to deliver
to a bank or trust company, which is a "bank" as defined in the 1940
Act, (delete "doing business ... Massachusetts" unless SSBT is the
Custodian) doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$100,000,000, all securities, funds and other properties held by the
Custodian and all instruments held by the Custodian relative thereto
and all other property held by it under this Contract for each Fund
and to transfer to separate accounts of such successor custodian
all of each Fund's securities held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in
the possession of the Custodian after the date of termination hereof
owing to failure of the Trust to procure the certified copy of the
vote referred to or of the Board to appoint a successor custodian,
the Custodian shall be entitled to fair compensation for its
services during such period as the Custodian retains possession of
such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and
the Trust may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall
be in a writing signed by both parties and shall be annexed hereto,
provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any
provision of the Declaration of Trust/Articles of Incorporation. No
interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or
to the Custodian at address for SSBT only: 225 Franklin Street,
Boston, Massachusetts, 02110, or to such other address as the Trust
or the Custodian may hereafter specify, shall be deemed to have been
properly delivered or given hereunder to the respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust of
those Trusts which are business trusts and agrees that the
obligations and liabilities assumed by the Trust and any Fund
pursuant to this Contract, including, without limitation, any
obligation or liability to indemnify the Custodian pursuant to
Section 8 hereof, shall be limited in any case to the relevant Fund
and its assets and that the Custodian shall not seek satisfaction of
any such obligation from the shareholders of the relevant Fund, from
any other Fund or its shareholders or from the Trustees, Officers,
employees or agents of the Trust, or any of them. In addition, in
connection with the discharge and satisfaction of any claim made by
the Custodian against the Trust, for whatever reasons, involving
more than one Fund, the Trust shall have the exclusive right to
determine the appropriate allocations of liability for any such
claim between or among the Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed effective as of the 1st day of
December, 1993.
ATTEST: INVESTMENT COMPANIES (Except those
listed below)
/s/John G. McGonigle_________ By /s/John G. Donahue_____________
John G. McGonigle John F. Donahue
Secretary Chairman
ATTEST: STATE STREET BANK AND TRUST
COMPANY
/s/ Ed McKenzie______________ By /s/ F. J. Sidoti, Jr.___________
(Assistant) Secretary Typed Name: Frank J. Sidoti, Jr.
Typed Name: Ed McKenzie Title: Vice President
ATTEST: FEDERATED SERVICES COMPANIY
/s/ Jeannette Fisher-Garber______ By /s/ James J. Dolan________________
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
CONTRACT
DATE INVESTMENT COMPANY
12/1/93 Cash Trust Series II
12/1/93 Municipal Cash Series II
12/1/93 Treasury Cash Series II
Exhibit 9 i under Form N-1A
Exhibit 10 under Item
601/Reg. S-K
AGREEMENT
for
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
and
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of the 1st day of December, 1993, by and between
those investment companies listed on Exhibit 1 as may be amended from
time to time, having their principal office and place of business at
Federated Investors Tower, Pittsburgh, PA 15222-3779 (the "Trust"), on
behalf of the portfolios (individually referred to herein as a "Fund" and
collectively as "Funds") of the Trust, and FEDERATED SERVICES COMPANY, a
Delaware business trust, having its principal office and place of
business at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-
3779 (the "Company").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended
(the "1940 Act"), with authorized and issued shares of capital stock or
beneficial interest ("Shares"); and
WHEREAS, the Trust wishes to retain the Company to provide certain
pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes"), and the
Company is willing to furnish such services; and
WHEREAS, the Trust desires to appoint the Company as its transfer
agent, dividend disbursing agent, and agent in connection with certain
other activities, and the Company desires to accept such appointment; and
WHEREAS, the Trust desires to appoint the Company as its agent to
select, negotiate and subcontract for custodian services from an approved
list of qualified banks and the Company desires to accept such
appointment; and
WHEREAS, from time to time the Trust may desire and may instruct the
Company to subcontract for the performance of certain of its duties and
responsibilities hereunder to State Street Bank and Trust Company or
another agent (the "Agent"); and
WHEREAS, the words Trust and Fund may be used interchangeably for
those investment companies consisting of only one portfolio;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:
SECTION ONE: Fund Accounting.
Article 1. Appointment.
The Trust hereby appoints the Company to provide certain pricing and
accounting services to the Funds, and/or the Classes, for the period and
on the terms set forth in this Agreement. The Company accepts such
appointment and agrees to furnish the services herein set forth in return
for the compensation as provided in Article 3 of this Section.
Article 2. The Company and Duties.
Subject to the supervision and control of the Trust's Board of
Trustees or Directors ("Board"), the Company will assist the Trust with
regard to fund accounting for the Trust, and/or the Funds, and/or the
Classes, and in connection therewith undertakes to perform the following
specific services;
A. Value the assets of the Funds and determine the net asset value
per share of each Fund and/or Class, at the time and in the
manner from time to time determined by the Board and as set forth
in the Prospectus and Statement of Additional Information
("Prospectus") of each Fund;
B. Calculate the net income of each of the Funds, if any;
C. Calculate capital gains or losses of each of the Funds resulting
from sale or disposition of assets, if any;
D. Maintain the general ledger and other accounts, books and
financial records of the Trust, including for each Fund, and/or
Class, as required under Section 31(a) of the 1940 Act and the
Rules thereunder in connection with the services provided by the
Company;
E. Preserve for the periods prescribed by Rule 31a-2 under the 1940
Act the records to be maintained by Rule 31a-1 under the 1940 Act
in connection with the services provided by the Company. The
Company further agrees that all such records it maintains for the
Trust are the property of the Trust and further agrees to
surrender promptly to the Trust such records upon the Trust's
request;
F. At the request of the Trust, prepare various reports or other
financial documents required by federal, state and other
applicable laws and regulations; and
G. Such other similar services as may be reasonably requested by the
Trust.
Article 3. Compensation and Allocation of Expenses.
A. The Funds will compensate the Company for its services rendered
pursuant to Section One of this Agreement in accordance with the
fees set forth on Fee Schedules A ("A1, A2, A3 etc..."), annexed
hereto and incorporated herein, as may be added or amended from
time to time. Such fees do not include out-of-pocket
disbursements of the Company for which the Funds shall reimburse
the Company upon receipt of a separate invoice. Out-of-pocket
disbursements shall include, but shall not be limited to, the
items specified in Schedules B ("B1, B2, B3, etc..."), annexed
hereto and incorporated herein, as may be added or amended from
time to time. Schedules B may be modified by the Company upon
not less than thirty days' prior written notice to the Trust.
