MUNICIPAL CASH SERIES II
(A PORTFOLIO OF CASH TRUST SERIES II)
PROSPECTUS
The shares of Municipal Cash Series II (the "Fund") offered by this prospectus
represent interests in a non-diversified portfolio of Cash Trust Series II (the
"Trust"), an open-end management investment company (a mutual fund). The Fund
invests in short-term municipal securities to achieve current income exempt from
federal regular income tax consistent with stability of principal.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated July 31,
1995, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information,
which is in paper form only, or a paper copy of this prospectus, if you have
received it electronically, free of charge by calling 1-800-235-4669. To obtain
other information, or make inquiries about the Trust, 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, 1995
- ------------------------------------------
- ------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of Fund Expenses............... 1
Financial Highlights................... 2
General Information.................... 3
Investment Information................. 3
Investment Objective................. 3
Investment Policies.................. 3
Acceptable Investments............... 3
Municipal Securities................. 6
Investment Risks..................... 6
Non-Diversification.................. 7
Investment Limitations............... 7
Regulatory Compliance................ 7
Trust Information...................... 8
Management of Cash Trust Series II... 8
Distribution of Shares............... 9
Administration of the Fund........... 10
Net Asset Value........................ 11
How to Purchase Shares................. 12
Special Purchase Features............ 12
How to Redeem Shares................... 13
Special Redemption Features.......... 14
Account and Share Information.......... 15
Tax Information........................ 16
Federal Income Tax................... 16
Pennsylvania Corporate and Personal
Property Taxes..................... 16
Performance Information................ 17
Financial Statements................... 18
Independent Auditor's Report........... 30
Addresses.............................. 31
</TABLE>
- ------------------------------------------
- ------------------------------------------
SUMMARY OF FUND EXPENSES
MUNICIPAL CASH SERIES II
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<TABLE>
<S> <C> <C>
Management Fee (after waiver) (1)....................................................... 0.27%
12b-1 Fee............................................................................... 0.20%
Total Other Expenses.................................................................... 0.32%
Shareholder Services Fee................................................. None
Total Fund Operating Expenses (2)............................................... 0.79%
<FN>
(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 1.02% absent the
voluntary waiver of a portion of the management fee.
</TABLE>
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............... $ 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.
1
- ------------------------------------------
- ------------------------------------------
MUNICIPAL CASH SERIES II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the report of Deloitte & Touche LLP, Independent Auditors,
on page 30.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991(A)
- -------------------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------
Net investment income 0.03 0.02 0.02 0.04 0.01
- -------------------------------------------- ----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS
- --------------------------------------------
Distributions to shareholders from net
investment income (0.03) (0.02) (0.02) (0.04) (0.01)
- -------------------------------------------- ----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
TOTAL RETURN (B) 3.02% 1.99% 2.29% 3.72% 1.19%
- --------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------
Expenses 0.79% 0.79% 0.77% 0.74% 0.47%(c)
- --------------------------------------------
Net investment income 2.91% 1.97% 2.23% 3.56% 4.68%(c)
- --------------------------------------------
Expense waiver/reimbursement (d) 0.23% 0.28% 0.50% 0.50% 0.39%(c)
- --------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------
Net assets, end of period (000 omitted) $67,611 $131,770 $104,563 $65,628 $34,048
- --------------------------------------------
<FN>
(a) Reflects operations for the period from February 13, 1991 (date of initial
public investment) to May 31, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
2
- ------------------------------------------
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 representing interests in separate portfolios of
securities. 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 investing primarily in
short-term municipal securities. The Trust may not be a suitable investment for
retirement plans because it invests in municipal securities. A minimum initial
investment of $25,000 is required. Subsequent investments must be in amounts of
at least $500.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
- ------------------------------------------
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income exempt from federal
regular income tax consistent with stability of principal and liquidity. This
investment objective cannot be changed without shareholder approval. While there
is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of
municipal securities (as defined below) maturing in 13 months or less. As a
matter of investment policy, which cannot be changed without shareholder
approval, at least 80% of the Fund's annual interest income will be exempt from
federal regular income tax. (Federal regular income tax does not include the
federal individual alternative minimum tax or the federal alternative minimum
tax for corporations.) The average maturity of the securities in the Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less. Unless
indicated otherwise, the investment policies may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in debt obligations issued by or on behalf of 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
3
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; and
- participation, trust, and partnership interests in any of the foregoing
obligations.
VARIABLE RATE DEMAND NOTES
Variable rate demand notes are long-term debt instruments that have variable or
floating interest rates and provide the Fund with the right to tender the
security for repurchase at its stated principal amount plus accrued interest.
Such securities typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted at
regular intervals (ranging from daily to annually), and is normally based on a
published interest rate or interest rate index. Most variable rate demand notes
allow the Fund to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Fund to tender the security at
the time of each interest rate adjustment or at other fixed intervals. See
"Demand Features." The Fund treats variable rate demand notes as maturing on the
later of the date of the next interest rate adjustment or the date on which the
Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS
The Fund may purchase interests in 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. 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 securities in which the Fund invests must be rated in one of the two highest
short-term rating categories by one or more nationally recognized statistical
rating organizations ("NRSROs") or be of comparable quality to securities having
such ratings. An NRSRO's two highest rating categories are determined without
regard for sub-categories and gradations. For example, securities rated SP-1+,
SP-1, or SP-2 by Standard & Poor's Ratings Group ("S&P"), MIG-1 or MIG-2 by
Moody's Investors Service, Inc. ("Moody's"), or FIN-1+, FIN-1, and FIN-2 by
Fitch Investors Service, Inc. ("Fitch") are all considered rated in
4
one of the two highest short-term rating cate-
gories. The Fund will follow applicable regulations in determining whether a
security rated by more than one NRSRO can be treated as being in one of the two
highest short-term rating categories; currently, such securities must be rated
by two NRSROs in one of their two highest rating categories. See "Regulatory
Compliance."
CREDIT ENHANCEMENT
Certain of the Fund's acceptable investments may be 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 by both 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 Trustees, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, the Fund will limit their purchase, together
with other illiquid securities, to 10% of its net assets. This investment policy
cannot be changed without shareholder approval.
WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS
The Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, the Fund may pay more
or
5
less than the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
TEMPORARY INVESTMENTS
From time to time, when the investment adviser determines that market conditions
call for a temporary defensive posture, the Fund may invest in tax-exempt or
taxable securities such as: obligations issued by or on behalf of municipal or
corporate issuers having the same quality characteristics as described above;
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 institution having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment; and repurchase agreements
(arrangements in which the organization selling the Fund a temporary investment
agrees at the time of sale to repurchase it at a mutually agreed upon time and
price); and prime commercial paper rated A-1 by Standard & Poor's Ratings Group,
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 to do so. However, the interest from certain Municipal
Securities is subject to the federal alternative minimum tax.
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.
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 participation interests, or the credit enhancers of
either, to meet their obligations for the payment of interest and principal when
6
due. In addition, from time to time, the supply of Municipal Securities
acceptable for purchase by the Fund could become limited.
The Fund may invest in Municipal Securities which are repayable out of revenue
streams generated from economically related projects or facilities and/or whose
issuers are located in the same state. Sizable investments in these Municipal
Securities could involve an increased risk to the Fund should any of these
related projects or facilities experience financial difficulties.
Obligations of issuers of Municipal Securities are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
laws enacted in the future by Congress, state legislators, or referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon the ability of states
or municipalities to levy taxes. There is also the possibility that, as a result
of litigation or other conditions, the power or ability of any issuer to pay,
when due, the principal of and interest on its municipal securities may be
materially affected.
NON-DIVERSIFICATION
The Fund is non-diversified. An investment in the Fund, therefore, will entail
greater risk than would exist if it were diversified because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Fund's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Fund's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
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. However, the Fund intends to comply with Subchapter M of
the Internal Revenue Code. This undertaking requires that, at the end of each
quarter of each taxable year, with regard to at least 50% of the Fund's total
assets, no more than 5% of its total assets are invested in the securities of a
single issuer and that with respect to the remainder of the Fund's total assets,
no more than 25% of its total assets are invested in the securities of a single
issuer.
INVESTMENT LIMITATIONS
The Fund will not borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for a percentage
of its cash value with an agreement to buy it back on a set date) or pledge
securities except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge assets to secure such
borrowings.
The above investment limitation cannot be changed without shareholder approval.
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.
7
In particular, the Fund will comply with the various requirements of Rule 2a-7,
which regulates money market mutual funds. The Fund will determine the effective
maturity of its investments, as well as its ability to consider a security as
having received the requisite short-term ratings by NRSROs, according to Rule
2a-7. The Fund may change these operational policies to reflect changes in the
laws and regulations without the approval of its shareholders.
- ------------------------------------------
TRUST 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 Fund's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. An Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
Investment decisions for the Fund are made by Federated 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 and sale of portfolio instruments.
ADVISORY FEES
The adviser receives an annual investment advisory fee equal to .50 of 1% of the
Fund's average daily net assets. The adviser has undertaken to reimburse the
Fund up to the amount of the advisory fee for operating expenses in excess of
limitations established by certain states. The adviser also may voluntarily
choose to waive a portion of its fee or reimburse other expenses of the Fund,
but reserves the right to terminate such waiver or reimbursement at any time at
its sole discretion.
ADVISER'S BACKGROUND
Federated 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
8
Federated Investors. All of the Class A (voting) shares of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue, Chairman and
Trustee of Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated 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. With over $72 billion invested across more than 260 funds
under management and/or administration by its subsidiaries, as of December 31,
1994, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 1,750 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,000 financial institutions nationwide. More
than 100,000 investment professionals have selected Federated funds for their
clients.
Both the Trust and the Adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Board of Trustees,
and could result in severe penalties.
DISTRIBUTION OF 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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION PLAN
Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Plan"), the distributor may select financial institutions such as
banks, fiduciaries, custodians for public funds, investment advisers and
brokers/dealers to provide sales services or distribution-related support
services as agents for their clients or customers. These services may include,
but are not limited to the following functions: providing office space,
equipment, telephone facilities, and various personnel including clerical,
supervisory, and computer 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 subject
to the Plan and 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 Fund provided that
for any period the total amount of these fees shall not
9
exceed an annual rate of .20 of 1% of the average net asset value of shares
subject to the Plan 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 under the Plan, will be reimbursed from the assets of the
Fund.
SUPPLEMENTAL 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 supplemental fee from its own
assets to financial institutions as financial assistance for providing
substantial sales services, distribution-related support services or shareholder
services. 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 Fund. Federated Administrative
Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- -------------- -----------------------
<C> <S>
.15 of 1% on the first $250
million
.125 of 1% on the next $250
million
.10 of 1% on the next $250
million
.075 of 1% on assets in excess of
$750 million
</TABLE>
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. Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may choose
voluntarily to waive a portion of its fee.
CUSTODIAN
State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Fund.
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Federated Services Company, Boston, MA, is transfer agent for the shares of, and
dividend disbursing agent for, the Fund. Federated Services Company is a
subsidiary of Federated Investors.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh,
P.A.
10
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the investment adviser looks for prompt execution of the order at a
favorable price. In working with dealers, the investment adviser will generally
utilize those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained elsewhere.
In selecting among firms believed to meet these criteria, the investment adviser
may give consideration to those firms which have sold or are selling shares of
the Fund and other Funds distributed by Federated Securities Corp. The
investment adviser makes decisions on portfolio transactions and selects brokers
and dealers subject to review by the Trustees.
