1933 Act File No. 33-49771
1940 Act File No. 811-7067
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 1 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ___X___
Amendment No. 4 X
TRUST FOR FINANCIAL INSTITUTIONS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b)
on _________________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on pursuant to paragraph (a) of Rule 485.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
filed the Notice required by that Rule on _________________; or
X__ intends to file the Notice required by that Rule on or about May 1994;
or
during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.
Copies to:
Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of TRUST FOR FINANCIAL
INSTITUTIONS, which consists of three portfolios: (1) Government Money
Market Fund, Institutional Shares and Institutional Service Shares;
(2) Government Qualifying Liquidity Fund, Institutional Shares and
Institutional Service Shares; and (3) Short-Term Government Qualifying
Liquidity Fund, Institutional Shares and Institutional Service Shares,
relates only to two of the portfolios, Government Money Market Fund, and
Government Qualifying Liquidity Fund, and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1,2) Cover Page.
Item 2. Synopsis (1,2) Expenses of the Funds;
(1,2) Summary of Fund Expenses.
Item 3. Condensed Financial
Information (1,2) Performance Information.
Item 4. General Description of
Registrant (1-2) General Information; (1,2)
Investment Information, (1,2)
Investment Objective; (1,2)
Investment
Policies; (2) Portfolio Turnover;
(1,2) Investment Limitations; (1,2)
Repurchase Agreements; (1,2)
When-Issued and Delayed Delivery
Transactions.
Item 5. Management of the Fund (1,2) Fund Information; (1,2)
Management of the Trust; (1,2)
Distribution of (Institutional or
Institutional Service) Shares.
Item 6. Capital Stock and Other
Securities (1,2) Dividends; (1,2) Shareholder
Information; (1,2) Voting Rights;
(1,2) Massachusetts Partnership Law;
(1,2) Pennsylvania Corporate and
Personal Property Tax; (1,2) Tax
Information, (1,2) Federal Income
Tax;
(1,2) Other Classes of Shares.
Item 7. Purchase of Securities Being
Offered (1,2) Net Asset Value; (1,2)
Investing
in (Institutional or Institutional
Service) Shares; (1,2) Minimum
Investment Required; (1,2) What
Shares
Cost; (1,2) Share Purchases; (1,2)
Certificates and Confirmations.
Item 8. Redemption or Repurchase (1,2) Redeeming (Institutional or
Institutional Service) Shares, By
Telephone, By Mail; (1,2) Redemption
Before Purchase Instruments Clear;
(1,2) Accounts with Low Balances.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page (1,2) Cover Page.
Item 11. Table of Contents (1,2) Table of Contents.
Item 12. General Information and
History (1,2) General Information.
Item 13. Investment Objectives and
Policies (1,2) Investment Objective and
Policies.
Item 14. Management of the Fund (1,2) Trust Management.
Item 15. Control Persons and Principal
Holders of Securities Not applicable.
Item 16. Investment Advisory and Other
Services (1,2) Investment Advisory Services;
(1,2) Administrative Services.
Item 17. Brokerage Allocation (1,2) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered (1,2) Purchasing Shares; (1,2)
Determining Net Asset Value;
(1,2) Redeeming Shares.
Item 20. Tax Status (1,2) Tax Status.
Item 21. Underwriters Not Applicable.
Item 22. Calculation of Performance
Data (1,2) Yield; Effective Yield; (2)
Total Return; Yield.
Item 23. Financial Statements (1,2) Filed in Part A.
- -------------------------------------------------------------------------------
GOVERNMENT
- --------------------------------------------------------------------------------
MONEY MARKET
- --------------------------------------------------------------------------------
FUND
- --------------------------------------------------------------------------------
INSTITUTIONAL SHARES
(A Portfolio of Trust for Financial Institutions)
SUPPLEMENT TO PROSPECTUS
DATED OCTOBER 15, 1993
FEDERATED SECURITIES CORP.
(LOGO)
Distributor
4010711 A-IS (3/94)
MARCH 31, 1994
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
A. Please insert the following "Financial Highlights--Institutional Shares"
table as page 2 of the prospectus, following the "Summary of Fund Expenses"
table and before the section entitled "General Information." In addition,
please add the heading "Financial Highlights--Institutional Shares" to the
Table of Contents on page I after the heading "Summary of Fund Expenses."
GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1994*
-------------------
<S> <C>
- --------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- --------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------
Net investment income 0.01
- -------------------------------------------------------------------- -------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------
Dividends to shareholders from net investment income (0.01)
- -------------------------------------------------------------------- -------------------
NET ASSET VALUE, END OF PERIOD $1.00
- -------------------------------------------------------------------- -------------------
TOTAL RETURN** 0.93%
- --------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------
Expenses 0.01%(b)
- --------------------------------------------------------------------
Net investment income 3.25%(b)
- --------------------------------------------------------------------
Expense waiver/reimbursement(a) 0.44%(b)
- --------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------
Net assets, end of period (000 omitted) $448,982
- --------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1993 (start of
performance) to January 31, 1994 (unaudited).
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
B. Please replace the sub-section entitled "Administrative Services on page 6 of
the prospectus with the following.
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, which
relates to the average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors ("Federated Funds"), as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET
MAXIMUM ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
- --------------------------------------------- ---------------------------------------------
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
C. Please insert the following at the end of the first paragraph under the
heading "Voting Rights" on page 10 of the prospectus.
As of March 4, 1994, Cooperative Savings Bank, Lynchburg, Virginia, owned
approximately 2,500,000 shares (27.0%); and Palmer National Bank, Washington,
D.C., owned approximately 4,007,936 shares (43.3%) of the Institutional Service
Shares of the Fund, and therefore, may, for certain purposes, be deemed to
control the Fund and be able to affect the outcome of certain matters presented
for a vote of shareholders.
D. Please insert the following "Financial Highlights--Institutional Service
Shares" table as page 13 of the prospectus immediately following the section
entitled "Other Classes of Shares." In addition, please add the heading
"Financial Highlights--Institutional Service Shares" to the Table of Contents
on page I after the heading "Other Classes of Shares."
GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1994*
-------------------
<S> <C>
- --------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- --------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------
Net investment income 0.01
- -------------------------------------------------------------------- -------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------
Dividends to shareholders from net investment income (0.01)
- -------------------------------------------------------------------- -------------------
NET ASSET VALUE, END OF PERIOD $1.00
- -------------------------------------------------------------------- -------------------
TOTAL RETURN** 0.90%
- --------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------
Expenses 0.11%(b)
- --------------------------------------------------------------------
Net investment income 3.19%(b)
- --------------------------------------------------------------------
Expense waiver/reimbursement(a) 0.59%(b)
- --------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------
Net assets, end of period (000 omitted) $15,526
- --------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1993 (start of
performance) to January 31, 1994 (unaudited).
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
E. Please insert the following financial statements after the "Financial
Highlights--Institutional Shares" table on page 13 of the prospectus. In
addition, please add the heading "Financial Statements" to the Table of
Contents on page I immediately before the heading "Addresses."
GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS--20.7%
- -----------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION,
DISCOUNT NOTES*--18.9%
---------------------------------------------------------------
$20,000,000 3.14%, 3/15/94 $ 19,926,733
---------------------------------------------------------------
15,000,000 3.13%, 3/17/94 14,942,617
---------------------------------------------------------------
10,000,000 3.22%, 5/17/94 9,906,083
---------------------------------------------------------------
8,500,000 3.30%, 6/2/94 8,405,721
---------------------------------------------------------------
3,000,000 3.29%, 6/3/94 2,966,552
---------------------------------------------------------------
4,000,000 3.29%, 6/7/94 3,953,940
---------------------------------------------------------------
5,000,000 3.38%, 7/6/94 4,927,236
---------------------------------------------------------------
2,500,000 3.34%, 8/8/94 2,456,394
---------------------------------------------------------------
6,000,000 3.41%, 8/10/94 5,892,017
---------------------------------------------------------------
10,000,000 3.42%, 9/23/94 9,777,700
---------------------------------------------------------------
5,000,000 3.34%, 11/25/94 4,862,225
--------------------------------------------------------------- ------------
Total 88,017,218
--------------------------------------------------------------- ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--0.7%
---------------------------------------------------------------
3,000,000 8.60%, 6/10/94 3,053,846
--------------------------------------------------------------- ------------
STUDENT LOAN MARKETING ASSOCIATION,
FLOATING RATE NOTE***--1.1%
---------------------------------------------------------------
5,000,000 3.20%, 2/1/94 5,004,358
--------------------------------------------------------------- ------------
TOTAL U.S. GOVERNMENT OBLIGATIONS 96,075,422
--------------------------------------------------------------- ------------
</TABLE>
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--4.5%
- -----------------------------------------------------------------------------------
U.S. TREASURY BILLS--1.7%
---------------------------------------------------------------
$ 2,000,000 3.27%, 5/5/94 $ 1,983,105
---------------------------------------------------------------
2,000,000 3.30%, 5/26/94 1,979,100
---------------------------------------------------------------
4,000,000 3.38%, 11/17/94 3,891,465
--------------------------------------------------------------- ------------
Total 7,853,670
--------------------------------------------------------------- ------------
U.S. TREASURY NOTES--2.8%
---------------------------------------------------------------
8,000,000 4.25%, 8/31/94 8,040,533
---------------------------------------------------------------
5,000,000 9.50%, 10/15/94 5,205,948
--------------------------------------------------------------- ------------
Total 13,246,481
--------------------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS 21,100,151
--------------------------------------------------------------- ------------
**REPURCHASE AGREEMENTS--73.3%
- -----------------------------------------------------------------------------------
6,000,000 Barclays de Zoete Wedd Securities, 3.17%, dated 1/31/94, due
2/1/94 6,000,000
---------------------------------------------------------------
24,400,000 Barclays de Zoete Wedd Securities, 3.26%, dated 1/31/94, due
2/1/94 24,400,000
---------------------------------------------------------------
20,000,000 BT Securities, Inc., 3.23%, dated 1/31/94, due 2/1/94 20,000,000
---------------------------------------------------------------
20,000,000 Deutsche Bank Government Securities, Inc., 3.24%, dated
1/31/94, due 2/1/94 20,000,000
---------------------------------------------------------------
20,000,000 Fuji Government Securities, Inc., 3.24%, dated 1/31/94, due
2/1/94 20,000,000
---------------------------------------------------------------
5,000,000 Greenwich Capital Market, Inc., 3.25%, dated 1/31/94, due
2/1/94 5,000,000
---------------------------------------------------------------
7,000,000 @ Greenwich Capital Market, Inc., 3.14%, dated 1/19/94, due
2/14/94 7,000,000
---------------------------------------------------------------
9,000,000 @ Greenwich Capital Market, Inc., 3.19%, dated 1/28/94, due
4/28/94 9,000,000
---------------------------------------------------------------
65,000,000 J.P. Morgan Securities, Inc., 3.20%, dated 1/31/94, due 2/1/94 65,000,000
---------------------------------------------------------------
45,000,000 Kidder, Peabody & Co., Inc., 3.24%, dated 1/31/94, due 2/1/94 45,000,000
---------------------------------------------------------------
10,000,000 @ Kidder, Peabody & Co., Inc., 3.16%, dated 1/10/94, due 3/14/94 10,000,000
---------------------------------------------------------------
1,000,000 @ Nomura Securities International, Inc., 3.30%, dated 11/8/93,
due 2/7/94 1,000,000
---------------------------------------------------------------
20,000,000 PaineWebber, Inc., 3.3875%, dated 1/31/94, due 2/1/94 20,000,000
---------------------------------------------------------------
15,000,000 @ Prudential Bache Securities, Inc., 3.15%, dated 1/7/94, due
2/7/94 15,000,000
---------------------------------------------------------------
15,000,000 @ Shearson Lehman Brothers, Inc., 3.10%, dated 1/14/94, due
2/14/94 15,000,000
---------------------------------------------------------------
</TABLE>
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
**REPURCHASE AGREEMENTS--CONTINUED
- -----------------------------------------------------------------------------------
$ 8,000,000 @ The First Boston Corp., 3.16%, dated 1/4/94, due 2/3/94 $ 8,000,000
---------------------------------------------------------------
30,000,000 UBS Securities, Inc., 3.25%, dated 1/31/94, due 2/1/94 30,000,000
---------------------------------------------------------------
20,000,000 UBS Securities, Inc., 3.28%, dated 1/31/94, due 2/1/94 20,000,000
--------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 340,400,000
--------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $457,575,573+
--------------------------------------------------------------- ------------
</TABLE>
* Each issue shows the rate of discount at the time of purchase.
** Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
*** Current rate and next reset date shown.
@ Although the final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase agreement
within seven days.
+ Also represents costs for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($464,507,521) at January 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) $340,400,000
- -----------------------------------------------------------------
Investment in other securities (Note 2A) 117,175,573
- ----------------------------------------------------------------- ------------
Total Investments, at amortized cost and value $457,575,573
- --------------------------------------------------------------------------------
Cash 35,700
- --------------------------------------------------------------------------------
Receivable from Adviser 15,740
- --------------------------------------------------------------------------------
Receivable for Fund shares sold 7,010,657
- --------------------------------------------------------------------------------
Interest receivable 499,081
- --------------------------------------------------------------------------------
Prepaid expenses 13,453
- -------------------------------------------------------------------------------- ------------
Total assets 465,150,204
- --------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------
Dividends payable 642,683
- -----------------------------------------------------------------
Total liabilities 642,683
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 464,507,521 shares of beneficial interest outstanding $464,507,521
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
Institutional Shares ($448,981,485/448,981,485 shares of beneficial
interest outstanding) $1.00
- -------------------------------------------------------------------------------- -----
Institutional Service Shares ($15,526,036/15,526,036 shares of beneficial
interest outstanding) $1.00
- -------------------------------------------------------------------------------- -----
</TABLE>
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT MONEY MARKET FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JANUARY 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest income (Note 2C) $2,773,600
- ----------------------------------------------------------------------------------- ----------
EXPENSES:
- -----------------------------------------------------------------------
Investment advisory fee (Note 5) $339,565
- -----------------------------------------------------------------------
Distribution services fee (Note 5) 11,156
- -----------------------------------------------------------------------
Administrative personnel and services (Note 5) 21,967
- -----------------------------------------------------------------------
Custodian and recordkeeper fees 9,915
- -----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 4,125
- -----------------------------------------------------------------------
Legal fees 650
- -----------------------------------------------------------------------
Printing and postage 500
- -----------------------------------------------------------------------
Fund share registration costs 4,068
- -----------------------------------------------------------------------
Miscellaneous 394
- ----------------------------------------------------------------------- --------
Total expenses 392,340
- ----------------------------------------------------------------------- --------
Deduct--
- ------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $339,565
- ------------------------------------------------------------
Waiver of distribution services fee (Note 5) 6,693
- ------------------------------------------------------------
Reimbursement of other operating expenses (Note 5) 31,480 377,738
- ------------------------------------------------------------ -------- --------
Net expenses 14,602
- ----------------------------------------------------------------------------------- ----------
Net investment income $2,758,998
- ----------------------------------------------------------------------------------- ----------
</TABLE>
* For the period from October 19, 1993 (date of initial public investment) to
January 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1994*
(UNAUDITED)
------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 2,758,998
--------------
- -------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- -------------------------------------------------------------------------
Institutional Shares (2,616,588)
- -------------------------------------------------------------------------
Institutional Service Shares (142,410)
--------------
- -------------------------------------------------------------------------
Change in net assets from distributions to shareholders (2,758,998)
--------------
- -------------------------------------------------------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- -------------------------------------------------------------------------
Proceeds from sale of shares 1,213,678,558
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 1,124,136
- -------------------------------------------------------------------------
Cost of shares redeemed (750,295,173)
--------------
- -------------------------------------------------------------------------
Change in net assets resulting from Fund share transactions 464,507,521
--------------
- -------------------------------------------------------------------------
Change in net assets 464,507,521
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period --
--------------
- -------------------------------------------------------------------------
End of period $ 464,507,521
--------------
- -------------------------------------------------------------------------
</TABLE>
* For the period from October 19, 1993 (date of initial public investment) to
January 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT MONEY MARKET FUND
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Trust for Financial Institutions (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company with three portfolios. The financial statements included
herein are only those of Government Money Market Fund (the "Fund"). The
financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held.
Effective October 14, 1993, the Fund established two classes of shares
("Institutional Shares" and "Institutional Service Shares"). Institutional
Service Shares are identical in all respects to Institutional Shares except that
Institutional Service Shares are sold pursuant to a distribution plan (the
"Plan") adopted in accordance with Investment Company Act Rule 12b-1.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--The Board of Trustees (the "Trustees") has determined that the
best method currently available for valuing portfolio securities is amortized cost. The
Trust's use of the amortized cost method to value portfolio securities is conditioned on
its compliance with Rule 2a-7 under the Investment Company Act of 1940, as amended.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry System or to
have segregated within the custodian bank's vault, all securities held as collateral in
support of repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's underlying securities to ensure the existence of a proper level of
collateral.
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. Risks may arise from
the potential inability of counterparties to honor the terms of the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the repurchase price
on the sale of collateral securities.
C. INCOME--Interest income is recorded on the accrual basis. Interest income includes
interest and discount earned (net of premium) including original issue discount as
required by the Internal Revenue Code, as amended, plus or minus realized gains or
losses, if any, on portfolio securities.