B. The Fund and/or the Class, and not the Company, shall bear the
cost of: custodial expenses; membership dues in the Investment
Company Institute or any similar organization; transfer agency
expenses; investment advisory expenses; costs of printing and
mailing stock certificates, Prospectuses, reports and notices;
administrative expenses; interest on borrowed money; brokerage
commissions; taxes and fees payable to federal, state and other
governmental agencies; fees of Trustees or Directors of the
Trust; independent auditors expenses; Federated Administrative
Services and/or Federated Administrative Services, Inc. legal and
audit department expenses billed to Federated Services Company
for work performed related to the Trust, the Funds, or the
Classes; law firm expenses; or other expenses not specified in
this Article 3 which may be properly payable by the Funds and/or
classes.
C. The Company will send an invoice to each of the Funds as soon as
practicable after the end of each month. Each invoice will
provide detailed information about the compensation and out-of-
pocket expenses in accordance with Schedules A and Schedules B.
The Funds and or the Classes will pay to the Company the amount
of such invoice within 30 days of receipt of the invoices.
D. Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedules A revised Schedules dated and
signed by a duly authorized officer of the Trust and/or the Funds
and a duly authorized officer of the Company.
E. The fee for the period from the effective date of this Agreement
with respect to a Fund or a Class to the end of the initial month
shall be prorated according to the proportion that such period
bears to the full month period. Upon any termination of this
Agreement before the end of any month, the fee for such period
shall be prorated according to the proportion which such period
bears to the full month period. For purposes of determining fees
payable to the Company, the value of the Fund's net assets shall
be computed at the time and in the manner specified in the Fund's
Prospectus.
F. The Company, in its sole discretion, may from time to time
subcontract to, employ or associate with itself such person or
persons as the Company may believe to be particularly suited to
assist it in performing services under this Section One. Such
person or persons may be third-party service providers, or they
may be officers and employees who are employed by both the
Company and the Funds. The compensation of such person or
persons shall be paid by the Company and no obligation shall be
incurred on behalf of the Trust, the Funds, or the Classes in
such respect.
SECTION TWO: Shareholder Recordkeeping.
Article 4. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement, the
Trust hereby appoints the Company to act as, and the Company agrees to
act as, transfer agent and dividend disbursing agent for each Fund's
Shares, and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of any Fund
("Shareholder(s)"), including without limitation any periodic investment
plan or periodic withdrawal program.
As used throughout this Agreement, a "Proper Instruction" means a
writing signed or initialed by one or more person or persons as the Board
shall have from time to time authorized. Each such writing shall set
forth the specific transaction or type of transaction involved. Oral
instructions will be deemed to be Proper Instructions if (a) the Company
reasonably believes them to have been given by a person previously
authorized in Proper Instructions to give such instructions with respect
to the transaction involved, and (b) the Trust, or the Fund, and the
Company promptly cause such oral instructions to be confirmed in writing.
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Trust, or the
Fund, and the Company are satisfied that such procedures afford adequate
safeguards for the Fund's assets. Proper Instructions may only be
amended in writing.
Article 5. Duties of the Company.
The Company shall perform the following services in accordance with
Proper Instructions as may be provided from time to time by the Trust as
to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the
purchase of shares and promptly deliver payment and
appropriate documentation therefore to the custodian of the
relevant Fund, (the "Custodian"). The Company shall notify
the Fund and the Custodian on a daily basis of the total
amount of orders and payments so delivered.
(2) Pursuant to purchase orders and in accordance with the
Fund's current Prospectus, the Company shall compute and
issue the appropriate number of Shares of each Fund and/or
Class and hold such Shares in the appropriate Shareholder
accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or
its agent requests a certificate, the Company, as Transfer
Agent, shall countersign and mail by first class mail, a
certificate to the Shareholder at its address as set forth
on the transfer books of the Funds, and/or Classes, subject
to any Proper Instructions regarding the delivery of
certificates.
(4) In the event that any check or other order for the purchase
of Shares of the Fund and/or Class is returned unpaid for
any reason, the Company shall debit the Share account of
the Shareholder by the number of Shares that had been
credited to its account upon receipt of the check or other
order, promptly mail a debit advice to the Shareholder, and
notify the Fund and/or Class of its action. In the event
that the amount paid for such Shares exceeds proceeds of
the redemption of such Shares plus the amount of any
dividends paid with respect to such Shares, the Fund
and/the Class or its distributor will reimburse the Company
on the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as
Dividend Disbursing Agent for the Funds in accordance with
the provisions of its governing document and the then-
current Prospectus of the Fund. The Company shall prepare
and mail or credit income, capital gain, or any other
payments to Shareholders. As the Dividend Disbursing
Agent, the Company shall, on or before the payment date of
any such distribution, notify the Custodian of the
estimated amount required to pay any portion of said
distribution which is payable in cash and request the
Custodian to make available sufficient funds for the cash
amount to be paid out. The Company shall reconcile the
amounts so requested and the amounts actually received with
the Custodian on a daily basis. If a Shareholder is
entitled to receive additional Shares by virtue of any such
distribution or dividend, appropriate credits shall be made
to the Shareholder's account, for certificated Funds and/or
Classes, delivered where requested; and
(2) The Company shall maintain records of account for each Fund
and Class and advise the Trust, each Fund and Class and its
Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or
set forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall
notify the Funds on a daily basis of the total amount of
redemption requests processed and monies paid to the
Company by the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds
from the Custodian with respect to any redemption, the
Company shall pay or cause to be paid the redemption
proceeds in the manner instructed by the redeeming
Shareholders, pursuant to procedures described in the then-
current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request
for redemption does not comply with the procedures for
redemption approved by the Fund, the Company shall promptly
notify the Shareholder of such fact, together with the
reason therefor, and shall effect such redemption at the
price applicable to the date and time of receipt of
documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the
registered owners thereof.
(5) The Company shall identify and process abandoned accounts
and uncashed checks for state escheat requirements on an
annual basis and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each
Fund, and/or Class, and maintain pursuant to applicable
rules of the Securities and Exchange Commission ("SEC") a
record of the total number of Shares of the Fund and/or
Class which are authorized, based upon data provided to it
by the Fund, and issued and outstanding. The Company shall
also provide the Fund on a regular basis or upon reasonable
request with the total number of Shares which are
authorized and issued and outstanding, but shall have no
obligation when recording the issuance of Shares, except as
otherwise set forth herein, to monitor the issuance of such
Shares or to take cognizance of any laws relating to the
issue or sale of such Shares, which functions shall be the
sole responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by
the Trust or the Fund to include a record for each
Shareholder's account of the following:
(a) Name, address and tax identification number (and
whether such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account,
including dividends paid and date and price for all
transactions;
(d) Any stop or restraining order placed against the
account;
(e) Information with respect to withholding in the case of
a foreign account or an account for which withholding
is required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application,
dividend address and correspondence relating to the
current maintenance of the account;
(g) Certificate numbers and denominations for any
Shareholder holding certificates;
(h) Any information required in order for the Company to
perform the calculations contemplated or required by
this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such
record retention shall be at the expense of the Company,
and such records may be inspected by the Fund at reasonable
times. The Company may, at its option at any time, and
shall forthwith upon the Fund's demand, turn over to the
Fund and cease to retain in the Company's files, records
and documents created and maintained by the Company
pursuant to this Agreement, which are no longer needed by
the Company in performance of its services or for its
protection. If not so turned over to the Fund, such
records and documents will be retained by the Company for
six years from the year of creation, during the first two
of which such documents will be in readily accessible form.