- ------------------------------------------
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 cannot
guarantee that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 3:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange each day the New York Stock Exchange is open.
11
- ------------------------------------------
HOW TO PURCHASE SHARES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange and the Federal Reserve Wire System are open for business. Shares may
be purchased as described below either through a financial institution (such as
a bank or broker/ dealer) or by wire or by check directly to the Fund with a
minimum initial investment of $25,000 or more and additional investments of as
little as $500. The minimum initial investment for retirement plans is only
$1,000. (Financial institutions may impose different minimum investment
requirements on their customers.)
In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before shares can be purchased.
PURCHASING SHARES THROUGH A
FINANCIAL INSTITUTION
Investors may purchase shares through a financial institution which has a sales
agreement with the distributor. Orders 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. Financial institutions may charge additional fees
for their services.
PURCHASING SHARES BY WIRE
Shares may be purchased by wire by calling the Fund before 3:00 p.m. (Eastern
time). The order is considered received immediately. Payment by federal funds
must be received before 3:00 p.m. (Eastern time) in order to begin earning
dividends that same day. Federal funds should be wired as follows: Federated
Services Company, c/o State Street Bank and Trust Company, Boston, MA;
Attention; EDGEWIRE; For credit to: 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; and ABA Number
011000028. Shares cannot be purchased by wire on holidays when wire transfers
are restricted.
PURCHASING SHARES BY CHECK
Shares may be purchased by sending a check made payable to Municipal Cash Series
II to: Federated Services Company, P.O. Box 8600 Boston, MA 02266-8600. Orders
by mail are considered received when payment by check is converted into federal
funds (normally the business day after the check is received) and shares begin
earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM
A minimum of $500 can be automatically withdrawn periodically from the
shareholder's checking account at an Automated Clearing House ("ACH") member and
invested in Fund shares. Shareholders should contact their financial institution
or the Fund to participate in this program.
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
12
internal recordkeeping requirements. The transfer agent charges a fee based on
the level of subaccounting services rendered. Financial institutions may charge
or pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Fund shares. This prospectus should,
therefore, be read together with any agreement between the customer and the
financial institution with regard to the services provided, the fees charged for
those services, and any restrictions and limitations imposed.
- ------------------------------------------
HOW TO REDEEM SHARES
Shares are redeemed at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made as described below.
REDEEMING THROUGH A
FINANCIAL INSTITUTION
Shares may be redeemed by contacting the shareholder's financial institution.
Shares will be redeemed at the net asset value next determined after Federated
Services Company receives the redemption request. According to the shareholder's
instructions, redemption proceeds can be sent to the financial institution or to
the shareholder by check or wire. The financial institution is responsible for
promptly submitting redemption requests and providing proper written redemption
instructions. Customary fees and commissions may be charged by the financial
institution for this service.
REDEEMING SHARES BY TELEPHONE
Redemptions in any amount may be made by calling the Fund provided the Fund has
a completed authorization form. These forms can be obtained from Federated
Securities Corp. Proceeds from redemption requests received before 12:00 noon
(Eastern time) will be wired the same day to the shareholder's account at a
domestic commercial bank which is a member of the Federal Reserve System, but
will not include that day's dividend. Proceeds from redemption requests received
after that time will include that day's dividends but will be wired the
following business day. Under limited circumstances, arrangements may be made
with the distributor for same-day payment of
13
proceeds, without that day's dividend, for redemption requests received before
2:00 p.m. (Eastern time). Proceeds from redeemed shares purchased by check or
through ACH will not be wired until that method of payment has cleared.
Telephone instructions will be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming shares by
telephone. If this occurs, "Redeeming Shares by Mail" should be considered. If
at any time the Fund shall determine it necessary to terminate or modify the
telephone redemption privilege, shareholders would be promptly notified.
REDEEMING SHARES BY MAIL
Shares may be redeemed in any amount by mailing a written request together with
certificates, if issued, to:
Municipal Cash Series II
P.O. Box 8600
Boston, MA 02266-8600
The written request should state: the Fund Name; the account name as registered
with the Fund; the account number; and the number of shares to be redeemed or
the dollar amount requested. All owners of the account must sign the request
exactly as the shares are registered. All share certificates should be sent by
registered or certified mail with the written request. 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.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by: a commercial
or savings bank, trust company or savings and loan association whose deposits
are insured by an organization which is administered by the Federal Deposit
Insurance Corporation; a member firm of a domestic stock exchange; or any other
"eligible guarantor institution" as defined in the Securities Exchange Act of
1934. The Fund does not accept signatures guaranteed by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING
Upon request, a checking account will be established to allow shareholders to
redeem their Fund shares. A fee will be charged for this service. The check
writing service allows the shareholder to receive the daily dividend declared on
the shares to be redeemed until the check is presented to State Street Bank for
payment. However, checks should never be made payable or sent to State Street
Bank or the Fund to redeem shares, and a check may not be written to close an
account. Canceled checks are sent to the shareholder each month.
DEBIT CARD
Upon request, a debit account will be established. This account allows
shareholders to redeem shares by using a debit card. A fee will be charged for
this service.
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 ACH member. Shareholders may apply for
participation in this program through their financial institution or the Fund.
14
- ------------------------------------------
ACCOUNT AND SHARE INFORMATION
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested in writing to the Fund.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
CERTIFICATE AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund or Federated Services Company in writing. Monthly
confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, if an account
balance falls below $25,000 due to shareholder redemptions, the Fund may redeem
all of the remaining shares in that account (except accounts maintained by
retirement plans) and pay the proceeds to the shareholder. Before shares are
redeemed to close an account, the shareholder will be notified in writing and
allowed 30 days to purchase additional shares to meet the minimum requirement.
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 circumstances.
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 obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
15
- ------------------------------------------
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Fund may purchase all types of municipal bonds, including private activity
bonds.
The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares.
PENNSYLVANIA CORPORATE AND
PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston, & Donnelly, counsel to the Trust: 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
Because interest received by the Fund may not be exempt from all state and local
income taxes, shareholders may be required to pay state and local taxes on
dividends received from the Fund. Shareholders are urged to consult their own
tax advisers regarding the status of their accounts under state and local tax
laws.
16
- ------------------------------------------
PERFORMANCE INFORMATION
From time to time, the Fund advertises its yield, effective yield, and
tax-equivalent yield.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the Fund's tax exempt yield, assuming a specific tax rate.
Advertisements and 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, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
17
- ------------------------------------------
- ------------------------------------------
MUNICIPAL CASH SERIES II
PORTFOLIO OF INVESTMENTS
MAY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
----------- ------------------------------------------------------------ --------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--98.8%
-------------------------------------------------------------------------
ALABAMA--1.8%
------------------------------------------------------------
$ 925,000 Abbeville, AL, IDB Monthly VRDNs (Great Southern Wood
Preserving Co.)/(SouthTrust Bank of Alabama, Birmingham LOC) P-1 $ 925,000
------------------------------------------------------------
305,000 Muscle Shoals, AL, IDB Weekly VRDNs (Whitesell
Manufacturing)/(SouthTrust Bank of Alabama, Birmingham LOC) P-1 305,000
------------------------------------------------------------ -----------
Total 1,230,000
------------------------------------------------------------ -----------
ARKANSAS--6.7%
------------------------------------------------------------
3,500,000 Hope, AR , Solid Waste Disposal Revenue Bonds (Series 1994),
4.30% CP (Temple-Inland Forest Products Corporation
Project)/(Temple-Inland, Inc. GTD), Mandatory Tender
8/24/1995 A-1 3,500,000
------------------------------------------------------------
1,000,000 Springdale, AR, IDA Weekly VRDNs (Newlywed Food)/ (Mellon
Bank NA, Pittsburgh LOC) VMIG1 1,000,000
------------------------------------------------------------ -----------
Total 4,500,000
------------------------------------------------------------ -----------
CALIFORNIA--5.0%
------------------------------------------------------------
2,400,000 Riverside County, CA, IDA Weekly VRDNs (Golden West
Homes)/(Wells Fargo Bank, N.A. LOC) P-1 2,400,000
------------------------------------------------------------
1,000,000 Sacramento County, CA, Housing Development Authority, (1992
Issue A) Weekly VRDNs (Shadowwood Apartments)/ (General
Electric Capital Corp. LOC) P-1 1,000,000
------------------------------------------------------------ -----------
Total 3,400,000
------------------------------------------------------------ -----------
GEORGIA--3.9%
------------------------------------------------------------
2,655,000 Georgia State, HFA, (Series 1990C), 4.40% TOBs (First
National Bank of Chicago LIQ), Optional Tender 6/1/1995 NR(2) 2,655,000
------------------------------------------------------------ -----------
</TABLE>
18
- ------------------------------------------
- ------------------------------------------
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
----------- ------------------------------------------------------------ --------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
-------------------------------------------------------------------------
ILLINOIS--4.6%
------------------------------------------------------------
$ 1,000,000 Chicago, IL, Gas Supply Revenue Bonds (1993 Series B), 4.95%
TOBs (Peoples Gas Light & Coke Company), Optional Tender
12/1/1995 VMIG1 $ 1,000,000
------------------------------------------------------------
2,135,000 Illinois Development Finance Authority Weekly VRDNs (Olympic
Steel, Inc.)/(National City Bank, Cleveland, OH LOC) P-1 2,135,000
------------------------------------------------------------ -----------
Total 3,135,000
------------------------------------------------------------ -----------
INDIANA--8.0%
------------------------------------------------------------
3,105,000 Avilla, IN Weekly VRDNs (Group Dekko International)/ (Bank
One, Indianapolis, IN LOC) P-1 3,105,000
------------------------------------------------------------
885,000 Avilla, IN, IDR Weekly VRDNs (Group Dekko
International)/(Bank One, Indianapolis, IN LOC) P-1 885,000
------------------------------------------------------------
1,415,000 Indiana Development Finance Authority, Adjustable Rate
Economic Development Revenue Refunding Bonds Weekly VRDNs
(T. M. Morris Manufacturing Co., Inc. Project)/ (Bank One,
Indianapolis, IN LOC) P-1 1,415,000
------------------------------------------------------------ -----------
Total 5,405,000
------------------------------------------------------------ -----------
KENTUCKY--4.4%
------------------------------------------------------------
1,000,000 Kentucky Pollution Abatement & Water Resource Finance
Authority Daily VRDNs (Toyota Motor Corp.) A-1+ 1,000,000
------------------------------------------------------------
2,000,000 Scottsville, KY, 4.45% TOBs (Sumitomo Electric Wiring
Systems)/(Sumitomo Bank Ltd., Osaka LOC), Optional Tender
11/1/1995 A-1 2,000,000
------------------------------------------------------------ -----------
Total 3,000,000
------------------------------------------------------------ -----------
LOUISIANA--3.2%
------------------------------------------------------------
2,150,000 East Baton Rouge, LA, Mortgage Finance Authority, Single
Family Mortgage Revenue Bonds (Series 1994C), 5.00% TOBs
(United States Treasury COL), Mandatory Tender 6/15/1995 MIG1 2,150,000
------------------------------------------------------------ -----------
</TABLE>
19
- ------------------------------------------
- ------------------------------------------
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
----------- ------------------------------------------------------------ --------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
-------------------------------------------------------------------------
MARYLAND--3.8%
------------------------------------------------------------
$ 2,575,000 Baltimore County, MD, IDA, (Series 1994A) Weekly VRDNs
(Pitts Realty Limited Partnership)/(PNC Bank, NA, Delaware