</TABLE>
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Internal
Revenue Code, as amended, applicable to investment companies and to distribute to
shareholders each year all of its taxable income. Accordingly, no provision for federal
tax is necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. To the extent the Fund engages in such transactions, it
will do so for the purpose of acquiring portfolio securities consistent with its
investment objective and policies and not for the purpose of investment leverage. The
Fund will record a when-issued security and the related liability on the trade date.
Until the securities are received and paid for, the Fund will maintain 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.
F. OTHER--Investment transactions are accounted for on the date of the transaction.
</TABLE>
(3) DIVIDENDS
Dividends from net investment income are declared daily and paid monthly.
Distributions of any net realized capital gains are made at least once every
twelve months. Dividends and capital gain distributions, if any, are recorded on
the ex-dividend date.
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At January 31, 1994, capital paid-in aggregated $464,507,521.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
INSTITUTIONAL SHARES JANUARY 31, 1994*
- ------------------------------------------------------------------------- ------------------
<S> <C>
Shares outstanding, beginning of period --
- -------------------------------------------------------------------------
Shares sold 1,142,793,686
- -------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 1,086,422
- -------------------------------------------------------------------------
Shares redeemed (694,898,623)
- ------------------------------------------------------------------------- ----------------
Shares outstanding, end of period 448,981,485
- ------------------------------------------------------------------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
INSTITUTIONAL SERVICE SHARES JANUARY 31, 1994*
- ------------------------------------------------------------------------- ------------------
<S> <C>
Shares outstanding, beginning of period --
- -------------------------------------------------------------------------
Shares sold 70,884,872
- -------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 37,714
- -------------------------------------------------------------------------
Shares redeemed (55,396,550)
- ------------------------------------------------------------------------- -------------
Shares outstanding, end of period 15,526,036
- ------------------------------------------------------------------------- -------------
</TABLE>
* For the period from October 19, 1993 (date of initial public investment) to
January 31, 1994.
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Federated Management, the Fund's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to .40 of 1% of the
Fund's average daily net assets. The Adviser has voluntarily agreed to waive its
fee and reimburse the Fund a portion of its annual operating expenses. The
Adviser can terminate this voluntary waiver and reimbursement at any time at its
sole discretion. For the period ended January 31, 1994, Adviser earned a fee of
$339,565, all of which was voluntarily waived. In addition, the Adviser
voluntarily reimbursed the Fund for $31,480 of operating expenses.
Organizational expenses and start-up administrative service expenses incurred by
the Fund will be borne initially by Adviser and are estimated at $34,100 and $0,
respectively. The Fund has agreed to reimburse the Adviser for the
organizational expenses and start-up administrative expenses initially borne by
the Adviser during the five year period following October 14, 1993 (date the
Trust's portfolio first became effective).
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
The Trust has adopted a Distribution Plan (the "Plan"), pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Trust will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Trust, to finance activities intended to result in the sale of the Fund's
Institutional Service Shares. The Plan provides that the Fund may incur
distribution expenses up to .25 of 1% of the average daily net assets of the
Institutional Service Shares, annually, to compensate FSC. For the period ended
January 31, 1994, FSC was compensated $11,156 in distribution services fees, of
which $6,693 was voluntarily waived under the Plan.
Administrative personnel and services were provided at approximate cost by
Federated Administrative Services, Inc. Effective March 1, 1994, Federated
Administrative Services, ("FAS") will provide administrative personnel and
services at an annual rate of 0.15 of 1% on the first $250 million of average
aggregate net assets of the total Federated Funds; 0.125 of 1% on the next $250
million; 0.10 of 1% on the next $250 million; and 0.075 of 1% on average
aggregate net assets in excess of $750 million. The administrative fee received
during any fiscal year shall be at least $125,000 per portfolio and $30,000 per
each additional class of shares.
Certain Officers and Directors of the Corporation are Officers and Directors of
the above corporations.
GOVERNMENT MONEY MARKET FUND
(A PORTFOLIO OF TRUST FOR FINANCIAL INSTITUTIONS)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares offered by this prospectus represent interests in a
no-load, diversified portfolio of securities of Government Money Market Fund
(the "Fund"), a portfolio of Trust For Financial Institutions (the "Trust"). The
Trust is an open-end management investment company (a mutual fund) investing
exclusively in certain securities which qualify as short-term liquid assets
under Section 566.1(h) [12 C.F.R. sec. 566.1(h)] of the federal regulations
applicable to federal savings associations, to provide current income consistent
with stability of principal and liquidity. Pursuant to current interpretation by
the Office of the Comptroller of the Currency, the Fund will also serve as an
appropriate vehicle for a national bank as an investment for its own account.
AN INVESTMENT IN INSTITUTIONAL SHARES OF THE FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE
ABLE TO DO SO.
The Fund's investors are limited to "depository institutions" as that term is
defined in Regulation D [12 C.F.R. Part 204] of the Board of Governors of the
Federal Reserve System.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
This prospectus contains the information you should read and know before you
invest in Institutional Shares of the Fund. Keep this prospectus for future
reference. The Fund has also filed a Combined Statement of Additional
Information for Institutional Shares and Institutional Service Shares, dated
October 15, 1993, 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 Combined Statement
of Additional Information free of charge by calling 1-800-235-4669. To obtain
other information or to make inquiries about the Fund, contact the Fund at the
address listed in the back of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated October 15, 1993
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
INVESTMENT INFORMATION 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Repurchase Agreements 3
Loans of Federal Funds 3
Restricted and Illiquid Securities 4
When-Issued and Delayed
Delivery Transactions 4
Investment Risks 4
Investment Limitations 4
Regulatory Compliance 5
TRUST INFORMATION 5
- ------------------------------------------------------
Management of the Trust 5
Board of Trustees 5
Investment Adviser 5
Advisory Fees 5
Adviser's Background 5
Distribution of Institutional Shares 6
Administration of the Fund 6
Administrative Services 6
Custodian, Transfer Agent, and
Dividend Disbursing Agent 6
Legal Counsel 6
Independent Auditor 6
Expenses of the Fund and
Institutional Shares 6
NET ASSET VALUE 7
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SHARES 7
- ------------------------------------------------------
Share Purchases 7
By Wire 7
By Mail 7
Minimum Investment Required 8
What Shares Cost 8
Receipt of Orders 8
Certificates and Confirmations 8
Dividends 8
Capital Gains 8
REDEEMING INSTITUTIONAL SHARES 9
- ------------------------------------------------------
Telephone Redemption 9
Written Requests 9
Signatures 9
Receiving Payment 10
Redemption Before Purchase
Instruments Clear 10
Accounts With Low Balances 10
SHAREHOLDER INFORMATION 10
- ------------------------------------------------------
Voting Rights 10
Massachusetts Partnership Law 10
TAX INFORMATION 11
- ------------------------------------------------------
Federal Income Tax 11
Pennsylvania Corporate and Personal
Property Taxes 11
PERFORMANCE INFORMATION 11
- ------------------------------------------------------
OTHER CLASSES OF SHARES 12
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)......... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering
price)............................................................................ None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds as applicable).............................. None
Redemption Fee (as a percentage of amount redeemed, if applicable).................. None
Exchange Fee........................................................................ None
ANNUAL INSTITUTIONAL SHARES OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver)(1).................................................... 0.00%
12b-1 Fee........................................................................... None
Other Expenses (after expense reimbursement)........................................ 0.20%
Total Institutional Shares Operating Expenses(2)............................... 0.20%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is 0.40%.
(2) The Total Institutional Shares Operating Expenses are estimated to be 0.65%
absent the anticipated voluntary waiver of the management fee and the
anticipated voluntary reimbursement of certain other operating expenses.
* The Total Operating Expenses are estimated based on average expenses expected
to be incurred during the period ending March 31, 1994. During the course of
this period, expenses may be more or less than the average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF INSTITUTIONAL SHARES OF THE
FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF
THE VARIOUS COSTS AND EXPENSES, SEE "TRUST INFORMATION" AND "INVESTING IN
INSTITUTIONAL SHARES." Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
------
<S> <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.
As noted in the table above, the Fund charges no redemption fees for
Institutional Shares..................................................... $2 $ 6
</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. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING MARCH 31,
1994.
The information set forth in the foregoing table and example relates only
to Institutional Shares of the Fund. The Fund also offers another class of
shares called Institutional Service Shares. Institutional Shares and
Institutional Service Shares are subject to certain of the same expenses;
however, Institutional Service Shares are subject to a 12b-1 fee of up to 0.25%.
See "Other Classes of Shares."
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated May 28, 1993. The Trust qualifies as a short-term liquid asset
pursuant to the regulations of the Office of Thrift Supervision. Since federal
funds are a permitted investment, shares of the Fund will be sold only to
'depository institutions' as that term is defined in Regulation D (12 C.F.R.
Part 204) of the Board of Governors of the Federal Reserve System, and the
securities of the Fund will be limited to those instruments which such
depository institutions may own directly.
The Declaration of Trust permits the Trust to offer separate series of shares of
beneficial interest representing interests in separate portfolios of securities.