At the end of the six year period, such records and
documents will either be turned over to the Fund or
destroyed in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the
following information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in
each state for "blue sky" purposes as determined
according to Proper Instructions delivered from time
to time by the Fund to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption
fees, or other transaction- or sales-related
payments;
(f) Such other information as may be agreed upon from time
to time.
(2) The Company shall prepare in the appropriate form, file with
the Internal Revenue Service and appropriate state
agencies, and, if required, mail to Shareholders, such
notices for reporting dividends and distributions paid as
are required to be so filed and mailed and shall withhold
such sums as are required to be withheld under applicable
federal and state income tax laws, rules and regulations.
(3) In addition to and not in lieu of the services set forth
above, the Company shall:
(a) Perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant,
agent in connection with accumulation, open-account
or similar plans (including without limitation any
periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining
all Shareholder accounts, mailing Shareholder reports
and Prospectuses to current Shareholders, withholding
taxes on accounts subject to back-up or other
withholding (including non-resident alien accounts),
preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms
required with respect to dividends and distributions
by federal authorities for all Shareholders,
preparing and mailing confirmation forms and
statements of account to Shareholders for all
purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts,
preparing and mailing activity statements for
Shareholders, and providing Shareholder account
information; and
(b) provide a system which will enable the Fund to monitor
the total number of Shares of each Fund and/or Class
sold in each state ("blue sky reporting"). The Fund
shall by Proper Instructions (i) identify to the
Company those transactions and assets to be treated
as exempt from the blue sky reporting for each state
and (ii) verify the classification of transactions
for each state on the system prior to activation and
thereafter monitor the daily activity for each state.
The responsibility of the Company for each Fund's
and/or Class's state blue sky registration status is
limited solely to the recording of the initial
classification of transactions or accounts with
regard to blue sky compliance and the reporting of
such transactions and accounts to the Fund as
provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other
correspondence as may from time to time be addressed to the
Company;
(2) The Company shall prepare Shareholder meeting lists, mail
proxy cards and other material supplied to it by the Fund
in connection with Shareholder Meetings of each Fund;
receive, examine and tabulate returned proxies, and certify
the vote of the Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check
forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of,
such certificates, forms and devices.
Article 6. Duties of the Trust.
A. Compliance
The Trust or Fund assume full responsibility for the preparation,
contents and distribution of their own and/or their classes'
Prospectus and for complying with all applicable requirements of
the Securities Act of 1933, as amended (the "1933 Act"), the 1940
Act and any laws, rules and regulations of government authorities
having jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of
blank Share certificates and from time to time shall renew such
supply upon request of the Company. Such blank Share
certificates shall be properly signed, manually or by facsimile,
if authorized by the Trust and shall bear the seal of the Trust
or facsimile thereof; and notwithstanding the death, resignation
or removal of any officer of the Trust authorized to sign
certificates, the Company may continue to countersign
certificates which bear the manual or facsimile signature of such
officer until otherwise directed by the Trust.
C. Distributions
The Fund shall promptly inform the Company of the declaration of
any dividend or distribution on account of any Fund's shares.
Article 7. Compensation and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual maintenance fee for each Shareholder account as set out in
Schedules C ("C1, C2, C3 etc..."), attached hereto, as may be
added or amended from time to time. Such fees may be changed
from time to time subject to written agreement between the Trust
and the Company. Pursuant to information in the Fund Prospectus
or other information or instructions from the Fund, the Company
may sub-divide any Fund into Classes or other sub-components for
recordkeeping purposes. The Company will charge the Fund the
fees set forth on Schedule C for each such Class or sub-component
the same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust
and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items set
out in Schedules D ("D1, D2, D3 etc..."), attached hereto, as may
be added or amended from time to time. In addition, any other
expenses incurred by the Company at the request or with the
consent of the Trust and/or the Fund, will be reimbursed by the
appropriate Fund.
C. Payment
The Company shall send an invoice with respect to fees and
reimbursable expenses to the Trust or each of the Funds as soon
as practicable at the end of each month. Each invoice will
provide detailed information about the Compensation and out-of-
pocket expenses in accordance with Schedules C and Schedules D.
The Trust or the Funds will pay to the Company the amount of such
invoice within 30 days following the receipt of the invoices.
Article 8. Assignment of Shareholder Recordkeeping.
Except as provided below, no right or obligation under this
Section Two may be assigned by either party without the written
consent of the other party.
(1) This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors
and assigns.
(2) The Company may without further consent on the part of the
Trust subcontract for the performance hereof with (A) State
Street Bank and its subsidiary, Boston Financial Data
Services, Inc., a Massachusetts Trust ("BFDS"), which is
duly registered as a transfer agent pursuant to
Section 17A(c)(1) of the Securities Exchange Act of 1934,
as amended, or any succeeding statute ("Section
17A(c)(1)"), or (B) a BFDS subsidiary duly registered as a
transfer agent pursuant to Section 17A(c)(1), or (C) a BFDS
affiliate, or (D) such other provider of services duly
registered as a transfer agent under Section 17A(c)(1) as
Company shall select; provided, however, that the Company
shall be as fully responsible to the Trust for the acts and
omissions of any subcontractor as it is for its own acts
and omissions; or
(3) The Company shall upon instruction from the Trust
subcontract for the performance hereof with an Agent
selected by the Trust, other than BFDS or a provider of
services selected by Company, as described in (2) above;
provided, however, that the Company shall in no way be
responsible to the Trust for the acts and omissions of the
Agent.
SECTION THREE: Custody Services Procurement
Article 9. Appointment.
The Trust hereby appoints Company as its agent to evaluate and
obtain custody services from a financial institution that (i)
meets the criteria established in Section 17(f) of the 1940 Act
and (ii) has been approved by the Board as eligible for selection
by the Company as a custodian (the "Eligible Custodian"). The
Company accepts such appointment.
Article 10. The Company and Its Duties.