LOC) P-1 $ 2,575,000
------------------------------------------------------------ -----------
NEVADA--3.7%
------------------------------------------------------------
2,500,000 Nevada State Department of Community and Industrial
Development Weekly VRDNs (Smithey-Oasis Co.)/(Mellon Bank
NA, Pittsburgh LOC) P-1 2,500,000
------------------------------------------------------------ -----------
NEW HAMPSHIRE--9.6%
------------------------------------------------------------
3,000,000 New Hampshire Business Finance Authority, Pollution Control
Revenue Bonds (Series A), 4.15% CP (New England Power Co.),
Mandatory Tender 10/19/1995 A-1 3,000,000
------------------------------------------------------------
1,200,000 New Hampshire Business Finance Authority, Pollution Control
Revenue Bonds (Series A), 4.30% CP (New England Power Co.),
Mandatory Tender 8/24/1995 A-1 1,200,000
------------------------------------------------------------
2,300,000 New Hampshire Higher Educational & Health Facilities
Authority Weekly VRDNs (Colby Sawyer College Issue)/
(Baybank LOC) A-2 2,300,000
------------------------------------------------------------ -----------
Total 6,500,000
------------------------------------------------------------ -----------
NEW JERSEY--3.0%
------------------------------------------------------------
2,000,000 Hudson County, NJ, 4.55% BANs, 10/11/1995 NR(4) 2,001,037
------------------------------------------------------------ -----------
NEW YORK--9.6%
------------------------------------------------------------
3,000,000 Central Islip, NY, Union Free School District, 4.50% TANs,
6/30/1995 NR 3,001,145
------------------------------------------------------------
3,475,000 South Country Central School District, NY, 4.50% TANs,
6/29/1995 NR(4) 3,475,598
------------------------------------------------------------ -----------
Total 6,476,743
------------------------------------------------------------ -----------
</TABLE>
20
- ------------------------------------------
- ------------------------------------------
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
----------- ------------------------------------------------------------ --------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
-------------------------------------------------------------------------
OHIO--3.8%
------------------------------------------------------------
$ 2,000,000 Ohio State Air Quality Development Authority, (Series C),
4.25% TOBs (Ohio Edison Co.)/(Barclays Bank PLC, London
LOC), Optional Tender 9/1/1995 A-1+ $ 2,000,000
------------------------------------------------------------
600,000 Youngstown City School District, OH, (Series 1994-2), 5.45%
RANs, 7/1/1995 NR 600,452
------------------------------------------------------------ -----------
Total 2,600,452
------------------------------------------------------------ -----------
PENNSYLVANIA--1.0%
------------------------------------------------------------
700,000 Pennsylvania EDA Weekly VRDNs (Respironics, Inc.)/(PNC Bank,
N.A. LOC) P-1 700,000
------------------------------------------------------------ -----------
SOUTH CAROLINA--4.3%
------------------------------------------------------------
2,885,000 South Carolina Job Development Authority, Economic
Development Revenue Bonds (Series 1994) Weekly VRDNs
(Carolina Cotton Works, Inc. Project)/(Branch Banking &
Trust Co, Wilson LOC) A-1 2,885,000
------------------------------------------------------------ -----------
TENNESSEE--5.5%
------------------------------------------------------------
1,000,000 Cocke County, TN, IDB Weekly VRDNs (GLI, Inc.)/(Sanwa Bank
Ltd, Osaka LOC) P-1 1,000,000
------------------------------------------------------------
700,000 Paris, TN, IDB Weekly VRDNs (Plumley -Marugo Limited)/ (PNC
Bank, Kentucky LOC) A-1 700,000
------------------------------------------------------------
2,000,000 Roane, TN, Industrial Development Board, Solid Waste
Disposal Revenue Bonds (Series 1990A), 4.85% TOBs (Horsehead
Resource Development, Inc.)/(Long Term Credit Bank of Japan
Ltd, Tokyo LOC), Mandatory Tender 11/1/1995 A-2 2,000,000
------------------------------------------------------------ -----------
Total 3,700,000
------------------------------------------------------------ -----------
WISCONSIN--16.9%
------------------------------------------------------------
2,850,000 Germantown, WI, IDA Weekly VRDNs (Zenith Sintered Products,
Inc.)/(Bank One, Milwaukee, WI N.A. LOC) P-1 2,850,000
------------------------------------------------------------
1,940,000 Plover, WI Weekly VRDNs (Sirco Manufacturing, Inc.)/
(Norwest Bank, Minneapolis LOC) A-1+ 1,940,000
------------------------------------------------------------
</TABLE>
21
- ------------------------------------------
- ------------------------------------------
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
----------- ------------------------------------------------------------ --------- -----------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
-------------------------------------------------------------------------
WISCONSIN--CONTINUED
------------------------------------------------------------
$ 2,000,000 Plymouth, WI, IDB Weekly VRDNs (Great Lakes Cheese)/
(Rabobank Nederland, Utrecht LOC) A-1+ $ 2,000,000
------------------------------------------------------------
2,800,000 Portage, WI, Adjustable Rate IDRB (Series 1994) Weekly VRDNs
(Portage Industries Corporation Project)/(Bank One,
Milwaukee, WI N.A. LOC) A-1+ 2,800,000
------------------------------------------------------------
1,840,000 Wisconsin Housing & Economic Development Authority, (Series
B), 4.625% TOBs (FSA INS)/(Meridian Bank, Reading, PA LIQ),
Optional Tender 6/1/1995 NR(1) 1,840,000
------------------------------------------------------------ -----------
Total 11,430,000
------------------------------------------------------------ -----------
TOTAL INVESTMENTS (AT AMORTIZED COST) $66,843,232+
------------------------------------------------------------ -----------
-----------
<FN>
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current Credit Ratings are unaudited.
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($67,611,234) at May 31, 1995.
</TABLE>
22
- ------------------------------------------
- ------------------------------------------
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The following abbreviation(s) are used in this portfolio:
BANs --Bond Anticipation Notes
COL --Collateralized
CP --Commercial Paper
EDA --Economic Development Authority
FSA --Financial Security Assurance
GTD --Guaranty
HFA --Housing Finance Authority
IDA --Industrial Development Authority
IDB --Industrial Development Bond
IDR --Industrial Development Revenue
IDRB --Industrial Development Revenue Bonds
INS --Insured
LIQ --Liquidity Agreement
LOC --Letter of Credit
RANs --Revenue Anticipation Notes
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)
23
- ------------------------------------------
- ------------------------------------------
MUNICIPAL CASH SERIES II
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------
Investments in securities, at amortized cost and value $ 66,843,232
- -----------------------------------------------------------------------------------
Cash 160,841
- -----------------------------------------------------------------------------------
Income receivable 724,437
- -----------------------------------------------------------------------------------
Deferred expenses 14,739
- ----------------------------------------------------------------------------------- ------------
Total assets 67,743,249
- -----------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------
Payable for shares redeemed $ 1,236
- ----------------------------------------------------------------------
Income distribution payable 102,355
- ----------------------------------------------------------------------
Accrued expenses 28,424
- ---------------------------------------------------------------------- ----------
Total liabilities 132,015
- ----------------------------------------------------------------------------------- ------------
NET ASSETS for 67,611,234 shares outstanding $ 67,611,234
- ----------------------------------------------------------------------------------- ------------
------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
($67,611,234 DIVIDED BY 67,611,234 shares outstanding) $ 1.00
- ----------------------------------------------------------------------------------- ------------
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
24
- ------------------------------------------
- ------------------------------------------
MUNICIPAL CASH SERIES II
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------
Interest $ 3,470,108
- -----------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------
Investment advisory fee $469,638
- ------------------------------------------------------------
Administrative personnel and services fee 125,000
- ------------------------------------------------------------
Custodian fees 31,272
- ------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and
expenses 27,536
- ------------------------------------------------------------
Directors'/Trustees' fees 5,082
- ------------------------------------------------------------
Auditing fees 13,196
- ------------------------------------------------------------
Legal fees 10,815
- ------------------------------------------------------------
Portfolio accounting fees 19,335
- ------------------------------------------------------------
Distribution services fee 187,785
- ------------------------------------------------------------
Share registration costs 39,897
- ------------------------------------------------------------
Printing and postage 9,097
- ------------------------------------------------------------
Insurance premiums 5,634
- ------------------------------------------------------------
Miscellaneous 15,721
- ------------------------------------------------------------ --------
Total expenses 960,008
- ------------------------------------------------------------
Deduct--Waiver of investment advisory fee 218,074
- ------------------------------------------------------------ --------
Net expenses 741,934
- ----------------------------------------------------------------------- -----------
Net investment income $ 2,728,174
- ----------------------------------------------------------------------- -----------
-----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
25
- ------------------------------------------
- ------------------------------------------
MUNICIPAL CASH SERIES II
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------------------
1995 1994
------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------
OPERATIONS--
- ------------------------------------------------
Net investment income $ 2,728,174 $ 2,474,809
- ------------------------------------------------ ------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------
Distributions from net investment income (2,728,174) (2,474,809)
- ------------------------------------------------ ------------- ---------------
SHARE TRANSACTIONS--
- ------------------------------------------------
Proceeds from sale of Shares 627,259,519 1,279,506,572
- ------------------------------------------------
Net asset value of Shares issued to shareholders
in payment of distributions declared 2,143,218 2,011,384
- ------------------------------------------------
Cost of Shares redeemed (693,561,189) (1,254,311,439)
- ------------------------------------------------ ------------- ---------------
Change in net assets resulting from Share
transactions (64,158,452) 27,206,517
- ------------------------------------------------ ------------- ---------------
Change in net assets (64,158,452) 27,206,517
- ------------------------------------------------
NET ASSETS:
- ------------------------------------------------
Beginning of period 131,769,686 104,563,169
- ------------------------------------------------ ------------- ---------------
End of period $ 67,611,234 $ 131,769,686
- ------------------------------------------------ ------------- ---------------
------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
26
- ------------------------------------------
- ------------------------------------------
MUNICIPAL CASH SERIES II
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION
Cash Trust Series II (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. The Trust consists of two portfolios, one diversified and one
non-diversified. The financial statements presented herein present only those of
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.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
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 its shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
27
- ------------------------------------------
- ------------------------------------------
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, 1995, capital paid-in aggregated $67,611,234.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------
MAY 31, 1995 MAY 31, 1994
- ------------------------------------------------- ------------- ---------------
<S> <C> <C>
Shares sold 627,259,519 1,279,506,572
- -------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 2,143,218 2,011,384
- -------------------------------------------------
Shares redeemed (693,561,189) (1,254,311,439)
- ------------------------------------------------- ------------- ---------------
Net change resulting from share transactions (64,158,452) 27,206,517
- ------------------------------------------------- ------------- ---------------
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser, (the
"Adviser"), receives for its services 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. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS 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 the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
reimburse Federated Securities Corp., 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 .20 of 1% of the average daily net assets of the Fund, annually, to
reimburse Federated Securities Corp.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
28
- ------------------------------------------
- ------------------------------------------
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
ORGANIZATIONAL EXPENSES--Organizational expenses ($18,628) and start up
administrative service expenses ($82,502) were initially borne by the Adviser.
The Fund has agreed to reimburse the Adviser 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 the Adviser are fully reimbursed or the expiration
of five years after April 24, 1991 (date the Fund first became effective),
whichever occurs earlier. For the year ended May 31, 1995, the Fund paid $3,505
and $9,787 pursuant to this agreement.