The shares in any one portfolio may be offered in separate classes. With respect
to this Fund, as of the date of this prospectus, the Board of Trustees (the
"Trustees") have established two classes of shares, known as Institutional
Shares and Institutional Service Shares. This prospectus relates only in
Institutional Shares ("Shares") of the Fund. Shareholders of either class of
shares of the Fund will not be permitted to make third party payments from their
accounts with the Fund. A minimum initial investment of $25,000 over a 90-day
period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income consistent
with stability of principal and liquidity. The Fund pursues this investment
objective by investing in a portfolio of money market instruments maturing in
twelve months or less which qualify as short-term liquid assets under Section
566.1(h) [12 C.F.R. sec. 566.1(h)] of the federal regulations applicable to
federal savings associations ["Section 566.1(h)"]. The Fund also complies with
the requirements of Circular 220, issued by the Office of the Comptroller of the
Currency, to provide national banks with an appropriate source of portfolio
liquidity through a mutual fund investment.The average maturity of money market
instruments in the Fund's portfolio, computed on a dollar weighted basis, will
be 90 days or less. While there is no assurance that the Fund will achieve its
investment objective, it will endeavor to do so by following the investment
policies described in this prospectus. The investment objective and the policies
and limitations cannot be changed without approval of shareholders.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. Under normal circumstances, at the time of purchase, at
least 65% of the Fund's total assets will be invested in securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities. The Fund
invests only in money market instruments which qualify as short-term liquid
assets under Section 566.1(h). These securities currently include, but are not
limited to:
- obligations of the United States maturing in twelve months or less;
- obligations of U.S. government agencies or instrumentalities that mature
in twelve months or less, such as: Federal Home Loan Banks, Federal
National Mortgage Association, Government National Mortgage Association,
Banks for Cooperatives, Farm Credit Banks, Export-Import Bank of the
United States, Commodity Credit Corporation, Federal Financing Bank,
Student Loan Marketing Association, Federal Home Loan Mortgage
Corporation, or National Credit Union Administration;
- time deposits in a Federal Home Loan Bank; and
- savings accounts, including loans of unsecured day(s) funds, to an
insured financial institution (i.e., Federal funds or similar unsecured
loans) that qualify under Section 566.1(h) and, in the case of negotiable
savings accounts, will mature in six months or less. These accounts
include certificates of deposit.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association participation
certificates, are backed by the full faith and credit of the U.S. Treasury. No
assurance can be given that the U.S. government will provide financial support
to other agencies or instrumentalities, since it is not obligated to do so.
These instrumentalities are supported by:
- the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
- discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
- the credit of the agency or instrumentality.
The Fund may also enter into repurchase agreements secured by those obligations
of the U.S. government and bank instruments which, but for their maturities,
qualify as short-term liquid assets. The Fund may also invest in the shares of
other money market funds.
REPURCHASE AGREEMENTS. The U.S. government 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 U.S. government securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. The Fund or its custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are deemed by the Fund's adviser to be
creditworthy pursuant to guidelines established by the Trustees.
LOANS OF FEDERAL FUNDS. Federal funds are funds held by a regional Federal
Reserve Bank for the account of a bank which is a member of that Federal Reserve
Bank. The member bank can lend federal funds to another member bank. These loans
are unsecured and are made at a negotiated interest rate
for a negotiated time period, generally overnight. Because reserves are not
required to be maintained on borrowed federal funds, member banks borrowing
federal funds are willing to pay interest rates which are generally higher than
they pay on other deposits of comparable size and maturity which are subject to
reserve requirements. The Fund sells its shares only to "depository
institutions" as that term is defined in Regulation D of the Board of Governors
of the Federal Reserve Board and limits its portfolio only to instruments which
"depository institutions" can purchase directly. Therefore, the Fund can
participate in the federal funds market and in effect make loans of federal
funds by instructing any willing member bank at which the Fund maintains an
account to loan federal funds on the Fund's behalf. These transactions permit
the Fund to obtain interest rates on its assets which are comparable to those
earned by member banks when they loan federal funds. The Fund may engage in
loans of federal funds and similar loans of unsecured day(s) funds to Bank
Insurance Fund ("BIF") or Savings Association Insurance Fund ("SAIF")-insured
institutions. As a matter of investment policy, which may be changed without
shareholder approval, the Fund will only lend federal funds to financial
institutions that the Fund's adviser determines to be adequately or well
capitalized. Financial institutions are deemed to be adequately or well
capitalized pursuant to guidelines established by the Trustees.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 10% of its net
assets in illiquid securities, which may include restricted securities.
Restricted securities are any securities in which the Fund may otherwise invest
pursuant to its investment objective but which are subject to restriction on
resale under federal securities laws. To the extent these securities are deemed
to be illiquid, the Fund will limit its purchases, together with other
securities considered to be illiquid, to 10% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase short-term
U.S. government obligations on a when-issued or delayed delivery basis. In
when-issued and delayed delivery transactions, the Fund relies on the seller to
complete the transaction. The seller's failure to complete the transaction may
cause the Fund to miss a price or yield considered to be advantageous.
INVESTMENT RISKS
Repurchase agreements with, loans of federal funds and other day(s) funds to,
and certain time deposits, such as savings accounts and certificates of deposit
over $100,000, of BIF or SAIF-insured institutions, and deposits in foreign
branches of domestic banks, are not insured by BIF or SAIF. The Fund does not
invest, however, in instruments issued by banks or savings and loans unless they
have capital, surplus, and undivided profits of over $100,000,000 at the time of
investment or unless the principal amount of the instrument is insured by BIF or
SAIF and is determined by the Fund's adviser to be adequately or well
capitalized.
INVESTMENT LIMITATIONS
The Fund will not
- borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge up
to 15% of the value of those assets to secure such borrowings;
- invest more than 10% of its net assets in securities subject to
restrictions on resale under federal securities law, except restricted
securities determined to be liquid under criteria established by the Board
of Trustees.
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 Combined Statement of Additional Information, in order to
comply with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940, as amended. In particular,
the Fund will comply with the various requirements of Rule 2a-7, which regulates
money market mutual funds. The Fund will also determine the effective maturity
of its investments, as well as its ability to consider a security as having
received the requisite short-term ratings by nationally recognized statistical
rating organizations, 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 THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the Trust's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser (the "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, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment Advisory
fee equal to .40 of 1% of the Fund's average daily net assets. The Adviser
has undertaken to waive a portion of its advisory fee, up to the amount of
the advisory fee, to reimburse the Fund for operating expenses in excess of
limitations established by certain states. The Adviser may further
voluntarily waive a portion of its fee or reimburse the Fund for certain
operating expenses. The Adviser can terminate such waiver or reimbursement
policy at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. Total assets
under management or administration by these and other subsidiaries of
Federated Investors is approximately $70 billion. Federated Investors,
which was founded in 1956 as Federated Investors, Inc., develops and
manages mutual funds primarily for the financial industry. Federated
Investors' track record of competitive performance and its disciplined,
risk averse investment philosophy serve approximately 3,500 client
institutions nationwide. Through these same client institutions, individual
shareholders also have access to this same level of investment expertise.
DISTRIBUTION OF INSTITUTIONAL 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Inc., a subsidiary
of Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc. provides these at approximate cost.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT. State Street Bank and
Trust Company, Boston, Massachusetts, is custodian for the securities and cash
of the Fund, transfer agent for shares of the Fund, and dividend disbursing
agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh Pennsylvania, and Dickstein, Shapiro & Morin, Washington, D.C.
INDEPENDENT AUDITOR. The independent auditor for the Fund is Deloitte & Touche,
Boston, Massachusetts.
EXPENSES OF THE FUND AND INSTITUTIONAL SHARES
Holders of Shares pay their allocable portion of Trust and Fund expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; the cost of meetings of Trustees;
legal fees of the Trust; association membership dues and such non-recurring and
extraordinary items as may arise.
The Fund expenses for which holders of Shares each pay their allocable portion
include, but are not limited to: registering the Fund and Shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors fees; and such non-recurring and extraordinary items as may
arise.
At present, no expenses are allocated to the Shares as a class. However, the
Board of Trustees reserves the right to allocate certain other expenses to
holders of Shares as it deems appropriate ("Class Expenses"). In any case, Class
Expenses would be limited to: transfer agent fees as identified by the transfer
agent as attributable to holders of Shares; printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current sharehold-
ers; registration fees paid to the Securities and Exchange Commission and
registration fees paid to state securities commissions; expenses related to
administrative personnel and services as required to support holders of Shares;
legal fees relating solely to Shares; and Trustees' fees incurred as a result of
issues relating solely to Shares.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its Shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per Share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of Shares outstanding. The Fund, of
course, cannot guarantee that its net asset value will always remain at $1.00
per Share.
INVESTING IN INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open for
business. Shares may be purchased either by wire or mail.