Subject to the review, supervision and control of the Board, the
Company shall:
(1) evaluate the nature and the quality of the custodial
services provided by the Eligible Custodian;
(2) employ the Eligible Custodian to serve on behalf of the
Trust as Custodian of the Trust's assets substantially on
the terms set forth as the form of agreement in Exhibit 2;
(3) negotiate and enter into agreements with the Custodians for
the benefit of the Trust, with the Trust as a party to each
such agreement. The Company shall not be a party to any
agreement with any such Custodian;
(4) establish procedures to monitor the nature and the quality
of the services provided by the Custodians;
(5) continuously monitor the nature and the quality of services
provided by the Custodians; and
(6) periodically provide to the Trust (i) written reports on the
activities and services of the Custodians; (ii) the nature
and amount of disbursement made on account of the Trust
with respect to each custodial agreement; and (iii) such
other information as the Board shall reasonably request to
enable it to fulfill its duties and obligations under
Sections 17(f) and 36(b) of the 1940 Act and other duties
and obligations thereof.
Article 11. Fees and Expenses.
A. Annual Fee
For the performance by the Company pursuant to Section Three of
this Agreement, the Trust and/or the Fund agree to pay the
Company an annual fee as set forth in Schedule E, attached
hereto.
B. Payment
The Company shall send an invoice with respect to fees and
reimbursable expenses to each of the Trust/or Fund as soon as
practicable at the end of each month. Each invoice will provide
detailed information about the Compensation and out-of-pocket
expenses in occurrence with Schedule E. The Trust and/or Fund
will pay to the Company the amount of such invoice within 30 days
following the receipt of the invoice.
Article 12. Representations.
The Company represents and warrants that it has obtained all
required approvals from all government or regulatory authorities
necessary to enter into this arrangement and to provide the
services contemplated in Section Three of this Agreement.
SECTION FOUR: General Provisions.
Article 13. Documents.
A. In connection with the appointment of the Company under this
Agreement, the Trust shall file with the Company the following
documents:
(1) A copy of the Charter and By-Laws of the Trust and all
amendments thereto;
(2) A copy of the resolution of the Board of the Trust
authorizing this Agreement;
(3) Specimens of all forms of outstanding Share certificates of
the Trust or the Funds in the forms approved by the Board
of the Trust with a certificate of the Secretary of the
Trust as to such approval;
(4) All account application forms and other documents relating
to Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following
documents:
(1) Each resolution of the Board of the Trust authorizing the
original issuance of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and
amendments thereof and orders relating thereto in effect
with respect to the sale of Shares of any Fund, and/or
Class;
(3) A certified copy of each amendment to the governing document
and the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing
officers to give Proper Instructions to the Custodian and
agents for fund accountant, custody services procurement,
and shareholder recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares
of any Fund, accompanied by Board resolutions approving
such forms;
(6) Such other certificates, documents or opinions which the
Company may, in its discretion, deem necessary or
appropriate in the proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
Article 14. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and in
good standing under the laws of the State of Delaware.
(2) It is duly qualified to carry on its business in the State
of Delaware.
(3) It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
(4) All requisite corporate proceedings have been taken to
authorize it to enter into and perform its obligations
under this Agreement.
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties
and obligations under this Agreement.
(6) It is in compliance with federal securities law requirements
and in good standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and
in good standing under the laws of its state of
organization;
(2) It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform its obligations under
this Agreement;
(3) All corporate proceedings required by said Charter and By-
Laws have been taken to authorize it to enter into and
perform its obligations under this Agreement;
(4) The Trust is an open-end investment company registered under
the 1940 Act; and
(5) A registration statement under the 1933 Act will be
effective, and appropriate state securities law filings
have been made and will continue to be made, with respect
to all Shares of each Fund being offered for sale.
Article 15. Indemnification.
A. Indemnification by Trust
The Company shall not be responsible for and the Trust or Fund
shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents employees and
affiliates, harmless against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liabilities arising
out of or attributable to:
(1) The acts or omissions of any Custodian,
(2) The Trust's or Fund's refusal or failure to comply with the
terms of this Agreement, or which arise out of the Trust's
or The Fund's lack of good faith, negligence or willful
misconduct or which arise out of the breach of any
representation or warranty of the Trust or Fund hereunder
or otherwise.
(3) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in
proper form which
(a) are received by the Company or its agents or
subcontractors and furnished to it by or on behalf of
the Fund, its Shareholders or investors regarding the
purchase, redemption or transfer of Shares and
Shareholder account information; or
(b) have been prepared and/or maintained by the Fund or
its affiliates or any other person or firm on behalf
of the Trust.
(4) The reliance on, or the carrying out by the Company or its
agents or subcontractors of Proper Instructions of the
Trust or the Fund.
(5) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that such
Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of
such Shares in such state.
Provided, however, that the Company shall not be protected
by this Article 15.A. from liability for any act or
omission resulting from the Company's willful misfeasance,
bad faith, gross negligence or reckless disregard of its
duties.
B. Indemnification by the Company
The Company shall indemnify and hold the Trust or each Fund
harmless from and against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liabilities arising
out of or attributable to any action or failure or omission to
act by the Company as a result of the Company's willful
misfeasance, bad faith, gross negligence or reckless disregard of
its duties.
C. Reliance
At any time the Company may apply to any officer of the Trust or
Fund for instructions, and may consult with legal counsel with
respect to any matter arising in connection with the services to
be performed by the Company under this Agreement, and the Company
and its agents or subcontractors shall not be liable and shall be
indemnified by the Trust or the appropriate Fund for any action
reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such
action is not in violation of applicable federal or state laws or
regulations. The Company, its agents and subcontractors shall be
protected and indemnified in recognizing stock certificates which
are reasonably believed to bear the proper manual or facsimile
signatures of the officers of the Trust or the Fund, and the
proper countersignature of any former transfer agent or
registrar, or of a co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 15 shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party
seeking indemnification shall promptly notify the other party of
such assertion, and shall keep the other party advised with
respect to all developments concerning such claim. The party who
may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such
claim. The party seeking indemnification shall in no case
confess any claim or make any compromise in any case in which the
other party may be required to indemnify it except with the other
party's prior written consent.
Article 16. Termination of Agreement.
This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other. Should the Trust
exercise its rights to terminate, all out-of-pocket expenses
associated with the movement of records and materials will be
borne by the Trust or the appropriate Fund. Additionally, the
Company reserves the right to charge for any other reasonable
expenses associated with such termination. The provisions of
Article 15 shall survive the termination of this Agreement.
Article 17. Amendment.
This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 18. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company
and the Trust may from time to time agree on such provisions
interpretive of or in addition to the provisions of this
Agreement as may in their joint opinion be consistent with the
general tenor of this Agreement. Any such interpretive or
additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Charter. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an
amendment of this Agreement.
Article 19. Governing Law.
This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts
Article 20. Notices.