INTERFUND TRANSACTIONS--During the year ended May 31, 1995, the Fund engaged in
purchase and sale transactions with funds that have a common investment adviser
(or affiliated investment advisers), common Directors/Trustees, and/or common
Officers. These transactions were made at current market value pursuant to Rule
17a-7 under the Act amounting to $253,950,000 and $331,040,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
29
- ------------------------------------------
- ------------------------------------------
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, 1995, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended May 31, 1995 and 1994 and the financial highlights
(see page 2 of the prospectus) for each of the years in the four-year period
ended May 31, 1995. 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, 1995, 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, 1995, the results of its operations, the changes in its
net assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP.
Pittsburgh, Pennsylvania
July 14, 1995
30
- ------------------------------------------
- ------------------------------------------
ADDRESSES
Cash Trust Series II
Federated Investors Tower
Pittsburgh, PA 15222-3779
<TABLE>
<S> <C>
DISTRIBUTOR TRANSFER AGENT AND DIVIDEND DISBURSING
Federated Securities Corp. AGENT
Federated Investors Tower Federated Services Company
Pittsburgh, PA 15222-3779 P.O. Box 8600
Boston, MA 02266-8600
INVESTMENT ADVISER INDEPENDENT PUBLIC ACCOUNTANTS
Federated Advisers Deloitte & Touche LLP
Federated Investors Tower 2500 One PPG Place
Pittsburgh, PA 15222-3779 Pittsburgh, PA 15222-5401
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
</TABLE>
31
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
Prospectus dated July 31, 1995
[LOGO] FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 147552103
0111205a (7/95) [RECYCLED PAPER LOGO]
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"), a portfolio of Cash
Trust Series II (the "Trust") dated July 31, 1995. This Statement is
not a prospectus. To receive a copy of a prospectus, write or call the
Trust.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Statement dated July 31, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
General Information About the Fund 1
Investment Policies 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
When-Issued And Delayed Delivery
Transactions 1
Repurchase Agreements 1
Reverse Repurchase Agreements 2
Investment Limitations 2
Selling Short and Buying on Margin 2
Issuing Senior Securities and
Borrowing Money 2
Pledging Assets 2
Lending Cash or Securities 2
Investing in Commodities 2
Investing in Real Estate 2
Underwriting 3
Concentration of Investments 3
Investing in Restricted Securities 3
Investing in Illiquid Securities 3
Investing in Securities of Other
Investment Companies 3
Investing in New Issuers 3
Investing for Control 3
Investing in Issuers Whose
Securities Are
Owned by Officers of the Fund 3
Investing in Options 4
Investing in Minerals 4
Cash Trust Series II Management 5
Share Ownership 9
Trustees Compensation 10
Trustee Liability 11
Investment Advisory Services 11
Investment Adviser 11
Advisory Fees 11
State Expense Limitations 11
Fund Administration 11
Distribution Plan 11
Determining Net Asset Value 12
Redemption in Kind 12
The Fund's Tax Status 12
Performance Information 13
Yield 13
Effective Yield 13
Tax-Equivalent Yield 13
Tax-Equivalency Table 13
Performance Comparisons 14
About Federated Investors 15
Appendix 16
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 Policies
Unless indicated otherwise, the 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.
Acceptable Investments
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security, the issuer of any demand feature applicable to the security, or any
guarantor of either the security or any demand feature.
Participation Interests
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the
Fund's maximum maturity requirements so long as the participation interests
include the right to demand payment from the issuers of those interests. By
purchasing these participation interests, the Fund is buying a security
meeting the maturity and quality requirements of the Fund and also is
receiving the tax-free benefits of the underlying securities.
Municipal Leases
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments
by a governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the
appropriation for the lease. Furthermore, a lease may provide that the
participants cannot accelerate lease obligations upon default. The
participants would only be able to enforce lease payments as they became due.
In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Board of Trustees, will base its
determination on the following factors: whether the lease can be terminated by
the lessee; the potential recovery, if any, from a sale of the leased property
upon termination of the lease; the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and prospects);
the likelihood that the lessee will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to its
operations (e.g., the potential for an "event of non-appropriation"); and any
credit enhancement or legal recourse provided upon an event of non-
appropriation or other termination of the lease.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the
Fund's records at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
Repurchase Agreements
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities to
the Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. The Fund or its custodian will take
possession of the securities subject to repurchase agreements, and these
securities will be marked to market daily. In the event that a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of
the Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.
Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument in return
for a percentage of the instrument's market value in cash and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an agreed
upon rate. The use of reverse repurchase agreements may enable the Fund to
avoid selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but does not ensure this result. When effecting reverse
repurchase agreements, liquid assets of the Fund, in a dollar amount
sufficient to make payment for the obligations to be purchased, are:
segregated on the Fund's records at the trade date; marked to market daily;
and maintained until the transaction is settled.
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 amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of the value of its total assets
are outstanding. During the period any reverse repurchase agreements are
outstanding, the Fund will restrict the purchase of portfolio securities to
money market instruments maturing on or before the expiration date of the
reverse repurchase agreements, but only to the extent necessary to assure
completion of the reverse repurchase agreements.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings. In 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, and limitations, or Declaration of Trust.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
Investing in Real Estate
The Fund will not purchase or sell real estate, including limited partnership
interests, although it may invest in securities of issuers whose business
involves the purchase or sale of real estate or in securities which are
secured by real estate or interests in real estate.
Underwriting
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
Concentration of Investments
The Fund will not invest 25% or more of the value of its total assets in any
one industry, or in industrial development bonds or other securities the
interest upon which is paid from revenues of similar types of projects, except
that the Fund may invest 25% or more of the value of its total assets in cash,
cash items, or securities issued or guaranteed by the government of the United
States or its agencies, or instrumentalities and repurchase agreements
collateralized by such U.S. government securities.
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 limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment companies, except as
part of a merger, consolidation, or other acquisition.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers (including companies responsible for paying principal
and interest on industrial development bonds) which have records of less than
three years of continuous operations, including the operation of any
predecessor.
Investing for Control
The Fund will not invest in securities of a company for the purpose of
exercising control or management.
Investing in Issuers Whose Securities Are Owned by Officers of the Fund
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Fund or its investment adviser owning
individually more than .50 of 1% of the issuer's securities together own more
than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or any
combination of them.
Investing in Minerals
The Fund will not purchase or sell interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase the
securities of issuers which invest in or sponsor such programs.
For purposes of the above limitations, the Fund considers instruments 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". Except with respect to borrowing money, if a
percentage limitation is adhered to at the time of investment, a later
increase or decrease in percentage resulting from any change in value or net
assets will not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the
value of its net assets during the last fiscal year and has no present intent
to do so during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the adviser will generally use
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. The
adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to guidelines established by the Board of Trustees. The
adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services.
Research services provided by brokers and dealers may be used by the adviser
or its affiliates in advising the Trust and other accounts. To the extent
that receipt of these services may supplant services for which the adviser or
its affiliates might otherwise have paid, it would tend to reduce their
expenses. The adviser and its affiliates exercise reasonable business
judgment in selecting brokers who offer brokerage and research services to
execute securities transactions. They determine in good faith that
commissions charged by such persons are reasonable in relationship to the
value of the brokerage and research services provided. During the fiscal
years ended May 31, 1995, 1994 and 1993, the Trust paid no brokerage
commissions.
Although investment decisions for the Fund are made independently from those
of the other accounts managed by the adviser, investments of the type the Fund
may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by the adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.
Cash Trust Series II Management
Officers and Trustees are listed with their addresses, present positions with
Cash Trust Series II, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue,
Executive Vice President and Trustee of the Trust.
J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President and Trustee
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder 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.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital
of Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds;
formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Peter E. Madden
70 Westcliff Road
Westin, MA
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; founding Chairman, National Advisory
Council for Environmental Policy and Technology and Federal Emergency
Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: July 21, 1935
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President
or Vice President of some of the Funds; Director or Trustee of some of the
Funds.
Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice President, Treasurer, and Trustee, Federated Investors; Vice President
and Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice
President, Treasurer, and Director, Federated Securities Corp.; Trustee,
Federated Services Company and Federated Shareholder Services; Chairman,
Treasurer, and Trustee, Federated Administrative Services; Trustee or Director
of some of the Funds; Executive Vice President or President of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services
Company; Executive Vice President, Secretary, and Trustee, Federated
Administrative Services; Secretary and Trustee, Federated Shareholder
Services; Executive Vice President and Director, Federated Securities Corp.;
Vice President and Secretary of the Funds.
David M. Taylor *
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice President,
Federated Shareholder Services; Senior Vice President, Federated
Administrative Services; Treasurer of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
As used in the table on the previous page, "The Funds" and "Funds" mean the
following investment companies: American Leaders Fund, Inc.; Annuity
Management Series; Arrow Funds; 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 Institutional 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; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; New York Municipal Cash
Trust; 111 Corcoran Funds; Peachtree Funds; The Planters Funds; RIMCO Monument
Funds; The Shawmut Funds; Short-Term Municipal Trust; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust For Government Cash Reserves; Trust
for Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; The Virtus Funds; World Investment Series, Inc.
Share Ownership
Officers and Trustees as a group own less than 1% of the Fund's outstanding
shares.
As of July 7, 1995, the following shareholders of record owned 5% or more of
the outstanding shares of Municipal Cash Series II: Kaw & Co., Charleston,
WV, owned approximately 12,939,006 shares (18.56%); Software Spectrum,
Garland, TX , owned approximately 10,487,067 shares (15.04%); and Clear Lakes
Trout Co., Boise, ID, owned approximately 5,397,102 shares (7.74%).
Trustees Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue
Trustee and Chairman $ -0- $-0- for the Trust and
68 other investment companies in
the Fund Complex
Thomas G. Bigley
Trustee $ 454 $20,688 for the Trust and
49 other investment companies in
the Fund Complex
John T. Conroy
Trustee $ 670 $117,202 for the Trust and
64 other investment companies in
the Fund Complex
William J. Copeland
Trustee $ 670 $117,202 for the Trust and
64 other investment companies in
the Fund Complex
J. Christopher Donahue
Trustee and Exec. Vice Pres.$ -0- $-0- for the Trust and
14 other investment companies in
the Fund Complex
James E. Dowd
Trustee $ 670 $117,202 for the Trust and
64 other investment companies in
the Fund Complex
Lawrence D. Ellis, M.D.
Trustee $ 611 $106,460 for the Trust and
64 other investment companies in
the Fund Complex
Edward L. Flaherty, Jr.
Trustee $ 670 $117,202 for the Trust and
64 other investment companies in
the Fund Complex
Peter E. Madden
Trustee $ 519 $90,563 for the Trust and
64 other investment companies in
the Fund Complex
Gregor F. Meyer
Trustee $ 611 $106,460 for the Trust and
64 other investment companies in
the Fund Complex
John E. Murray, Jr.
Trustee $ 301 $-0- for the Trust and
64 other investment companies in
the Fund Complex
Wesley W. Posvar
Trustee $ 611 $106,460 for the Trust and
64 other investment companies in
the Fund Complex
Marjorie P. Smuts
Trustee $ 611 $106,460 for the Trust and
64 other investment companies in
the Fund Complex
*Information is furnished for the fiscal year ended May 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of 2
portfolios.
+The information is provided for the last calendar year.
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated 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.