To purchase Shares of the Fund, open an account by calling Federated Securities
Corp. at 1-800-245-4270. Information needed to establish the account will be
taken over the telephone.
Purchases by any single investor are limited to not more than $20 million in
total Fund investment. In the event any investor exceeds this investment
limitation, the Fund reserves the right to redeem shares that exceed the
limitation and provide the investor with the proceeds of that redemption. See
"Redeeming Institutional Shares."
BY WIRE. To purchase Shares of the Fund by Federal Reserve wire, call the Fund
before 3:00 p.m. (Boston time) to place an order. The order is considered
received immediately. Payment by federal funds must be received before 3:00 p.m.
(Boston time) that same day. Federal funds should be wired as follows: State
Street Bank and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For
Credit to: Trust For Financial Institutions-Government Money Market
Fund-Institutional Shares: Fund Number (this number can be found on the account
statement or by contacting the Fund); Group Number or Order Number; Nominee or
Institution Name; ABA Number 011000028. Shares cannot be purchased on days on
which the New York Stock Exchange is closed and on federal holidays restricting
wire transfers.
BY MAIL. To purchase Shares of the Fund by mail, send a check made payable to
Trust For Financial Institutions-Government Money Market Fund-Institutional
Shares, to the Trust's transfer agent, State Street Bank and Trust Company, P.O.
Box 8602, Boston, Massachusetts 02266-8602. An order by mail is considered
received after payment by check is converted by State Street Bank into federal
funds. This is normally the next business day after State Street Bank receives
the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000. However, an account may
be opened with a smaller amount as long as the $25,000 minimum is reached within
90 days. An institutional investor's minimum investment will be calculated by
combining all accounts it maintains with the Fund. Accounts established through
a non-affiliated bank or broker may be subject to a smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund.
The net asset value is determined at 12:00 noon (Boston time), 3:00 p.m. (Boston
time), and 4:00 p.m. (Boston time), Monday through Friday, except on: (i) days
on which there are not sufficient changes in the value of the Fund's portfolio
securities that its net asset value might be materially affected; (ii) days
during which no Shares are tendered for redemption and no orders to purchase
Shares are received; and (iii) the following holidays : New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
RECEIPT OF ORDERS
Shares are sold on days on which the New York Stock Exchange is open. Orders are
considered received after payment by check is converted by State Street Bank
into federal funds (normally the next business day after receiving the check).
When payment is made with federal funds, the order is considered received
immediately.
The Fund reserves the right to reject any purchase request.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, State Street Bank maintains a Share account for
each shareholder. Share certificates are not issued unless requested by
contacting the Fund.
Monthly confirmations are sent to report transactions such as purchases and
redemptions, as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional Shares of the Fund unless cash
payments are requested by writing or calling Federated Securities Corp. Shares
purchased by wire before 3:00 p.m. (Boston time) begin earning dividends that
day. Shares purchased by check begin earning dividends on the day after the
check is converted by State Street Bank into federal funds.
CAPITAL GAINS
Since the Fund's policy is, under normal circumstances, to hold portfolio
securities to maturity and to value portfolio securities at amortized cost, it
does not expect any capital gains or losses. If the Fund does experience gains,
however, it could result in an increase in dividends. Capital losses could
result in
a decrease in dividends. If, for some extraordinary reason, the Fund realizes
net long-term capital gains, it will distribute them at least once every 12
months.
REDEEMING INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made by telephone or in writing. Shares may also be
redeemed without a shareholder request if the total value of a single
shareholder's investment in the Fund exceeds $20 million, as described in the
section entitled "Share Purchases."
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Fund before 12:00 noon
(Boston time). All proceeds will be wire transferred to the shareholder's
account at a domestic commercial bank that is a member of the Federal Reserve
System. If at any time the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders will be promptly notified.
Telephone redemption instructions may be recorded.
A daily dividend will be paid on Shares redeemed if the redemption request is
received after 12:00 noon (Boston time). However, the proceeds are not wired
until the following business day. Redemption requests received before 12:00 noon
(Boston time) will be paid the same day but will not be entitled to that day's
dividends.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as written requests, should be considered. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name, his account number,
and the share or dollar amount requested. If share certificates have been
issued, they must be properly endorsed and should be sent by registered or
certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the BIF;
- a member firm of the New York, American, Boston, Midwest, or Pacific
Stock Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the SAIF; or
- any other 'eligible guarantor institution,' as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. 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, provided the transfer agent has received the
purchase price for the Shares from the shareholder.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When Shares are purchased by check, the proceeds from the redemption of those
Shares are not available until State Street Bank collects payment for those
Shares. It is the Fund's policy to allow up to 10 calendar days from the date
such Shares were purchased for collection.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operation and for the election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the Fund shall be called by the Trustees upon the written
request of shareholders owning at least 10% of the Fund's outstanding shares.
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 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.
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, if any, 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. The Fund will
provide detailed tax information for reporting purposes.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Fund:
- the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
- 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.
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.
The yield of the Fund represents the annualized rate of income earned on an
investment in the Fund over a seven-day period without including dividends
earned on reinvested dividends. It is the annualized dividends earned during the
period on the investment, shown as a percentage of the investment. The effective
yield is calculated similarly to the yield, but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested daily. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Fund after reinvesting all
income distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
From time to time, the Fund may advertise its performance using certain
reporting services and/or compare its performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Institutional Service Shares are sold to financial institutions, and are subject
to a minimum initial investment of $25,000. Institutional Service Shares are
sold at net asset value and are distributed pursuant to a Rule 12b-l Plan
adopted by the Trust whereby the distributor is paid a fee of up to .25 of l% of
the Institutional Service Shares' average net assets.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation from one class of shares than from
another class of shares.
The amount of dividends payable to Institutional Shares will be greater than
those payable to Institutional Service Shares by the difference in class
expenses and distribution expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of the Fund.
[THIS PAGE INTENTIONALLY LEFT BLANK]
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Government Money Market Fund Federated Investors Tower
Institutional Shares Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian, Transfer Agent, and Dividend Disbursing Agent
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditor
Deloitte & Touche 2500 One PPG Place
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
</TABLE>
GOVERNMENT
MONEY MARKET FUND
INSTITUTIONAL SHARES
PROSPECTUS
A No-Load, Open-End, Diversified
Management Investment Company
October 15, 1993
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3080503A-IS (10/93)
- --------------------------------------------------------------------------------
GOVERNMENT
- --------------------------------------------------------------------------------
MONEY MARKET
- --------------------------------------------------------------------------------
FUND
- --------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
(A Portfolio of Trust for Financial Institutions)
SUPPLEMENT TO PROSPECTUS
DATED OCTOBER 15, 1993
FEDERATED SECURITIES CORP.
(LOGO)
Distributor
4010711 A-ISS (3/94)
March 31, 1994
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
A. Please insert the following "Financial Highlights--Institutional Service
Shares" table as page 2 of the prospectus, following the "Summary of Fund
Expenses" table and before the section entitled "General Information." In
addition, please add the heading "Financial Highlights--Institutional Service
Shares" to the Table of Contents on page I after the heading "Summary of Fund
Expenses."
GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1994*
-------------------
<S> <C>
- --------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- --------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------
Net investment income 0.01
- -------------------------------------------------------------------- -------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------
Dividends to shareholders from net investment income (0.01)
- -------------------------------------------------------------------- -------------------
NET ASSET VALUE, END OF PERIOD $1.00
- -------------------------------------------------------------------- -------------------
TOTAL RETURN** 0.90%
- --------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------
Expenses 0.11%(b)
- --------------------------------------------------------------------
Net investment income 3.19%(b)
- --------------------------------------------------------------------
Expense waiver/reimbursement(a) 0.59%(b)
- --------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------
Net assets, end of period (000 omitted) $15,526
- --------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1993 (start of
performance) to January 31, 1994 (unaudited).
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
B. Please replace the sub-section entitled "Administrative Services on page 7 of
the prospectus with the following.
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, which
relates to the average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors ("Federated Funds"), as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET
MAXIMUM ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
- --------------------------------------------- ---------------------------------------------
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
C. Please insert the following at the end of the first paragraph under the
heading "Voting Rights" on page 11 of the prospectus.
As of March 4, 1994, Cooperative Savings Bank, Lynchburg, Virginia, owned
approximately 2,500,000 shares (27.0%); and Palmer National Bank, Washington,
D.C., owned approximately 4,007,936 shares (43.3%) of the Institutional Service
Shares of the Fund, and therefore, may, for certain purposes, be deemed to
control the Fund and be able to affect the outcome of certain matters presented
for a vote of shareholders.
D. Please insert the following "Financial Highlights--Institutional Shares"
table as page 14 of the prospectus immediately following the section entitled
"Other Classes of Shares." In addition, please add the heading "Financial
Highlights--Institutional Shares" to the Table of Contents on page I after
the heading "Other Classes of Shares."
GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1994*
-------------------
<S> <C>
- --------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- --------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------
Net investment income 0.01
- -------------------------------------------------------------------- -------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------
Dividends to shareholders from net investment income (0.01)
- -------------------------------------------------------------------- -------------------
NET ASSET VALUE, END OF PERIOD $1.00
- -------------------------------------------------------------------- -------------------
TOTAL RETURN** 0.93%
- --------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------
Expenses 0.01%(b)
- --------------------------------------------------------------------
Net investment income 3.25%(b)
- --------------------------------------------------------------------
Expense waiver/reimbursement(a) 0.44%(b)
- --------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------
Net assets, end of period (000 omitted) $448,982
- --------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1993 (start of
performance) to January 31, 1994 (unaudited).
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
E. Please insert the financial statements after the "Financial
Highlights--Institutional Shares" table on page 14 of the prospectus. In
addition, please add the heading "Financial Statements" to the Table of
Contents on page I immediately before the heading "Addresses."
GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS--20.7%
- -----------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION,
DISCOUNT NOTES*--18.9%
---------------------------------------------------------------
$20,000,000 3.14%, 3/15/94 $ 19,926,733
---------------------------------------------------------------
15,000,000 3.13%, 3/17/94 14,942,617
---------------------------------------------------------------
10,000,000 3.22%, 5/17/94 9,906,083
---------------------------------------------------------------
8,500,000 3.30%, 6/2/94 8,405,721
---------------------------------------------------------------
3,000,000 3.29%, 6/3/94 2,966,552
---------------------------------------------------------------
4,000,000 3.29%, 6/7/94 3,953,940
---------------------------------------------------------------
5,000,000 3.38%, 7/6/94 4,927,236
---------------------------------------------------------------
2,500,000 3.34%, 8/8/94 2,456,394
---------------------------------------------------------------
6,000,000 3.41%, 8/10/94 5,892,017
---------------------------------------------------------------
10,000,000 3.42%, 9/23/94 9,777,700
---------------------------------------------------------------
5,000,000 3.34%, 11/25/94 4,862,225
--------------------------------------------------------------- ------------
Total 88,017,218
--------------------------------------------------------------- ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--0.7%
---------------------------------------------------------------
3,000,000 8.60%, 6/10/94 3,053,846
--------------------------------------------------------------- ------------
STUDENT LOAN MARKETING ASSOCIATION,
FLOATING RATE NOTE***--1.1%
---------------------------------------------------------------
5,000,000 3.20%, 2/1/94 5,004,358
--------------------------------------------------------------- ------------
TOTAL U.S. GOVERNMENT OBLIGATIONS 96,075,422
--------------------------------------------------------------- ------------
</TABLE>
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--4.5%
- -----------------------------------------------------------------------------------
U.S. TREASURY BILLS--1.7%
---------------------------------------------------------------
$ 2,000,000 3.27%, 5/5/94 $ 1,983,105
---------------------------------------------------------------
2,000,000 3.30%, 5/26/94 1,979,100
---------------------------------------------------------------
4,000,000 3.38%, 11/17/94 3,891,465
--------------------------------------------------------------- ------------
Total 7,853,670
--------------------------------------------------------------- ------------
U.S. TREASURY NOTES--2.8%
---------------------------------------------------------------
8,000,000 4.25%, 8/31/94 8,040,533
---------------------------------------------------------------
5,000,000 9.50%, 10/15/94 5,205,948
--------------------------------------------------------------- ------------
Total 13,246,481
--------------------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS 21,100,151
--------------------------------------------------------------- ------------
**REPURCHASE AGREEMENTS--73.3%
- -----------------------------------------------------------------------------------
6,000,000 Barclays de Zoete Wedd Securities, 3.17%, dated 1/31/94, due
2/1/94 6,000,000
---------------------------------------------------------------
24,400,000 Barclays de Zoete Wedd Securities, 3.26%, dated 1/31/94, due
2/1/94 24,400,000
---------------------------------------------------------------
20,000,000 BT Securities, Inc., 3.23%, dated 1/31/94, due 2/1/94 20,000,000
---------------------------------------------------------------
20,000,000 Deutsche Bank Government Securities, Inc., 3.24%, dated
1/31/94, due 2/1/94 20,000,000
---------------------------------------------------------------
20,000,000 Fuji Government Securities, Inc., 3.24%, dated 1/31/94, due
2/1/94 20,000,000
---------------------------------------------------------------
5,000,000 Greenwich Capital Market, Inc., 3.25%, dated 1/31/94, due
2/1/94 5,000,000
---------------------------------------------------------------
7,000,000 @ Greenwich Capital Market, Inc., 3.14%, dated 1/19/94, due
2/14/94 7,000,000
---------------------------------------------------------------
9,000,000 @ Greenwich Capital Market, Inc., 3.19%, dated 1/28/94, due
4/28/94 9,000,000
---------------------------------------------------------------
65,000,000 J.P. Morgan Securities, Inc., 3.20%, dated 1/31/94, due 2/1/94 65,000,000
---------------------------------------------------------------
45,000,000 Kidder, Peabody & Co., Inc., 3.24%, dated 1/31/94, due 2/1/94 45,000,000
---------------------------------------------------------------
10,000,000 @ Kidder, Peabody & Co., Inc., 3.16%, dated 1/10/94, due 3/14/94 10,000,000
---------------------------------------------------------------
1,000,000 @ Nomura Securities International, Inc., 3.30%, dated 11/8/93,
due 2/7/94 1,000,000
---------------------------------------------------------------
20,000,000 PaineWebber, Inc., 3.3875%, dated 1/31/94, due 2/1/94 20,000,000
---------------------------------------------------------------
15,000,000 @ Prudential Bache Securities, Inc., 3.15%, dated 1/7/94, due
2/7/94 15,000,000
---------------------------------------------------------------
15,000,000 @ Shearson Lehman Brothers, Inc., 3.10%, dated 1/14/94, due
2/14/94 15,000,000
---------------------------------------------------------------
</TABLE>
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
**REPURCHASE AGREEMENTS--CONTINUED
- -----------------------------------------------------------------------------------
$ 8,000,000 @ The First Boston Corp., 3.16%, dated 1/4/94, due 2/3/94 $ 8,000,000
---------------------------------------------------------------
30,000,000 UBS Securities, Inc., 3.25%, dated 1/31/94, due 2/1/94 30,000,000
---------------------------------------------------------------
20,000,000 UBS Securities, Inc., 3.28%, dated 1/31/94, due 2/1/94 20,000,000
--------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 340,400,000
--------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $457,575,573+
--------------------------------------------------------------- ------------
</TABLE>
* Each issue shows the rate of discount at the time of purchase.
** Repurchase agreements are fully collaterized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
*** Current rate and next reset date shown.
@ Although the final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase agreement
within seven days.
+ Also represents costs for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($464,507,521) at January 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) $340,400,000
- -----------------------------------------------------------------
Investment in other securities (Note 2A) 117,175,573
- ----------------------------------------------------------------- ------------
Total Investments, at amortized cost and value $457,575,573
- --------------------------------------------------------------------------------
Cash 35,700
- --------------------------------------------------------------------------------
Receivable from Adviser 15,740
- --------------------------------------------------------------------------------
Receivable for Fund shares sold 7,010,657
- --------------------------------------------------------------------------------
Interest receivable 499,081
- --------------------------------------------------------------------------------
Prepaid expenses 13,453
- -------------------------------------------------------------------------------- ------------
Total assets 465,150,204
- --------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------
Dividends payable 642,683
- -----------------------------------------------------------------
Total liabilities 642,683
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 464,507,521 shares of beneficial interest outstanding $464,507,521
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
Institutional Shares ($448,981,485/448,981,485 shares of beneficial
interest outstanding) $1.00
- -------------------------------------------------------------------------------- -----
Institutional Service Shares ($15,526,036/15,526,036 shares of beneficial
interest outstanding) $1.00
- -------------------------------------------------------------------------------- -----
</TABLE>
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT MONEY MARKET FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JANUARY 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest income (Note 2C) $2,773,600
- ----------------------------------------------------------------------------------- ----------
EXPENSES:
- -----------------------------------------------------------------------
Investment advisory fee (Note 5) $339,565
- -----------------------------------------------------------------------
Distribution services fee (Note 5) 11,156
- -----------------------------------------------------------------------
Administrative personnel and services (Note 5) 21,967
- -----------------------------------------------------------------------
Custodian and recordkeeper fees 9,915
- -----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 4,125
- -----------------------------------------------------------------------
Legal fees 650
- -----------------------------------------------------------------------
Printing and postage 500
- -----------------------------------------------------------------------
Fund share registration costs 4,068
- -----------------------------------------------------------------------
Miscellaneous 394
- ----------------------------------------------------------------------- --------
Total expenses 392,340
- ----------------------------------------------------------------------- --------
Deduct--
- ------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $339,565
- ------------------------------------------------------------
Waiver of distribution services fee (Note 5) 6,693
- ------------------------------------------------------------
Reimbursement of other operating expenses (Note 5) 31,480 377,738
- ------------------------------------------------------------ -------- --------
Net expenses 14,602
- ----------------------------------------------------------------------------------- ----------
Net investment income $2,758,998
- ----------------------------------------------------------------------------------- ----------
</TABLE>
* For the period from October 19, 1993 (date of initial public investment) to
January 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1994*
(UNAUDITED)
------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 2,758,998
--------------
- -------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- -------------------------------------------------------------------------
Institutional Shares (2,616,588)
- -------------------------------------------------------------------------
Institutional Service Shares (142,410)
--------------
- -------------------------------------------------------------------------
Change in net assets from distributions to shareholders (2,758,998)
--------------
- -------------------------------------------------------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- -------------------------------------------------------------------------
Proceeds from sale of shares 1,213,678,558
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 1,124,136
- -------------------------------------------------------------------------
Cost of shares redeemed (750,295,173)
--------------
- -------------------------------------------------------------------------
Change in net assets from Fund share transactions 464,507,521
--------------
- -------------------------------------------------------------------------
Change in net assets 464,507,521
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period --
--------------
- -------------------------------------------------------------------------
End of period $ 464,507,521
--------------
- -------------------------------------------------------------------------
</TABLE>
* For the period from October 19, 1993 (date of initial public investment) to
January 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT MONEY MARKET FUND
NOTES TO THE FINANCIAL STATEMENTS
JANUARY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Trust for Financial Institutions (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company with three portfolios. The financial statements included
herein are only those of Government Money Market Fund (the "Fund"). The
financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held.