Except as otherwise specifically provided herein, Notices and
other writings delivered or mailed postage prepaid to the Trust
at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-
3779, or to the Company at Federated Investors Tower, Pittsburgh,
Pennsylvania, 15222-3779, or to such other address as the Trust
or the Company may hereafter specify, shall be deemed to have
been properly delivered or given hereunder to the respective
address.
Article 21. Counterparts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
Article 22. Limitations of Liability of Trustees and Shareholders of
the Trust.
The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an authorized officer
of the Trust, acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or
to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the
Trustees or Shareholders of the Trust, but bind only the
appropriate property of the Fund, or Class, as provided in the
Declaration of Trust.
Article 23. Limitations of Liability of Trustees and Shareholders of
the Company.
The execution and delivery of this Agreement have been authorized
by the Trustees of the Company and signed by an authorized
officer of the Company, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding
upon any of the Trustees or Shareholders of the Company, but bind
only the property of the Company as provided in the Declaration
of Trust.
Article 24. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to the Trust or the Funds by either of
the parties hereto except by the specific written consent of the
other party.
Article 25. Merger of Agreement.
This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to
the subject hereof whether oral or written.
Article 26. Successor Agent.
If a successor agent for the Trust shall be appointed by the
Trust, the Company shall upon termination of this Agreement
deliver to such successor agent at the office of the Company all
properties of the Trust held by it hereunder. If no such
successor agent shall be appointed, the Company shall at its
office upon receipt of Proper Instructions deliver such
properties in accordance with such instructions.
In the event that no written order designating a successor agent
or Proper Instructions shall have been delivered to the Company
on or before the date when such termination shall become
effective, then the Company shall have the right to deliver to a
bank or trust company, which is a "bank" as defined in the 1940
Act, of its own selection, having an aggregate capital, surplus,
and undivided profits, as shown by its last published report, of
not less than $2,000,000, all properties held by the Company
under this Agreement. Thereafter, such bank or trust company
shall be the successor of the Company under this Agreement.
Article 27. Force Majeure.
The Company shall have no liability for cessation of services
hereunder or any damages resulting therefrom to the Fund as a
result of work stoppage, power or other mechanical failure,
natural disaster, governmental action, communication disruption
or other impossibility of performance.
Article 28. Assignment; Successors.
This Agreement shall not be assigned by either party without the
prior written consent of the other party, except that either
party may assign to a successor all of or a substantial portion
of its business, or to a party controlling, controlled by, or
under common control with such party. Nothing in this Article 28
shall prevent the Company from delegating its responsibilities to
another entity to the extent provided herein.
Article 29. Severability.
In the event any provision of this Agreement is held illegal,
void or unenforceable, the balance shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf under their seals by and
through their duly authorized officers, as of the day and year first
above written.
ATTEST: INVESTMENT COMPANIES (listed on Exhibit 1)
/s/ John W. McGonigle_______ By:__/s/ John F. Donahue___
John W. McGonigle John F. Donahue
Secretary Chairman
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber By:_/s/ James J. Dolan_____
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
CONTRACT
DATE INVESTMENT COMPANY PROVIDED SCHEDULES
12/1/93 Cash Trust Series II
12/1/93 Municipal Cash Series II
12/1/93 Treasury Cash Series II
Exhibit 9ii under Form N-1A
Exhibit 10 under Item 601/Reg S-K
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this first day of
March, 1994, between those investment companies listed on Exhibit 1, as may
be amended from time to time, having their principal office and place of
business at Federated Investors Tower, Pittsburgh PA 15222-3779
(individually referred to herein as "Fund" and collectively referred to as
"Funds), on behalf of the portfolios of the Funds, and Federated
Administrative Services, a Delaware business trust (herein called "FAS").
WHEREAS, the Funds desire to retain FAS as their Administrator to
provide them with Administrative Services (as herein defined), and FAS is
willing to render such services;
WHEREAS, the Funds are registered as open-end management investment
companies under the Investment Company Act of 1940, as amended (the "1940
Act"), with authorized and issued shares of capital stock or beneficial
interest ("Shares"); and
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Funds hereby appoint FAS as
Administrator of the Funds on the terms and conditions set forth in this
Agreement; and FAS hereby accepts such appointment and agrees to perform the
services and duties set forth in Section 2 of this Agreement in consideration
of the compensation provided for in Section 4 hereof.
2. Services and Duties. As Administrator, and subject to the
supervision and control of the Funds' Boards of Trustees or Directors, as
applicable (the "Boards"), FAS will provide facilities, equipment, and
personnel to carry out the following administrative services for operation of
the business and affairs of the Funds and each of their portfolios:
(a) prepare, file, and maintain the Funds'
governing documents and any amendments thereto, including the
Declaration of Trust or Articles of Incorporation, as
appropriate,(which has already been prepared and filed), the By-
laws and minutes of meetings of their Boards, Committees, and
shareholders;
(b) prepare and file with the Securities
and Exchange Commission and the appropriate state securities
authorities the registration statements for the Funds and the
Funds' shares and all amendments thereto, reports to regulatory
authorities and shareholders, prospectuses, proxy statements,
and such other documents all as may be necessary to enable the
Funds to make continuous offerings of their shares, as
applicable;
(c) prepare, negotiate, and administer
contracts on behalf of the Funds with, among others, each Fund's
investment adviser, distributor, custodian, and transfer agent,
subject to any applicable restrictions of the Boards or the 1940
Act;
(d) supervise the Funds' custodians in the
maintenance of the Funds' general ledgers and in the preparation
of the Funds' financial statements, including oversight of
expense accruals and payments, the determination of the net
asset value of the Funds and the declaration and payment of
dividends and other distributions to shareholders;
(e) calculate performance data of the
Funds for dissemination to information services covering the
investment company industry;
(f) prepare and file the Funds' tax
returns;
(g) examine and review the operations of
the Funds' custodians and transfer agents;
(h) coordinate the layout and printing of
publicly disseminated prospectuses and reports;
(i) perform internal audit examinations in
accordance with a charter to be adopted by FAS and the Funds;
(j) assist with the design, development,
and operation of the Funds;
(k) provide individuals reasonably
acceptable to the Funds' Boards for nomination, appointment, or
election as officers of the Funds, who will be responsible for
the management of certain of the Funds' affairs as determined by
the Funds' Boards; and
(l) consult with the Funds and their
Boards of Trustees or Directors, as appropriate, on matters
concerning the Funds and their affairs.
The foregoing, along with any additional services that FAS shall agree
in writing to perform for the Funds hereunder, shall hereafter be referred to
as "Administrative Services." Administrative Services shall not include any
duties, functions, or services to be performed for any Fund by such Fund's
investment adviser, distributor, custodian, transfer agent, or shareholder
service agent, pursuant to their respective agreements with such Fund.