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 fiscal years ended May
31 1995, 1994, and 1993, the adviser earned $469,638, $626,848, and $599,682,
respectively, of which $218,074, $346,147, and $599,389, respectively, were
waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1-1/2%
per year of the remaining average net assets, the adviser will reimburse
the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated Administrative
Services, Inc., also a subsidiary of Federated Investors, served as the Fund's
Administrator. (For purposes of this Statement of Additional Information,
Federated Administrative Services and Federated Administrative Services, Inc.
may hereinafter collectively be referred to as the "Administrators".) For the
fiscal year ended May 31, 1995, Federated Administrative Services earned
$125,000. For the fiscal year ended May 31, 1994, the Administrators earned
$246,535. For the fiscal year ended May 31, 1993, Federated Administrative
Services, Inc. earned $240,232. 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.
Distribution Plan
The Fund has adopted a Plan pursuant to Rule 12b-1 which was promulgated by
the Securities and Exchange Commission pursuant to the Investment Company Act
of 1940. The Plan permits the payment of fees to financial institutions for
sales services or distribution-related support services. The Plan is designed
to stimulate distribution activities and to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. 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 may include: (1) an efficient and effective distribution-
related support system; (2) a more efficient use of shareholder assets by
having them rapidly invested 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 fiscal year ending May 31, 1995, payments in the amount of
$187,785 were made pursuant to the distribution plan, all of which was paid to
financial institutions.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust Company,
Boston, MA, is custodian for the securities and cash of the Fund. It also
provides certain accounting and recordkeeping services with respect to the
Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains all
necessary shareholder records. For its services, the transfer agent receives
a fee based on the number of shareholder accounts.
Determining Net Asset Value
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of
the Fund computed by dividing the annualized daily income on the Fund's
portfolio by the net asset value computed as above may tend to be higher than
a similar computation made by using a method of valuation based upon market
prices and estimates. In periods of rising interest rates, the opposite may be
true.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed
for purposes of distribution and redemption, at $1.00 per share, taking into
account current market conditions and the Fund's investment objective. The
procedures include monitoring the relationship between the amortized cost
value per share and the net asset value per share based upon available
indications of market value. The Trustees will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the
two values. The Trustees will take any steps they consider appropriate (such
as redemption in kind or shortening the average portfolio maturity) to
minimize any material dilution or other unfair results arising from
differences between the two methods of determining net asset value.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Fund's net asset value, whichever is less, for any one shareholder within
a 90-day period. Any redemption beyond this amount will also be in cash
unless the Trustees determine that further payments should be in kind. In
such cases, the Fund will pay all or a portion of the remainder of the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected in a
manner that the Trustees deem fair and equitable. Redemption in kind is not
as liquid as a cash redemption. If redemption is made in kind, shareholders
who sell these securities could receive less than the redemption value and
could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its net
income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers charge
fees in connection with services provided in conjunction with an investment in
shares of the Fund, the performance will be reduced for those shareholders
paying those fees.
Yield
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding
capital changes but including the value of any additional shares purchased
with dividends earned from the original one share and all dividends declared
on the original and any purchased shares; dividing the net change in the
account's value by the value of the account at the beginning of the base
period to determine the base period return; and multiplying the base period
return by 365/7.
The Fund's yield for the seven-day period ended May 31, 1995, was 3.55%.
Effective Yield
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended May 31, 1995, was
3.62%.
Tax-Equivalent Yield
The Fund's tax-equivalent yield for the seven-day period ended May 31, 1995,
was 5.99%.
Tax-Equivalency Table
A tax-equivalency table may be used in advertising and sales literature. The
interest earned by the municipal securities in the Fund's portfolio generally
remains free from federal regular income tax,* and is often free from state
and local taxes as well. As the table below indicates, a "tax-free"
investment can be an attractive choice for investors, particularly in times of
narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
MULTISTATE MUNICIPAL FUND
FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
Joint $1- $39,001 - $94,251 - $143,601 - OVER
Return 39,000 94,250 143,600 256,500 256,500
Single Return $1- $23,351 - $56,551 - $117,951 - OVER
23,350 56,550 117,950 256,500 $256,500
Tax-Exempt
Yield Taxable Yield Equivalent
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 2.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
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 Fund.
*Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local taxes.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
o Lipper Analytical Services, Inc., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o Donoghue's Money Fund Report publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports
monthly and 12-month-to-date investment results for the same money
funds.
o Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
About Federated Investors
Federated is dedicated to meeting investor needs which is reflected in its
investment decision making -- structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands
of clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market
fund. Simultaneously, the company pioneered the use of the amortized cost
method of accounting for valuing shares of money market funds, a principal
means used by money managers today to value money market fund shares. Other
innovations include the first institutional tax-free money market fund. As of
December 31, 1994, Federated managed more than $31 billion in assets across
approximately 43 money market funds, including 17 government, 8 prime and 18
municipal with assets approximating $17 billion, $7.4 billion and $6.6
billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated's equity and
high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated's domestic fixed income management. Henry A.
Frantzen, Executive Vice President, oversees the management of Federated's
international portfolios.
Mutual Fund Market
Twenty-seven percent of American households are pursuing their
financial goals through mutual funds. These investors, as well as
businesses and institutions, have entrusted over $2 trillion to
the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual
funds for a variety of investment applications. Specific markets
include:
Institutional
Federated meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts
and mutual funds for a variety of applications, including defined
benefit and defined contribution programs, cash management, and
asset/liability management. Institutional clients include
corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional
clients is headed by John B. Fisher, President, Institutional
Sales Division.
Trust Organizations
Other institutional clients include close relationships with more
than 1,500 banks and trust organizations. Virtually all of the
trust divisions of the top 100 bank holding companies use
Federated funds in their clients' portfolios. The marketing
effort to trust clients is headed by Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.
Broker/dealers and bank broker/dealer subsidiaries
Federated mutual funds are available to consumers through major
brokerage firms nationwide--including 200 New York Stock Exchange
firms--supported by more wholesalers than any other mutual fund
distributor. The marketing effort to these firms is headed by
James F. Getz, President, Broker/Dealer Division.
*source: Investment Company Institute
Appendix
STANDARD AND POOR'S RATINGS GROUP MUNICIPAL BOND RATINGS
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 effect of changes in
circumstances and economic conditions than debt 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.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATINGS
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than in
Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as 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.
STANDARD & POOR'S RATINGS GROUP MUNICIPAL NOTE RATINGS
SP-1 - Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given
a plus sign (+) designation.
SP-2 - atisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC. SHORT TERM LOAN RATING DEFINITIONS
MIG 1/VMIG 1 - This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG 2/VMIG 2 - This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.
FITCH INVESTORS SERVICE, INC. SHORT-TERM DEBT RATINGS
F-1 - Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment only slightly less in degree than issues rated F-
1+.
F-2 - Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as for issues assigned F-1+ and F-1 ratings.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
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.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
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.
Cusip 147552103
0111205b (7/95)
TREASURY CASH SERIES II
(A PORTFOLIO OF CASH TRUST SERIES II)
PROSPECTUS
The shares of Treasury Cash Series II (the "Fund") offered by this prospectus
represent interests in a diversified portfolio of Cash Trust Series II (the
"Trust"), an open-end management investment company (a mutual fund). The Fund
invests in short-term U.S. Treasury securities to achieve current income
consistent with stability of principal and liquidity.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated July 31,
1995, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information,
which is in paper form only, or a paper copy of this prospectus, if you have
received it electronically, free of charge by calling 1-800-235-4669. To obtain
other information, or make inquiries about the Trust, 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, 1995
- ------------------------------------------
- ------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of Fund Expenses............... 1
Financial Highlights................... 2
General Information.................... 3
Investment Information................. 3
Investment Objective................. 3
Investment Policies.................. 3
Acceptable Investments............... 3
Investment Limitations............... 4
Regulatory Compliance................ 4
Trust Information...................... 5
Management of Cash Trust Series II... 5
Distribution of Shares............... 6
Administration of the Fund........... 7
Net Asset Value........................ 8
How to Purchase Shares................. 8
Special Purchase Features............ 9
How to Redeem Shares................... 10
Special Redemption Features.......... 11
Account and Share Information.......... 11
Tax Information........................ 13
Federal Income Tax................... 13
Pennsylvania Corporate and Personal
Property Taxes..................... 13
Performance Information................ 13
Financial Statements................... 14
Independent Auditors' Report........... 22
Addresses.............................. 23
</TABLE>
- ------------------------------------------
- ------------------------------------------
SUMMARY OF FUND EXPENSES
TREASURY CASH SERIES II
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
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
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<S> <C> <C>
Management Fee.......................................................................... 0.50%
12b-1 Fee............................................................................... 0.20%
Total Other Expenses.................................................................... 0.18%
Shareholder Services Fee................................................. None
Total Fund Operating Expenses................................................... 0.88%
</TABLE>
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 $ 108
</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.
1
- ------------------------------------------
- ------------------------------------------
TREASURY CASH SERIES II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Deloitte & Touche LLP, Independent Auditors,
on page 22.
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
----------------------------------------------------------
1995 1994 1993 1992 1991(A)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------
Net investment income 0.04 0.02 0.03 0.04 0.02
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS
- ------------------------------------------------------------
Distributions from net investment income (0.04) (0.02) (0.03) (0.04) (0.02)
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL RETURN (B) 4.47% 2.47% 2.64% 4.41% 2.06%
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------
Expenses 0.88% 0.89% 0.78% 0.73% 0.47%(c)
- ------------------------------------------------------------
Net investment income 4.40% 2.42% 2.55% 4.34% 5.71%(c)
- ------------------------------------------------------------
Expense waiver/reimbursement (d) 0.00% 0.05% 0.19% 0.57% 0.37%(c)
- ------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------
Net assets, end of period (000 omitted) $243,651 $229,882 $310,648 $104,371 $70,798
- ------------------------------------------------------------
<FN>
(a) Reflects operations for the period from February 9, 1991 (date of initial
public investment) to May 31, 1991.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
2
- ------------------------------------------
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 representing interests in separate portfolios of
securities. 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 investing only in short-term U.S.
Treasury securities. A minimum initial investment of $25,000 is required, except
for 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. Shares are
currently sold and redeemed at that price.
- ------------------------------------------
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income consistent with stability
of principal and liquidity. This investment objective cannot be changed without
shareholder approval. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the investment policies
described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing only in U.S. Treasury
securities maturing in 13 months or less. The average maturity of the securities
in the Fund's portfolio, computed on a dollar-weighted basis, will be 90 days or
less. Unless indicated otherwise, the investment policies may be changed by the
Trustees without shareholder approval. Shareholders will be notified before any
material change in these policies becomes effective.
The Fund will limit its investments to investments which, if owned directly, pay
interest exempt from state personal income tax. Therefore, dividends paid by the
Fund may be exempt from state personal income tax.
ACCEPTABLE INVESTMENTS
The Fund invests only in U.S. Treasury securities, which are fully guaranteed as
to principal and interest by the United States.
REPURCHASE AGREEMENTS
Certain securities in which the Fund invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell
3
securities to the Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price. To the extent that the seller does not
repurchase the securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities.
WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS
The Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, the Fund may pay more
or less than the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
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 assets to secure such
borrowings.
The above investment limitation cannot be changed without shareholder approval.
The following limitation, however, may 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.
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 determine the effective maturity of its
investments 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.
4
- ------------------------------------------
TRUST 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 Fund's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. An Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
Investment decisions for the Fund are made by Federated 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 and sale of portfolio instruments.