Effective October 14, 1993, the Fund established two classes of shares
("Institutional Shares" and "Institutional Service Shares"). Institutional
Service Shares are identical in all respects to Institutional Shares except that
Institutional Service Shares are sold pursuant to a distribution plan (the
"Plan") adopted in accordance with Investment Company Act Rule 12b-1.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--The Board of Trustees (the "Trustees") has determined that the
best method currently available for valuing portfolio securities is amortized cost. The
Trust's use of the amortized cost method to value portfolio securities is conditioned on
its compliance with Rule 2a-7 under the Investment Company Act of 1940, as amended.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry System or to
have segregated within the custodian bank's vault, all securities held as collateral in
support of repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's underlying securities to ensure the existence of a proper level of
collateral.
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. Risks may arise from
the potential inability of counterparties to honor the terms of the repurchase agreement.
Accordingly, the Fund could receive less than the repurchase price on the sale of
collateral securities.
C. INCOME--Interest income is recorded on the accrual basis. Interest income includes
interest and discount earned (net of premium) including original issue discount as
required by the Internal Revenue Code, as amended, plus or minus realized gains or
losses, if any, on portfolio securities.
</TABLE>
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Internal
Revenue Code, as amended, applicable to investment companies and to distribute to
shareholders each year all of its taxable income. Accordingly, no provision for federal
tax is necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. To the extent the Fund engages in such transactions, it
will do so for the purpose of acquiring portfolio securities consistent with its
investment objective and policies and not for the purpose of investment leverage. The
Fund will record a when-issued security and the related liability on the trade date.
Until the securities are received and paid for, the Fund will maintain 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.
F. OTHER--Investment transactions are accounted for on the date of the transaction.
</TABLE>
(3) DIVIDENDS
Dividends from net investment income are declared daily and paid monthly.
Distributions of any net realized capital gains are made at least once every
twelve months. Dividends and capital gain distributions, if any, are recorded on
the ex-dividend date.
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At January 31, 1994, capital paid-in aggregated $464,507,521.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
INSTITUTIONAL SHARES JANUARY 31, 1994*
- ------------------------------------------------------------------------- ------------------
<S> <C>
Shares outstanding, beginning of period --
- -------------------------------------------------------------------------
Shares sold 1,142,793,686
- -------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 1,086,422
- -------------------------------------------------------------------------
Shares redeemed (694,898,623)
- ------------------------------------------------------------------------- ----------------
Shares outstanding, end of period 448,981,485
- ------------------------------------------------------------------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
INSTITUTIONAL SERVICE SHARES JANUARY 31, 1994*
- ------------------------------------------------------------------------- ------------------
<S> <C>
Shares outstanding, beginning of period --
- -------------------------------------------------------------------------
Shares sold 70,884,872
- -------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 37,714
- -------------------------------------------------------------------------
Shares redeemed (55,396,550)
- ------------------------------------------------------------------------- -------------
Shares outstanding, end of period 15,526,036
- ------------------------------------------------------------------------- -------------
</TABLE>
* For the period from October 19, 1993 (date of initial public investment) to
January 31, 1994.
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Federated Management, the Fund's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to .40 of 1% of the
Fund's average daily net assets. The Adviser has voluntarily agreed to waive its
fee and reimburse the Fund a portion of its annual operating expenses. The
Adviser can terminate this voluntary waiver and reimbursement at any time at its
sole discretion. For the period ended January 31, 1994, Adviser earned a fee of
$339,565, all of which was voluntarily waived. In addition, the Adviser
voluntarily reimbursed the Fund for $31,480 of operating expenses.
Organizational expenses and start-up administrative service expenses incurred by
the Fund will be borne initially by Adviser and are estimated at $34,100 and $0,
respectively. The Fund has agreed to reimburse the Adviser for the
organizational expenses and start-up administrative expenses initially borne by
the Adviser during the five year period following October 14, 1993 (date the
Trust's portfolio first became effective).
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
The Trust has adopted a Distribution Plan (the "Plan"), pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Trust will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Trust, to finance activities intended to result in the sale of the Fund's
Institutional Service Shares. The Plan provides that the Fund may incur
distribution expenses up to .25 of 1% of the average daily net assets of the
Institutional Service Shares, annually, to compensate FSC. For the period ended
January 31, 1994, FSC was compensated $11,156, in distribution services fees, of
which $6,693 was voluntarily waived under the Plan.
Administrative personnel and services were provided at approximate cost by
Federated Administrative Services, Inc. Effective March 1, 1994, Federated
Administrative Services, ("FAS") will provide administrative personnel and
services at an annual rate of 0.15 of 1% on the first $250 million of average
aggregate net assets of the total Federated Funds; 0.125 of 1% on the next $250
million; 0.10 of 1% on the next $250 million; and 0.075 of 1% on average
aggregate net assets in excess of $750 million. The administrative fee received
during any fiscal year shall be at least $125,000 per portfolio and $30,000 per
each additional class of shares.
Certain Officers and Directors of the Corporation are Officers and Directors of
the above corporations.
GOVERNMENT MONEY MARKET FUND
(A PORTFOLIO OF TRUST FOR FINANCIAL INSTITUTIONS)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares offered by this prospectus represent interests
in a no-load, diversified portfolio of securities of Government Money Market
Fund (the 'Fund'), a portfolio of Trust For Financial Institutions (the
'Trust'). The Trust is an open-end management investment company (a mutual fund)
investing exclusively in certain securities which qualify as short-term liquid
assets under Section 566.1(h) [12 C.F.R. sec. 566.1(h)] of the federal
regulations applicable to federal savings associations, to provide current
income consistent with stability of principal and liquidity. Pursuant to current
interpretation by the Office of the Comptroller of the Currency, the Fund will
also serve as an appropriate vehicle for a national bank as an investment for
its own account.
AN INVESTMENT IN INSTITUTIONAL SERVICE SHARES OF THE FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET
ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE
ABLE TO DO SO.
The Fund's investors are limited to 'depository institutions' as that term is
defined in Regulation D [(12 C.F.R. Part 204)] of the Board of Governors of the
Federal Reserve System.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY.