3. Expenses. FAS shall be responsible for expenses incurred in
providing office space, equipment, and personnel as may be necessary or
convenient to provide the Administrative Services to the Fund, including the
compensation of FAS employees who serve on the Funds' Boards, or as officers
of the Funds. Each Fund shall be responsible for all other expenses incurred
by FAS on behalf of such Fund, including without limitation postage and
courier expenses, printing expenses, travel expenses, registration fees,
filing fees, fees of outside counsel and independent auditors, insurance
premiums, fees payable to members of such Fund's Board who are not FAS
employees, and trade association dues.
4. Compensation. For the Administrative Services provided, each
Fund hereby agrees to pay and FAS hereby agrees to accept as full
compensation for its services rendered hereunder an administrative fee at an
annual rate, payable daily, as specified below, based upon the total assets
of all of the Funds:
Maximum Administrative Average Daily Net Assets
Fee of the Funds
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of
$750 million
However, in no event shall the administrative fee received during any
year of this Agreement be less than, or be paid at a rate less than would
aggregate, $125,000, per individual Fund, with an additional $30,000 for each
class of shares added to any such Fund after the date hereof.
5. Standard of Care.
(a) FAS shall not be liable for any error
of judgment or mistake of law or for any loss suffered by any
Fund in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and
duties under this Agreement. FAS shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for such
Fund) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice. Any
person, even though also an officer, trustee, partner, employee
or agent of FAS, who may be or become a member of such Fund's
Board, officer, employee or agent of any Fund, shall be deemed,
when rendering services to such Fund or acting on any business
of such Fund (other than services or business in connection with
the duties of FAS hereunder) to be rendering such services to or
acting solely for such Fund and not as an officer, trustee,
partner, employee or agent or one under the control or direction
of FAS even though paid by FAS.
(b) This Section 5 shall survive
termination of this Agreement.
6. Duration and Termination. The initial term of this Agreement
with respect to each Fund shall commence on the date hereof, and extend for a
period of one year, renewable annually by the approval of the Board of
Directors/Trustees of each Fund.
7. Amendment. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which an enforcement of the change, waiver,
discharge or termination is sought.
8. Limitations of Liability of Trustees or Officers, Employees,
Agents and Shareholders of the Funds. FAS is expressly put on notice of the
limitation of liability as set forth in the Declaration of Trust of each Fund
that is a Massachusetts business trust and agrees that the obligations
assumed by each such Fund pursuant to this Agreement shall be limited in any
case to such Fund and its assets and that FAS shall not seek satisfaction of
any such obligations from the shareholders of such Fund, the Trustees,
Officers, Employees or Agents of such Fund, or any of them.
9. Limitations of Liability of Trustees and Shareholders of FAS.
The execution and delivery of this Agreement have been authorized by the
Trustees of FAS and signed by an authorized officer of FAS, acting as such,
and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Trustees or
shareholders of FAS, but bind only the trust property of FAS as provided in
the Declaration of Trust of FAS.
10. Notices. Notices of any kind to be given hereunder shall be
in writing (including facsimile communication) and shall be duly given if
delivered to any Fund at the following address: Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President and if delivered to FAS at
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention: President.
11. Miscellaneous. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject hereof whether oral or written. The captions in this Agreement
are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction
or effect. If any provision of this Agreement shall be held or made invalid
by a court or regulatory agency decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. Subject to the
provisions of Section 5, hereof, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by Pennsylvania law; provided, however, that
nothing herein shall be construed in a manner inconsistent with the
Investment Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
12. Counterparts. This Agreement may be executed by different
parties on separate counterparts, each of which, when so executed and
delivered, shall be an original, and all such counterparts shall together
constitute one and the same instrument.
13. Assignment; Successors. This Agreement shall not be assigned by
any party without the prior written consent of FAS, in the case of assignment
by any Fund, or of the Funds, in the case of assignment by FAS, except that
any party may assign to a successor all of or a substantial portion of its
business to a party controlling, controlled by, or under common control with
such party. Nothing in this Section 13 shall prevent FAS from delegating its
responsibilities to another entity to the extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Administrative Services
By: /s/ Edward C. Gonzales
Edward C. Gonzales
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Exhibit 1
Cash Trust Series II
Municipal Cash Series II
Treasury Cash Series II
Exhibit 9 iii under Form N-1A
Exhibit 10 under Item 601/Reg S-K
SHAREHOLDER SERVICES PLAN
This Shareholder Services Plan ("Plan") is adopted as of this 1st
day of March, 1994, by the Boards of Directors or Trustees, as
applicable (the "Boards"), of those investment companies listed on
Exhibit 1 hereto as may be amended from time to time, having their
principal office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 (individually referred to herein as a "Fund"
and collectively as "Funds").
1. This Plan is adopted to allow the Funds to make payments as
contemplated herein to obtain certain personal services for shareholders
and/or the maintenance of shareholder accounts ("Services").
2. This Plan is designed to compensate Federated Shareholder
Services ("FSS") for providing personal services and/or the maintenance
of shareholder accounts to the Funds and their shareholders. In
compensation for the services provided pursuant to this Plan, FSS may be
paid a monthly fee computed at the annual rate not to exceed .25 of 1%
of the average aggregate net asset value of the shares of each Fund held
during the month.
3. Any payments made by the Funds to FSS pursuant to this Plan
will be made pursuant to a "Shareholder Services Agreement" between FSS
and each of the Funds.
4. Quarterly in each year that this Plan remains in effect, FSS
shall prepare and furnish to the Boards of the Funds, and the Boards
shall review, a written report of the amounts expended under the Plan.
5. This Plan shall become effective with regard to each Fund
(i) after approval by majority votes of: (a) such Fund's Board; and (b)
the members of the Board of such Fund who are not interested persons of
such Fund and have no direct or indirect financial interest in the
operation of such Fund's Plan or in any related documents to the Plan
("Independent Trustees or Directors"), cast in person at a meeting
called for the purpose of voting on the Plan.
6. This Plan shall remain in effect with respect to each Fund
presently set forth on an exhibit and any subsequent Fund added pursuant
to an exhibit during the initial year of this Plan for the period of one
year from the date set forth above and may be continued thereafter if
this Plan is approved with respect to each Fund at least annually by a
majority of the relevant Fund's Board and a majority of the Independent
Trustees or
Directors, of such Fund as applicable, cast in person at a meeting
called for the purpose of voting on the renewal of such Plan. If this
Plan is adopted with respect to a fund after the first annual approval
by the Trustees or Directors as described above, this Plan will be
effective as to that Fund at such time as Exhibit 1 hereto is amended to
add such Fund and will continue in effect until the next annual approval
of this Plan by the Funds' Boards and thereafter for successive periods
of one year subject to approval as described above.