ADVISORY FEES
The adviser receives an annual investment advisory fee equal to .50 of 1% of the
Fund's average daily net assets. The adviser has undertaken to reimburse the
Fund up to the amount of the advisory fee for operating expenses in excess of
limitations established by certain states. The adviser also may voluntarily
choose to waive a portion of its fee or reimburse other expenses of the Fund,
but reserves the right to terminate such waiver or reimbursement at any time at
its sole discretion.
ADVISER'S BACKGROUND
Federated 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.
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. With over $72 billion invested across more than 260 funds
under management and/or administration by its subsidiaries, as of December 31,
1994, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 1,750 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,000 financial institutions nationwide. More
than 100,000 investment professionals have selected Federated funds for their
clients.
Both the Trust and the Adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to
5
review by the Board of Trustees, and could result in severe penalties.
DISTRIBUTION OF 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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION PLAN
Under a distribution plan adopted in accordance with Investment Company Act Rule
12b-1 (the "Plan"), the distributor may select financial institutions such as
banks, fiduciaries, custodians for public funds, investment advisers and
brokers/dealers to provide sales services or distribution-related support
services as agents for their clients or customers. These services may include,
but are not limited to the following functions: providing office space,
equipment, telephone facilities, and various personnel including clerical,
supervisory, and computer 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 subject
to the Plan and 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 Fund provided that for any period the total
amount of these fees shall not exceed an annual rate of .20 of 1% of the average
net asset value of shares subject to the Plan 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 under the Plan, will be reimbursed
from the assets of the Fund.
SUPPLEMENTAL 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 supplemental fee from its own
assets to financial institutions as financial assistance for providing
substantial sales services, distribution-related support services, or
shareholder services. 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.
6
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Administrative
Services provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- -------------- -----------------------
<C> <S>
.15 of 1% on the first $250
million
.125 of 1% on the next $250
million
.10 of 1% on the next $250
million
.075 of 1% on assets in excess of
$750 million
</TABLE>
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. Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may choose
voluntarily to waive a portion of its fee.
CUSTODIAN
State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Fund.
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Federated Services Company, Boston, MA, is transfer agent for the shares of, and
dividend disbursing agent for, the Fund. Federated Services Company is a
subsidiary of Federated Investors.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh,
P.A.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the investment adviser looks for prompt execution of the order at a
favorable price. In working with dealers, the investment adviser will generally
utilize those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained elsewhere.
In selecting among firms believed to meet these criteria, the investment adviser
may give consideration to those firms which have sold or are selling shares of
the Fund and other Funds distributed by Federated Securities Corp. The
investment adviser makes decisions on portfolio transactions and selects brokers
and dealers subject to review by the Trustees.
7
- ------------------------------------------
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 cannot
guarantee that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 3:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange each day the New York Stock Exchange is open.
- ------------------------------------------
HOW TO PURCHASE SHARES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange and the Federal Reserve Wire System are open for business. Shares may
be purchased as described below either through a financial institution (such as
a bank or broker/dealer) or by wire or by check directly to the Fund with a
minimum initial investment of $25,000 or more and additional investments of as
little as $500. The minimum initial investment for retirement plans is only
$1,000. (Financial institutions may impose different minimum investment
requirements on their customers.)
In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before shares can be purchased.
PURCHASING SHARES THROUGH A
FINANCIAL INSTITUTION
Investors may purchase shares through a financial institution which has a sales
agreement with the distributor. Orders 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. Financial institutions may charge additional fees
for their services.
PURCHASING SHARES BY WIRE
Shares may be purchased by wire by calling the Fund before 3:00 p.m. (Eastern
time). The
8
order is considered received immediately. Payment by federal funds must be
received before 3:00 p.m. (Eastern time) in order to begin earning dividends
that same day. Federal funds should be wired as follows: Federated Services
Company, c/o State Street Bank and Trust Company, Boston, MA; Attention;
EDGEWIRE; For credit to: 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; and ABA Number 011000028. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.
PURCHASING SHARES BY CHECK
Shares may be purchased by sending a check made payable to Treasury Cash Series
II to: Federated Services Company, P.O. Box 8600, Boston, MA 02266-8600. Orders
by mail are considered received when payment by check is converted into federal
funds (normally the business day after the check is received) and shares begin
earning dividends the next day.
SPECIAL PURCHASE FEATURES
SYSTEMATIC INVESTMENT PROGRAM
A minimum of $500 can be automatically withdrawn periodically from the
shareholder's checking account at an Automated Clearing House ("ACH") member and
invested in Fund shares. Shareholders should contact their financial institution
or the Fund to participate in this program.
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 charges a fee based on the level of subaccounting services
rendered. Financial institutions may charge or pass through subaccounting fees
as part of or in addition to normal trust or agency account fees. They may also
charge fees for other services provided which may be related to the ownership of
Fund shares. This prospectus should, therefore, be read together with any
agreement between the customer and the financial institution with regard to the
services provided, the fees charged for those services, and any restrictions and
limitations imposed.
9
- ------------------------------------------
HOW TO REDEEM SHARES
Shares are redeemed at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made as described below.
REDEEMING THROUGH A
FINANCIAL INSTITUTION
Shares may be redeemed by contacting the shareholder's financial institution.
Shares will be redeemed at the net asset value next determined after Federated
Services Company receives the redemption request. According to the shareholder's
instructions, redemption proceeds can be sent to the financial institution or to
the shareholder by check or wire. The financial institution is responsible for
promptly submitting redemption requests and providing proper written redemption
instructions. Customary fees and commissions may be charged by the financial
institution for this service.
REDEEMING SHARES BY TELEPHONE
Redemptions in any amount may be made by calling the Fund provided the Fund has
a completed authorization form. These forms can be obtained from Federated
Securities Corp. Proceeds from redemption requests received before 12:00 noon
(Eastern time) will be wired the same day to the shareholder's account at a
domestic commercial bank which is a member of the Federal Reserve System, but
will not include that day's dividend. Proceeds from redemption requests received
after that time will include that day's dividends but will be wired the
following business day. Under limited circumstances, arrangements may be made
with the distributor for same-day payment of proceeds, without that day's
dividend, for redemption requests received before 2:00 p.m. (Eastern time).
Proceeds from redeemed shares purchased by check or through ACH will not be
wired until that method of payment has cleared.
Telephone instructions will be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming shares by
telephone. If this occurs, "Redeeming Shares by Mail" should be considered. If
at any time the Fund shall determine it necessary to terminate or modify the
telephone redemption privilege, shareholders would be promptly notified.
REDEEMING SHARES BY MAIL
Shares may be redeemed in any amount by mailing a written request together with
certificates, if issued, to:
Treasury Cash Series II
P.O. Box 8600
Boston, MA 02266-8600
The written request should state: the Fund Name; the account name as registered
with the Fund; the account number; and the number of shares to be redeemed or
the dollar amount requested. All owners of the account must sign the request
exactly as the shares are registered. All share certificates should be sent by
registered or certified mail with the written request. 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.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption
10
payable other than to the shareholder of record must have their signatures
guaranteed by: a commercial or savings bank, trust company or savings and loan
association whose deposits are insured by an organization which is administered
by the Federal Deposit Insurance Corporation; a member firm of a domestic stock
exchange; or any other "eligible guarantor institution" as defined in the
Securities Exchange Act of 1934. The Fund does not accept signatures guaranteed
by a notary public.
SPECIAL REDEMPTION FEATURES
CHECK WRITING
Upon request, a checking account will be established to allow shareholders to
redeem their Fund shares. A fee will be charged for this service. The check
writing service allows the shareholder to receive the daily dividend declared on
the shares to be redeemed until the check is presented to State Street Bank for
payment. However, checks should never be made payable or sent to State Street
Bank or the Fund to redeem shares, and a check may not be written to close an
account. Canceled checks are sent to the shareholder each month.
DEBIT CARD
Upon request, a debit account will be established. This account allows
shareholders to redeem shares by using a debit card. A fee will be charged for
this service.
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 ACH member. Shareholders may apply for
participation in this program through their financial institution or the Fund.
- ------------------------------------------
ACCOUNT AND SHARE INFORMATION
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested in writing to the Fund.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
CERTIFICATE AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund or Federated Services Company in writing. Monthly
confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, if an account
balance falls below $25,000 due to shareholder redemptions, the Fund may redeem
all of the remaining shares in that account (except accounts maintained by
retirement plans) and pay the proceeds to the shareholder. Before shares are
redeemed to close an account, the shareholder will be notified in writing and
allowed 30 days to purchase additional shares to meet the minimum requirement.
11
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 circumstances.
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 obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
12
- ------------------------------------------
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies. The Fund will be
treated as a single, separate entity for federal income tax purposes so that
income (including capital gains) and losses realized by the Trust's other
portfolios will not be combined for tax purposes with those realized by the
Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.
PENNSYLVANIA CORPORATE AND
PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston, & Donnelly, counsel to the Trust, 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
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
- ------------------------------------------
PERFORMANCE INFORMATION
From time to time, the Fund advertises its yield and effective yield.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment.
Advertisements and 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, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
13
- ------------------------------------------
- ------------------------------------------
TREASURY CASH SERIES II
PORTFOLIO OF INVESTMENTS
MAY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------------- -------------------------------------------------- ------------
<C> <S> <C>
SHORT-TERM U.S. TREASURY OBLIGATIONS--18.8%
- ------------------------------------------------------------------
(a) U.S. TREASURY BILLS--15.1%
--------------------------------------------------
$38,000,000 5.58%-6.50%, 8/24/1995-4/4/1996 $ 36,918,066
-------------------------------------------------- ------------
U.S. TREASURY NOTES--3.7%
--------------------------------------------------
9,000,000 3.875%-8.50%, 9/30/1995-1/31/1996 8,958,071
-------------------------------------------------- ------------
TOTAL SHORT-TERM U.S. TREASURY OBLIGATIONS 45,876,137
-------------------------------------------------- ------------
(B)REPURCHASE AGREEMENTS--81.2%
- ------------------------------------------------------------------
10,000,000 BT Securities Corp., 6.18%, dated 5/31/1995, due
6/1/1995 10,000,000
--------------------------------------------------
17,800,000 BZW Securities, Inc., 6.18%, dated 5/31/1995, due
6/1/1995 17,800,000
--------------------------------------------------
10,000,000 BOT Securities, Inc., 6.15%, dated 5/31/1995, due
6/1/1995 10,000,000
--------------------------------------------------
10,000,000 Bear, Stearns & Co., Inc., 6.125%, dated
5/31/1995, due 6/1/1995 10,000,000
--------------------------------------------------
10,000,000 Chase Government Securities, Inc., N.A., 6.14%,
dated 5/31/1995, due 6/1/1995 10,000,000
--------------------------------------------------
10,000,000 Daiwa Securities America, Inc., 6.125%, dated
5/31/1995, due 6/1/1995 10,000,000
--------------------------------------------------
10,000,000 Deutsche Bank Government Securities, 6.18%, dated
5/31/1995, due 6/1/1995 10,000,000
--------------------------------------------------
10,000,000 Donaldson, Lufkin and Jenrette Securities Corp.,
6.15%, dated 5/31/1995, due 6/1/1995 10,000,000
--------------------------------------------------
10,000,000 First Chicago Capital Markets, Inc., 6.125%, dated
5/31/1995, due 6/1/1995 10,000,000
--------------------------------------------------
10,000,000 HSBC Securities, Inc., 6.18%, dated 5/31/1995, due
6/1/1995 10,000,000
--------------------------------------------------
10,000,000 Harris Government Securities, Inc., 6.18%, dated
5/31/1995, due 6/1/1995 10,000,000
--------------------------------------------------
10,000,000 J.P. Morgan Securities, Inc., 6.17%, dated
5/31/1995, due 6/1/1995 10,000,000
--------------------------------------------------
5,000,000 (c) Merrill Lynch, Government Securities, Inc.,
6.00%, dated 5/2/1995, due 6/30/1995 5,000,000
--------------------------------------------------
5,000,000 (c) Merrill Lynch, Government Securities, Inc.,
6.05%, dated 4/11/1995, due 6/23/1995 5,000,000
--------------------------------------------------
</TABLE>
14
- ------------------------------------------
- ------------------------------------------
TREASURY CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------------- -------------------------------------------------- ------------
<C> <S> <C>
(B)REPURCHASE AGREEMENTS--CONTINUED
- ------------------------------------------------------------------
$10,000,000 National Westminster USA, 6.15%, dated 5/31/1995,
due 6/1/1995 $ 10,000,000
--------------------------------------------------
10,000,000 NationsBank of North Carolina-Charlotte, 6.13%,
dated 5/31/1995, due 6/1/1995 10,000,000
--------------------------------------------------
10,000,000 Nikko Securities Co. International, Inc., 6.15%,
dated 5/31/1995, due 6/1/1995 10,000,000
--------------------------------------------------
10,000,000 Nomura Securities International, Inc., 6.125%,
dated 5/31/1995, due 6/1/1995 10,000,000
--------------------------------------------------
10,000,000 Sanwa Securities USA Co., L.P., 6.125%, dated
5/31/1995, due 6/1/1995 10,000,000
--------------------------------------------------
10,000,000 Swiss Bank Corp., New York, 6.15%, dated
5/31/1995, due 6/1/1995 10,000,000
-------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 197,800,000
-------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST (D) $243,676,137
-------------------------------------------------- ------------
------------
<FN>
(a) The issue shows the rate of discount at time of purchase.