7. All material amendments to this Plan must be approved by a
vote of the Board of each Fund and of the Independent Directors or
Trustees of such Fund, cast in person at a meeting called for such
purpose.
8. This Plan may be terminated as follows:
(a) at any time, without the payment of any penalty, by
the vote of a majority of the Independent Board Members of any
Fund or by a vote of a majority of the outstanding voting
securities of any Fund as defined in the Investment Company Act
of 1940 on sixty (60) days' written notice to the parties to
this Agreement; or
(b) by any party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice
of its intention to terminate.
9. While this Plan shall be in effect, the selection and
nomination of Independent Directors or Trustees of each Fund shall be
committed to the discretion of the Independent Directors or Trustees
then in office.
10. All agreements with any person relating to the
implementation of this Plan shall be in writing and any agreement
related to this Plan shall be subject to termination, without penalty,
pursuant to the provisions of Paragraph 8 herein.
11. This Plan shall be construed in accordance with and governed
by the laws of the Commonwealth of Pennsylvania.
Witness the due execution hereof this as of the date set forth
above.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Shareholder Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
John W. McGonigle
Exhibit 1
Cash Trust Series II
Municipal Cash Series II
Treasury Cash Series II
Exhibit 9iv under Form N-1A
Exhibit 10 under Item 601/Reg S-K
SHAREHOLDER SERVICES AGREEMENT
AGREEMENT made as of the first day of March, 1994, by and between
those investment companies listed on Exhibit 1, as may be amended from
time to time, having their principal office and place of business at
Federated Investors Tower, Pittsburgh, PA 15222-3779 and who have
approved a Shareholder Services Plan (the "Plan") and this form of
Agreement (individually referred to herein as a "Fund" and collectively
as "Funds") and Federated Shareholder Services, a Delaware business
trust, having its principal office and place of business at Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779 ("FSS").
1. The Funds hereby appoint FSS to render or cause to be
rendered personal services to shareholders of the Funds and/or the
maintenance of accounts of shareholders of the Funds ("Services"). In
addition to providing Services directly to shareholders of the Funds,
FSS is hereby appointed the Funds' agent to select, negotiate and
subcontract for the performance of Services. FSS hereby accepts such
appointments. FSS agrees to provide or cause to be provided Services
which, in its best judgment (subject to supervision and control of the
Funds' Boards of Trustees or Directors, as applicable), are necessary or
desirable for shareholders of the Funds. FSS further agrees to provide
the Funds, upon request, a written description of the Services which FSS
is providing hereunder.
2. During the term of this Agreement, each Fund will pay FSS
and FSS agrees to accept as full compensation for its services rendered
hereunder a fee at an annual rate, calculated daily and payable monthly,
up to 0.25% of 1% of average net assets of each Fund.
For the payment period in which this Agreement becomes effective
or terminates with respect to any Fund, there shall be an appropriate
proration of the monthly fee on the basis of the number of days that
this Agreement is in effect with respect to such Fund during the month.
To enable the Funds to comply with an applicable exemptive order, FSS
represents that the fees received pursuant to this Agreement will be
disclosed to and authorized by any person or entity receiving Services,
and will not result in an excessive fee to FSS.
3. This Agreement shall continue in effect for one year from
the date of its execution, and thereafter for successive periods of one
year only if the form of this Agreement is approved at least annually by
the Board of each Fund, including a majority of the members of the Board
of the Fund who are not interested persons of the Fund and have no
direct or indirect financial interest in the operation of the Funds'
Plan or in any related documents to the Plan ("Independent Board
Members") cast in person at a meeting called for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be
terminated as follows:
(a) at any time, without the payment of any penalty, by
the vote of a majority of the Independent Board Members of any
Fund or by a vote of a majority of the outstanding voting
securities of any Fund as defined in the Investment Company Act
of 1940 on sixty (60) days' written notice to the parties to
this Agreement;
(b) automatically in the event of the Agreement's
assignment as defined in the Investment Company Act of 1940; and
(c) by any party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice
of its intention to terminate.
5. FSS agrees to obtain any taxpayer identification number
certification from each shareholder of the Funds to which it provides
Services that is required under Section 3406 of the Internal Revenue
Code, and any applicable Treasury regulations, and to provide each Fund
or its designee with timely written notice of any failure to obtain such
taxpayer identification number certification in order to enable the
implementation of any required backup withholding.
6. FSS shall not be liable for any error of judgment or mistake
of law or for any loss suffered by any Fund in connection with the
matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. FSS shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for such
Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. Any person, even
though also an officer, trustee, partner, employee or agent of FSS, who
may be or become a member of such Fund's Board, officer, employee or
agent of any Fund, shall be deemed, when rendering services to such Fund
or acting on any business of such Fund (other than services or business
in connection with the duties of FSS hereunder) to be rendering such
services to or acting solely for such Fund and not as an officer,
trustee, partner, employee or agent or one under the control or
direction of FSS even though paid by FSS.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing
signed by the party against which an enforcement of the change, waiver,
discharge or termination is sought.
8. FSS is expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust of each Fund that is
a Massachusetts business trust and agrees that the obligations assumed
by each such Fund pursuant to this Agreement shall be limited in any
case to such Fund and its assets and that FSS shall not seek
satisfaction of any such obligations from the shareholders of such Fund,
the Trustees, Officers, Employees or Agents of such Fund, or any of
them.
9. The execution and delivery of this Agreement have been
authorized by the Trustees of FSS and signed by an authorized officer of
FSS, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of
them personally, and the obligations of this Agreement are not binding
upon any of the Trustees or shareholders of FSS, but bind only the trust
property of FSS as provided in the Declaration of Trust of FSS.
10. Notices of any kind to be given hereunder shall be in
writing (including facsimile communication) and shall be duly given if
delivered to any Fund and to such Fund at the following address:
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President and if delivered to FSS at Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President.
11. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written. If any provision of this
Agreement shall be held or made invalid by a court or regulatory agency
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. Subject to the provisions of Sections 3
and 4, hereof, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
shall be governed by Pennsylvania law; provided, however, that nothing
herein shall be construed in a manner inconsistent with the Investment
Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
12. This Agreement may be executed by different parties on
separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together
constitute one and the same instrument.