(b) The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in joint
accounts with other Federated funds.
(c) 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.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($243,650,582) at May 31, 1995.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
15
- ------------------------------------------
- ------------------------------------------
TREASURY CASH SERIES II
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C>
- --------------------------------------------------------------------------
Investments in repurchase agreements $197,800,000
- ------------------------------------------------------------
Investments in securities 45,876,137
- ------------------------------------------------------------ ------------
Total Investments in securities, at amortized cost and
value $243,676,137
- --------------------------------------------------------------------------
Cash 151,824
- --------------------------------------------------------------------------
Income receivable 167,458
- --------------------------------------------------------------------------
Deferred expenses 37,258
- -------------------------------------------------------------------------- ------------
Total assets 244,032,677
- --------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------
Payable for shares redeemed 100
- ------------------------------------------------------------
Income distribution payable 257,903
- ------------------------------------------------------------
Accrued expenses 124,092
- ------------------------------------------------------------ ------------
Total liabilities 382,095
- -------------------------------------------------------------------------- ------------
NET ASSETS for 243,650,582 shares outstanding $243,650,582
- -------------------------------------------------------------------------- ------------
------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per
Share: ($243,650,582 DIVIDED BY 243,650,582 shares
outstanding) $ 1.00
- -------------------------------------------------------------------------- ------------
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
16
- ------------------------------------------
- ------------------------------------------
TREASURY CASH SERIES II
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
- ------------------------------------------------------------------------
Interest $12,416,941
- ------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------
Investment advisory fee $1,174,877
- ------------------------------------------------------------
Administrative personnel and services fee 177,876
- ------------------------------------------------------------
Custodian fees 79,817
- ------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and
expenses 29,949
- ------------------------------------------------------------
Directors'/Trustees' fees 4,503
- ------------------------------------------------------------
Auditing fees 13,197
- ------------------------------------------------------------
Legal fees 10,005
- ------------------------------------------------------------
Portfolio accounting fees 28,814
- ------------------------------------------------------------
Distribution services fee 469,951
- ------------------------------------------------------------
Share registration costs 64,497
- ------------------------------------------------------------
Printing and postage 7,464
- ------------------------------------------------------------
Insurance premiums 7,692
- ------------------------------------------------------------
Taxes 354
- ------------------------------------------------------------
Miscellaneous 6,322
- ------------------------------------------------------------ ----------
Total expenses 2,075,318
- ------------------------------------------------------------------------ -----------
Net investment income $10,341,623
- ------------------------------------------------------------------------ -----------
-----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
17
- ------------------------------------------
- ------------------------------------------
TREASURY CASH SERIES II
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------
Net investment income $ 10,341,623 $ 5,902,413
- --------------------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------------
Distributions from net investment income (10,341,623) (5,902,413)
- --------------------------------------------------------------------------- ------------- -------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------------------
Proceeds from sale of Shares 677,897,145 658,832,271
- ---------------------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 7,311,204 4,890,179
- ---------------------------------------------------------------------------
Cost of Shares redeemed (671,440,119) (744,488,408)
- --------------------------------------------------------------------------- ------------- -------------
Change in net assets resulting from Share transactions 13,768,230 (80,765,958)
- --------------------------------------------------------------------------- ------------- -------------
Change in net assets 13,768,230 (80,765,958)
- ---------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------
Beginning of period 229,882,352 310,648,310
- --------------------------------------------------------------------------- ------------- -------------
End of period $ 243,650,582 $ 229,882,352
- --------------------------------------------------------------------------- ------------- -------------
------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
18
- ------------------------------------------
- ------------------------------------------
TREASURY CASH SERIES II
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION
Cash Trust Series II (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), 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
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. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require a custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to
be paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
19
- ------------------------------------------
- ------------------------------------------
TREASURY CASH SERIES II
- --------------------------------------------------------------------------------
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
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 its shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
3. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At May
31, 1995, capital paid-in aggregated $243,650,582. Transactions in shares were
as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-----------------------------
1995 1994
------------- -------------
<S> <C> <C>
- --------------------------------------------------
Shares sold 677,897,145 658,832,271
- --------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 7,311,204 4,890,179
- --------------------------------------------------
Shares redeemed (671,440,119) (744,488,408)
- -------------------------------------------------- ------------- -------------
Net change resulting from share transactions 13,768,230 (80,765,958)
- -------------------------------------------------- ------------- -------------
------------- -------------
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser, (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.50 of 1% of the Fund's average daily net assets.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS 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 the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. 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
20
- ------------------------------------------
- ------------------------------------------
TREASURY CASH SERIES II
- --------------------------------------------------------------------------------
to result in the sale of the Fund's shares. The Plan provides that the Fund may
incur distribution expenses up to .20 of 1% of the average daily net assets of
the shares, annually, to reimburse FSC.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. This fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
21
- ------------------------------------------
- ------------------------------------------
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, 1995, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended May 31, 1995 and 1994 and the financial highlights
(see page 2 of the prospectus) for each of the years in the five-year period
ended May 31, 1995. 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, 1995, by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe 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, 1995, the results of its operations, the changes in its net
assets, and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
July 14, 1995
22
- ------------------------------------------
- ------------------------------------------
ADDRESSES
Cash Trust Series II
Federated Investors Tower
Pittsburgh, PA 15222-3779
<TABLE>
<S> <C>
DISTRIBUTOR TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Securities Corp. Federated Services Company
Federated Investors Tower P.O. Box 8600
Pittsburgh, PA 15222-3779 Boston, MA 02266-8600
INVESTMENT ADVISER INDEPENDENT PUBLIC ACCOUNTANTS
Federated Advisers Deloitte & Touche LLP
Federated Investors Tower 2500 One PPG Place
Pittsburgh, PA 15222-3779 Pittsburgh, PA 15222-5401
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
</TABLE>
23
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
Prospectus dated July 31, 1995
[LOGO] FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 147552301
0111203a (7/95) [RECYCLED PAPER LOGO]
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"), a portfolio of Cash
Trust Series II (the "Trust") dated July 31, 1995. This Statement is not
a prospectus. To receive a copy of a prospectus, write or call the
Trust.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Statement dated July 31, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
General Information About the Fund 1
Investment Policies 1
Repurchase Agreements 1
When-Issued And Delayed Delivery
Transactions 1
Reverse Repurchase Agreements 1
Investment Limitations 1
Selling Short and Buying on Margin 1
Issuing Senior Securities and
Borrowing Money 1
Pledging Assets 2
Lending Cash or Securities 2
Investing in Restricted Securities 2
Investing in Illiquid Securities 2
Investing in Securities of Other
Investment
Companies 2
Investing for Control 2
Investing in Issuers Whose
Securities Are
Owned by Officers of the Fund 2
Investing in Options 2
Investing in Minerals 2
Investing in Commodities 2
Underwriting 2
Cash Trust Series II Management 4
Share Ownership 8
Trustees Compensation 9
Trustee Liability 10
Investment Advisory Services 10
Investment Adviser 10
Advisory Fees 10
Fund Administration 10
Distribution Plan 11
Determining Net Asset Value 11
Redemption in Kind 11
The Fund's Tax Status 11
Performance Information 12
Yield 12
Effective Yield 12
Performance Comparisons 12
About Federated Investors 12
General Information About the Fund
The Fund is a portfolio in Cash Trust Series II (the "Trust"), which was
extablished as a Massachusetts business trust under a Declaration of Trust
dated November 14, 1990.
Investment Policies
Unless indicated otherwise, the 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.
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 daily.
In the event that a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed pending
court action. The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only
enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Fund's adviser
to be creditworthy pursuant to guidelines established by the Trustees.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the
Fund's records at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument in return
for a percentage of the instrument's market value in cash and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio
instrument by remitting the original consideration plus interest at an agreed
upon rate. The use of reverse repurchase agreements may enable the Fund to
avoid selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but does not ensure this result. When effecting reverse
repurchase agreements, liquid assets of the Fund in a dollar amount
sufficient to make payment for the obligations to be purchased, are:
segregated on the Fund's records at the trade date; marked to market daily;
and maintained until the transaction is settled.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for clearance
of transactions.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may borrow money
directly or through reverse repurchase agreements in amounts up to one-third of
the value of its total assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of the value of its total assets
are outstanding. During the period any reverse repurchase agreements are
outstanding, the Fund will restrict the purchase of portfolio securities to
money market instruments maturing on or before the expiration date of the
reverse repurchase agreements, but only to the extent necessary to assure
completion of the reverse repurchase agreements.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets except as
necessary to secure permitted borrowings. In 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
portfolio securities permitted by its investment objective, policies, and
limitations, or 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 investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
Investing in Illiquid Securities
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment companies, except as
part of a merger, consolidation, or other acquisition.
Investing for Control
The Fund will not invest in securities of a company for the purpose of
exercising control or management.
Investing in Issuers Whose Securities Are Owned by Officers of the Fund
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Fund or its investment adviser owning
individually more than .50 of 1% of the issuer's securities together own more
than 5% of the issuer's securities.
Investing in Options
The Fund will not invest in puts, calls, straddles, spreads, or any
combination of them.
Investing in Minerals
The Fund will not purchase or sell interests in oil, gas, or other mineral
exploration or development programs or leases, although it may purchase the
securities of issuers which invest in or sponsor such programs.
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.
For purposes of the above limitations, the Fund considers instruments 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". Except with respect to borrowing money, if a
percentage limitation is adhered to at the time of investment, a later
increase or decrease in percentage resulting from any change in value or net
assets will not result in a violation of such limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the
value of its net assets during the last fiscal year and has no present intent
to do so during the coming fiscal year.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the adviser will generally use
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. The
adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to guidelines established by the Board of Trustees. The
adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services.
Research services provided by brokers and dealers may be used by the adviser
or its affiliates in advising the Trust and other accounts. To the extent
that receipt of these services may supplant services for which the adviser or
its affiliates might otherwise have paid, it would tend to reduce their
expenses. The adviser and its affiliates exercise reasonable business
judgment in selecting brokers who offer brokerage and research services to
execute securities transactions. They determine in good faith that
commissions charged by such persons are reasonable in relationship to the
value of the brokerage and research services provided. During the fiscal
years ended May 31, 1995, 1994 and 1993, the Trust paid no brokerage
commissions.
Although investment decisions for the Fund are made independently from those
of the other accounts managed by the adviser, investments of the type the Fund
may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by the adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.
Cash Trust Series II Management
Officers and Trustees are listed with their addresses, present positions with
Cash Trust Series II, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue,
Executive Vice President and Trustee of the Trust.
J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President and Trustee
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder 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.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital
of Pittsburgh; Director, Trustee, or Managing General Partner of the Funds;
formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds;
formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Peter E. Madden
70 Westcliff Road
Westin, MA
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director, Trustee, or Managing General Partner of the Funds; President
Emeritus, University of Pittsburgh; founding Chairman, National Advisory
Council for Environmental Policy and Technology and Federal Emergency
Management Advisory Board.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: July 21, 1935
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing General
Partner of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President
or Vice President of some of the Funds; Director or Trustee of some of the
Funds.
Edward C. Gonzales *
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice President, Treasurer, and Trustee, Federated Investors; Vice President
and Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice
President, Treasurer, and Director, Federated Securities Corp.; Trustee,
Federated Services Company and Federated Shareholder Services; Chairman,
Treasurer, and Trustee, Federated Administrative Services; Trustee or Director
of some of the Funds; Executive Vice President or President of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services
Company; Executive Vice President, Secretary, and Trustee, Federated
Administrative Services; Secretary and Trustee, Federated Shareholder
Services; Executive Vice President and Director, Federated Securities Corp.;
Vice President and Secretary of the Funds.
David M. Taylor *
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President, Controller, and Trustee, Federated Investors;
Controller, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Senior Vice President,
Federated Shareholder Services; Senior Vice President, Federated
Administrative Services; Treasurer of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
As used in the table on the previous page, "The Funds" and "Funds" mean the
following investment companies: American Leaders Fund, Inc.; Annuity
Management Series; Arrow Funds; 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 Institutional 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; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; New York Municipal Cash
Trust; 111 Corcoran Funds; Peachtree Funds; The Planters Funds; RIMCO Monument
Funds; The Shawmut Funds; Short-Term Municipal Trust; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust For Government Cash Reserves; Trust
for Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; The Virtus Funds; World Investment Series, Inc.
Share Ownership
Officers and Trustees as a group own less than 1% of the Fund's outstanding
shares.
As of July 7, 1995, the following shareholders of record owned 5% or more of
the outstanding shares of Treasury Cash Series II: The Bank of Guam, Agana,
GU, for the account of the Gov. of Guam Gen. Obl. Funds Procd., owned
approximately 38,065, 524 shares (13.30%); Clark & Co., Westerville, OH,
owned approximately 30,171,167 shares (10.54%); The Bank of Guam, Agana, GU,
for the account of the Government of Guam, owned approximately 25,600,320
shares (8.95%); The Bank of Guam, Agana, GU, for the account of the Government
of Guam, owned approximately 22,752,171 shares (7.95%); The Bank of Guam,
Agana, GU, for the account of CPA Seaport Rev. Bond 1995A Cons., owned
approximately 16,656,336 shares (5.82%); and The Bank of Guam, Agana, GU, for
the account of Guam Power Authority, owned approximately 15,434,790 shares
(5.39%).
Trustees Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue
Trustee and Chairman $ -0- $-0- for the Trust and
68 other investment companies in
the Fund Complex
Thomas G. Bigley
Trustee $ 552 $20,688 for the Trust and
49 other investment companies in
the Fund Complex
John T. Conroy
Trustee $ 798 $117,202 for the Trust and
64 other investment companies in
the Fund Complex
William J. Copeland
Trustee $ 798 $117,202 for the Trust and
64 other investment companies in
the Fund Complex
J. Christopher Donahue
Trustee and Exec. Vice Pres.$ -0- $-0- for the Trust and
14 other investment companies in
the Fund Complex
James E. Dowd
Trustee $ 798 $117,202 for the Trust and
64 other investment companies in
the Fund Complex
Lawrence D. Ellis, M.D.
Trustee $ 728 $106,460 for the Trust and
64 other investment companies in
the Fund Complex
Edward L. Flaherty, Jr.
Trustee $ 798 $117,202 for the Trust and
64 other investment companies in
the Fund Complex
Peter E. Madden
Trustee $ 617 $90,563 for the Trust and
64 other investment companies in
the Fund Complex
Gregor F. Meyer
Trustee $ 728 $106,460 for the Trust and
64 other investment companies in
the Fund Complex
John E. Murray, Jr.
Trustee $ 367 $-0- for the Trust and
64 other investment companies in
the Fund Complex
Wesley W. Posvar
Trustee $ 728 $106,460 for the Trust and
64 other investment companies in
the Fund Complex
Marjorie P. Smuts
Trustee $ 728 $106,460 for the Trust and
64 other investment companies in
the Fund Complex
*Information is furnished for the fiscal year ended May 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of 2
portfolios.
+The information is provided for the last calendar year.
Trustee Liability
The Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
Investment Advisory Services
Investment Adviser
The Fund's investment adviser is Federated 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.
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 fiscal years ended May
31, 1995, 1994, and 1993, the adviser earned $1,174,877, $1,217,479, and
$1,278,111, respectively, of which $0, $122,580, and $497,407, respectively,
were waived.
State Expense Limitations
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1-1/2%
per year of the remaining average net assets, the adviser will reimburse
the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
Fund Administration
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. Prior to March 1, 1994, Federated Administrative
Services, Inc., also a subsidiary of Federated Investors, served as the Fund's
Administrator. (For purposes of this Statement of Additional Information,
Federated Administrative Services and Federated Administrative Services, Inc.
may hereinafter collectively be referred to as the "Administrators".) For the
fiscal year ended May 31, 1995, Federated Administrative Services earned
$177,876. For the fiscal year ended May 31, 1994, the Administrators earned
$310,344. For the fiscal year ended May 31, 1993, Federated Administrative
Services, Inc. earned $333,357. 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.
Distribution Plan
The Fund has adopted a Plan pursuant to Rule 12b-1 which was promulgated by
the Securities and Exchange Commission pursuant to the Investment Company Act
of 1940. The Plan permits the payment of fees to financial institutions for
sales services or distribution-related support services. The Plan is designed
to stimulate distribution activities and to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. 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 may include: (1) an efficient and effective distribution-
related support system; (2) a more efficient use of shareholder assets by
having them rapidly invested 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 fiscal year ending May 31, 1995, payments in the amount of
$469,951 were made pursuant to the distribution plan, all of which was paid to
financial institutions.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust Company,
Boston, MA, is custodian for the securities and cash of the Fund. It also
provides certain accounting and recordkeeping services with respect to the
Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains all
necessary shareholder records. For its services, the transfer agent receives
a fee based on the number of shareholder accounts.
Determining Net Asset Value
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of
the Fund computed by dividing the annualized daily income on the Fund's
portfolio by the net asset value computed as above may tend to be higher than
a similar computation made by using a method of valuation based upon market
prices and estimates. In periods of rising interest rates, the opposite may be
true.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed
for purposes of distribution and redemption, at $1.00 per share, taking into
account current market conditions and the Fund's investment objective. The
procedures include monitoring the relationship between the amortized cost
value per share and the net asset value per share based upon available
indications of market value. The Trustees will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the
two values. The Trustees will take any steps they consider appropriate (such
as redemption in kind or shortening the average portfolio maturity) to
minimize any material dilution or other unfair results arising from
differences between the two methods of determining net asset value.
Redemption in Kind
The Fund is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Fund's net asset value, whichever is less, for any one shareholder within
a 90-day period. Any redemption beyond this amount will also be in cash
unless the Trustees determine that further payments should be in kind. In
such cases, the Fund will pay all or a portion of the remainder of the
redemption in portfolio instruments valued in the same way as the Fund
determines net asset value. The portfolio instruments will be selected in a
manner that the Trustees deem fair and equitable. Redemption in kind is not
as liquid as a cash redemption. If redemption is made in kind, shareholders
who sell these securities could receive less than the redemption value and
could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its net
income earned during the year.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers charge
fees in connection with services provided in conjunction with an investment in
shares of the Fund, the performance will be reduced for those shareholders
paying those fees.
Yield
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding
capital changes but including the value of any additional shares purchased
with dividends earned from the original one share and all dividends declared
on the original and any purchased shares; dividing the net change in the
account's value by the value of the account at the beginning of the base
period to determine the base period return; and multiplying the base period
return by 365/7.
The Fund's yield for the seven-day period ended May 31, 1995, was 5.23%.
Effective Yield
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended May 31, 1995, was
5.37%.
Performance Comparisons
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
o Lipper Analytical Services, Inc., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o Donoghue's Money Fund Report publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports
monthly and 12-month-to-date investment results for the same money
funds.
o Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
o 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.
About Federated Investors
Federated is dedicated to meeting investor needs which is reflected in its
investment decision making -- structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands
of clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market
fund. Simultaneously, the company pioneered the use of the amortized cost
method of accounting for valuing shares of money market funds, a principal
means used by money managers today to value money market fund shares. Other
innovations include the first institutional tax-free money market fund. As of
December 31, 1994, Federated managed more than $31 billion in assets across
approximately 43 money market funds, including 17 government, 8 prime and 18
municipal with assets approximating $17 billion, $7.4 billion and $6.6
billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated's equity and
high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated's domestic fixed income management. Henry A.
Frantzen, Executive Vice President, oversees the management of Federated's
international portfolios.
Mutual Fund Market
Twenty-seven percent of American households are pursuing their
financial goals through mutual funds. These investors, as well as
businesses and institutions, have entrusted over $2 trillion to
the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual
funds for a variety of investment applications. Specific markets
include:
Institutional
Federated meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts
and mutual funds for a variety of applications, including defined
benefit and defined contribution programs, cash management, and
asset/liability management. Institutional clients include
corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional
clients is headed by John B. Fisher, President, Institutional
Sales Division.
Trust Organizations
Other institutional clients include close relationships with more
than 1,500 banks and trust organizations. Virtually all of the
trust divisions of the top 100 bank holding companies use
Federated funds in their clients' portfolios. The marketing
effort to trust clients is headed by Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.
Broker/dealers and bank broker/dealer subsidiaries
Federated mutual funds are available to consumers through major
brokerage firms nationwide--including 200 New York Stock Exchange
firms--supported by more wholesalers than any other mutual fund
distributor. The marketing effort to these firms is headed by
James F. Getz, President, Broker/Dealer Division.
*source: Investment Company Institute
Cusip 147552301
0111203b (7/95)