13. This Agreement shall not be assigned by any party without
the prior written consent of FSS in the case of assignment by any Fund,
or of the Funds in the case of assignment by FSS, except that any party
may assign to a successor all of or a substantial portion of its
business to a party controlling, controlled by, or under common control
with such party. Nothing in this Section 13 shall prevent FSS from
delegating its responsibilities to another entity to the extent provided
herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year
first above written.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Shareholder Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
John W. McGonigle
Exhibit 1
Cash Trust Series II
Municipal Cash Series II
Treasury Cash Series II
Exhibit 9 v under Form N-1A
Exhibit 10 under Item 601/Reg S-K
SHAREHOLDER SERVICES SUB-CONTRACT
This Agreement is made between the Financial Institution executing
this Agreement ("Provider") and Federated Shareholder Services ("FSS")
on behalf of the investment companies listed in Exhibit A hereto (the
"Funds"), for whom FSS administers the Shareholder Services Plan
("Plan") and who have approved this form of Agreement. In consideration
of the mutual covenants hereinafter contained, it is hereby agreed by
and between the parties hereto as follows:
1. FSS hereby appoints Provider to render or cause to be
rendered personal services to shareholders of the Funds and/or the
maintenance of accounts of shareholders of the Funds ("Services").
Provider agrees to provide Services which, in its best judgment, are
necessary or desirable for its customers who are investors in the Funds.
Provider further agrees to provide FSS, upon request, a written
description of the Services which Provider is providing hereunder.
2. During the term of this Agreement, the Funds will pay the
Provider fees as set forth in a written schedule delivered to the
Provider pursuant to this Agreement. The fee schedule for Provider may
be changed by FSS sending a new fee schedule to Provider pursuant to
Paragraph 9 of this Agreement. For the payment period in which this
Agreement becomes effective or terminates, there shall be an appropriate
proration of the fee on the basis of the number of days that this
Agreement is in effect during the quarter. To enable the Funds to
comply with an applicable exemptive order, Provider represents that the
fees received pursuant to this Agreement will be disclosed to its
customers, will be authorized by its customers, and will not result in
an excessive fee to the Provider.
3. The Provider understands that the Department of Labor views
ERISA as prohibiting fiduciaries of discretionary ERISA assets from
receiving shareholder service fees or other compensation from funds in
which the fiduciary's discretionary ERISA assets are invested. To date,
the Department of Labor has not issued any exemptive order or advisory
opinion that would exempt fiduciaries from this interpretation. Without
specific authorization from the Department of Labor, fiduciaries should
carefully avoid investing discretionary assets in any fund pursuant to
an arrangement where the fiduciary is to be compensated by the fund for
such investment. Receipt of such compensation could violate ERISA
provisions against fiduciary self-dealing and conflict of interest and
could subject the fiduciary to substantial penalties.
4. The Provider agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of a Fund in opposition to proxies solicited by management
of the Fund, unless a court of competent jurisdiction shall have
determined that the conduct of a majority of the Board of Trustees or
Directors of the Fund constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties. This paragraph 4 will
survive the term of this Agreement.
5. This Agreement shall continue in effect for one year from
the date of its execution, and thereafter for successive periods of one
year if the form of this Agreement is approved at least annually by the
Board of each Fund, including a majority of the members of the Board of
the Fund who are not interested persons of the Fund and have no direct
or indirect financial interest in the operation of the Fund's Plan or in
any related documents to the Plan ("Disinterested Board Members") cast
in person at a meeting called for that purpose.
6. Notwithstanding paragraph 5, this Agreement may be
terminated as follows:
(a) at any time, without the payment of any penalty, by
the vote of a majority of the Disinterested Board Members of the
Fund or by a vote of a majority of the outstanding voting
securities of the Fund as defined in the Investment Company Act
of 1940 on not more than sixty (60) days' written notice to the
parties to this Agreement;
(b) automatically in the event of the Agreement's
assignment as defined in the Investment Company Act of 1940; and
(c) by either party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice
of its intention to terminate.
7. The Provider agrees to obtain any taxpayer identification
number certification from its customers required under Section 3406 of
the Internal Revenue Code, and any applicable Treasury regulations, and
to provide the Fund or its designee with timely written notice of any
failure to obtain such taxpayer identification number certification in
order to enable the implementation of any required backup withholding.
8. The execution and delivery of this Agreement have been
authorized by the Trustees of FSS and signed by an authorized officer of
FSS, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of
them personally, and the obligations of this Agreement are not binding
upon any of the Trustees or shareholders of FSS, but bind only the trust
property of FSS as provided in the Declaration of Trust of FSS.
9. Notices of any kind to be given hereunder shall be in
writing (including facsimile communication) and shall be duly given if
delivered to Provider at the address set forth below and if delivered to
FSS at Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
10. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written. If any provision of this
Agreement shall be held or made invalid by a court or regulatory agency
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. Subject to the provisions of Sections 5
and 6, hereof, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
shall be governed by Pennsylvania law; provided, however, that nothing
herein shall be construed in a manner inconsistent with the Investment
Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
11. This Agreement may be executed by different parties on
separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together
constitute one and the same instrument.
12. This Agreement shall not be assigned by any party without
the prior written consent of FSS in the case of assignment by Provider,
or of Provider in the case of assignment by FSS, except that any party
may assign to a successor all of or a substantial portion of its
business to a party controlling, controlled by, or under common control
with such party.
13. This Agreement may be amended by FSS from time to time by
the following procedure. FSS will mail a copy of the amendment to the
Provider's address, as shown below. If the Provider does not object to
the amendment within thirty (30) days after its receipt, the amendment
will become part of the Agreement. The Provider's objection must be in
writing and be received by FSS within such thirty days.
14. This Agreement may be terminated with regard to a
particular Fund or Class at any time, without the payment of any
penalty, by FSS or by the vote of a majority of the Disinterested
Trustees or Directors, as applicable, or by a majority of the
outstanding voting securities of the particular Fund or Class on not
more than sixty (60) days' written notice to the Provider. This
Agreement may be terminated by Provider on sixty (60) days' written
notice to FSS.
15. The Provider acknowledges and agrees that FSS has entered
into this Agreement solely in the capacity of agent for the Funds and
administrator of the Plan. The Provider agrees not to claim that FSS is
liable for any responsibilities or amounts due by the Funds hereunder.
[Provider]
Address
City State Zip Code
Dated: By:
Authoried Signature
Title
Print Name of Authorized Signature
FEDERATED SHAREHOLDER SERVICES
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:
Vice President
EXHIBIT A to Shareholder Services Sub-Contract with
Cash Trust Series II
Funds covered by this Agreement:
Shareholder Service Fees
1. During the term of this Agreement, FSS will pay Provider a
quarterly fee. This fee will be computed at the annual rate of .25 of
1% of the average net asset value of shares of the Funds held during the
quarter in accounts for which the Provider provides Services under this
Agreement, so long as the average net asset value of Shares in the Funds
during the quarter equals or exceeds such minimum amount as FSS shall
from time to time determine and communicate in writing to the Provider.
2. For the quarterly period in which the Agreement becomes
effective or terminates, there shall be an appropriate proration of any
fee payable on the basis of the number of days that the Agreement is in
effect during the quarter.