This prospectus contains the information you should read and know before you
invest in Institutional Service Shares of the Fund. Keep this prospectus for
future reference. The Fund has also filed a Combined Statement of Additional
Information for Institutional Service Shares and Institutional Shares, dated
October 15, 1993, 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 Combined Statement
of Additional Information free of charge by calling 1-800-235-4669. To obtain
other information or to make inquiries about the Fund, contact the Fund at the
address listed in the back of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated October 15, 1993
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
INVESTMENT INFORMATION 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Repurchase Agreements 3
Loans of Federal Funds 3
Restricted and Illiquid Securities 4
When-Issued and Delayed
Delivery Transactions 4
Investment Risks 4
Investment Limitations 4
Regulatory Compliance 5
TRUST INFORMATION 5
- ------------------------------------------------------
Management of the Trust 5
Board of Trustees 5
Investment Adviser 5
Advisory Fees 5
Adviser's Background 5
Distribution of Institutional
Service Shares 6
Distribution Plan 6
Administration of the Fund 7
Administrative Services 7
Custodian, Transfer Agent, and
Dividend Disbursing Agent 7
Legal Counsel 7
Independent Auditor 7
Expenses of the Fund and
Institutional Service Shares 7
NET ASSET VALUE 8
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SERVICE SHARES 8
- ------------------------------------------------------
Share Purchases 8
By Wire 8
By Mail 8
Minimum Investment Required 8
What Shares Cost 9
Receipt of Orders 9
Certificates and Confirmations 9
Dividends 9
Capital Gains 9
REDEEMING INSTITUTIONAL SERVICE SHARES 10
- ------------------------------------------------------
Telephone Redemption 10
Written Requests 10
Signatures 10
Receiving Payment 11
Redemption Before Purchase
Instruments Clear 11
Accounts With Low Balances 11
SHAREHOLDER INFORMATION 11
- ------------------------------------------------------
Voting Rights 11
Massachusetts Partnership Law 11
TAX INFORMATION 12
- ------------------------------------------------------
Federal Income Tax 12
Pennsylvania Corporate and Personal
Property Taxes 12
PERFORMANCE INFORMATION 12
- ------------------------------------------------------
OTHER CLASSES OF SHARES 13
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).............. None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)... None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds as applicable)................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)....................... None
Exchange Fee............................................................................. None
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver)(1)......................................................... 0.00%
12b-1 Fee (after waiver)(2).............................................................. 0.10%
Other Expenses (after expense reimbursement)............................................. 0.20%
Total Institutional Service Shares Operating Expenses(3)................................. 0.30%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is 0.40%.
(2) The maximum 12b-1 fee is 0.25%.
(3) The Total Institutional Service Shares Operating Expenses are estimated to
be 0.90% absent the anticipated voluntary waiver of the management fee, a
portion of the 12b-1 fee, and the anticipated voluntary reimbursement of certain
other operating expenses.
* The Total Operating Expenses are estimated based on average expenses expected
to be incurred during the period ending March 31, 1994. During the course of
this period, expenses may be more or less than the average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF INSTITUTIONAL SERVICE SHARES OF
THE FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE
DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES, SEE 'TRUST INFORMATION' AND
'INVESTING IN INSTITUTIONAL SERVICE SHARES.' Wire-transferred redemptions of
less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
------ -------
<S> <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.
As noted in the table above, the Fund charges no redemption fees for
Institutional Service Shares.................................................. $3 $10
</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. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING MARCH 31,
1994.
The information set forth in the foregoing table and example relates only to
Institutional Service Shares of the Fund. The Fund also offers another class of
shares called Institutional Shares. Institutional Service Shares and
Institutional Shares are subject to certain of the same expenses; however,
Institutional Shares are not subject to a 12b-1 fee. See 'Other Classes of
Shares.'
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated May 28, 1993. The Trust qualifies as a short-term liquid asset
pursuant to the regulations of the Office of Thrift Supervision. Since federal
funds are a permitted investment, shares of the Fund will be sold only to
'depository institutions' as that term is defined in Regulation D (12 C.F.R.
Part 204) of the Board of Governors of the Federal Reserve System, and the
securities of the Fund will be limited to those instruments which such
depository institutions may own directly.
The Declaration of Trust permits the Trust to offer separate series of shares of
beneficial interest representing interests in separate portfolios of securities.
The shares in any one portfolio may be offered in separate classes. With respect
to this Fund, as of the date of this prospectus, the Board of Trustees (the
'Trustees') have established two classes of shares, known as Institutional
Shares and Institutional Service Shares. This prospectus relates only in
Institutional Service Shares ('Shares') of the Fund. Shareholders of either
class of shares of the Fund will not be permitted to make third party payments
from their accounts with the Fund. A minimum initial investment of $25,000 over
a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income consistent
with stability of principal and liquidity. The Fund pursues this investment
objective by investing in a portfolio of money market instruments maturing in
twelve months or less which qualify as short-term liquid assets under Section
566.1(h) [12 C.F.R. sec. 566.1(h)] of the federal regulations applicable to
federal savings associations [('Section 566.1(h)')]. The Fund also complies with
the requirements of Circular 220, issued by the Office of the Comptroller of the
Currency, to provide national banks with an appropriate source of portfolio
liquidity through a mutual fund investment. The average maturity of money market
instruments in the Fund's portfolio, computed on a dollar weighted basis, will
be 90 days or less. While there is no assurance that the Fund will achieve its
investment objective, it will endeavor to do so by following the investment
policies described in this prospectus. The investment objective and the policies
and limitations cannot be changed without approval of shareholders.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. Under normal circumstances, at the time of purchase, at
least 65% of the Fund's total assets will be invested in securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities. The Fund
invests only in money market instruments which qualify as short-term liquid
assets under Section 566.1(h). These securities currently include, but are not
limited to:
- obligations of the United States maturing in twelve months or less;
- obligations of U.S. government agencies or instrumentalities that mature
in twelve months or less, such as: Federal Home Loan Banks, Federal
National Mortgage Association, Government National Mortgage Association,
Banks for Cooperatives, Farm Credit Banks, Export-Import Bank of the
United States, Commodity Credit Corporation, Federal Financing Bank,
Student Loan Marketing Association, Federal Home Loan Mortgage
Corporation, or National Credit Union Administration;
- time deposits in a Federal Home Loan Bank; and
- savings accounts, including loans of unsecured days(s) funds to an
insured financial institution (i.e., Federal funds or similar unsecured
loans) that qualify under Section 566.1(h) and, in the case of negotiable
savings accounts, will mature in six months or less. These accounts
include certificates of deposit.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association participation
certificates, are backed by the full faith and credit of the U.S. Treasury. No
assurance can be given that the U.S. government will provide financial support
to other agencies or instrumentalities, since it is not obligated to do so.
These instrumentalities are supported by:
- the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
- discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
- the credit of the agency or instrumentality.
The Fund may also enter into repurchase agreements secured by those obligations
of the U.S. government and bank instruments which, but for their maturities,
qualify as short-term liquid assets. The Fund may also invest in the shares of
other money market funds.
REPURCHASE AGREEMENTS. The U.S. government 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 U.S. government securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. The Fund or its custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are deemed by the Fund's adviser to be
creditworthy pursuant to guidelines established by the Trustees.
LOANS OF FEDERAL FUNDS. Federal funds are funds held by a regional Federal
Reserve Bank for the account of a bank which is a member of that Federal Reserve
Bank. The member bank can lend federal funds to another member bank. These loans
are unsecured and are made at a negotiated interest rate
for a negotiated time period, generally overnight. Because reserves are not
required to be maintained on borrowed federal funds, member banks borrowing
federal funds are willing to pay interest rates which are generally higher than
they pay on other deposits of comparable size and maturity which are subject to
reserve requirements. The Fund sells its shares only to 'depository
institutions' as that term is defined in Regulation D of the Board of Governors
of the Federal Reserve Board and limits its portfolio only to instruments which
'depository institutions' can purchase directly. Therefore, the Fund can
participate in the federal funds market and in effect make loans of federal
funds by instructing any willing member bank at which the Fund maintains an
account to loan federal funds on the Fund's behalf. These transactions permit
the Fund to obtain interest rates on its assets which are comparable to those
earned by member banks when they loan federal funds. The Fund may engage in
loans of federal funds and similar loans of unsecured day(s) funds to Bank
Insurance Fund ('BIF') or Savings Association Insurance Fund ('SAIF')-insured
institutions. As a matter of investment policy, which may be changed without
shareholder approval, the Fund will only lend federal funds to financial
institutions that the Fund's adviser determines to be adequately or well
capitalized. Financial institutions are deemed to be adequately or well
capitalized pursuant to guidelines established by the Trustees.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 10% of its net
assets in illiquid securities, which may include restricted securities.
Restricted securities are any securities in which the Fund may otherwise invest
pursuant to its investment objective but which are subject to restriction on
resale under federal securities laws. To the extent these securities are deemed
to be illiquid, the Fund will limit its purchases, together with other
securities considered to be illiquid, to 10% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase short-term
U.S. government obligations on a when-issued or delayed delivery basis. In
when-issued and delayed delivery transactions, the Fund relies on the seller to
complete the transaction. The seller's failure to complete the transaction may
cause the Fund to miss a price or yield considered to be advantageous.
INVESTMENT RISKS
Repurchase agreements with, loans of federal funds and other day(s) funds to,
and certain time deposits, such as savings accounts and certificates of deposit
over $100,000, of BIF or SAIF-insured institutions, and deposits in foreign
branches of domestic banks, are not insured by BIF or SAIF. The Fund does not
invest, however, in instruments issued by banks or savings and loans unless they
have capital, surplus, and undivided profits of over $100,000,000 at the time of
investment or unless the principal amount of the instrument is insured by BIF or
SAIF and is determined by the Fund's adviser to be adequately or well
capitalized.
INVESTMENT LIMITATIONS
The Fund will not:
- borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge up
to 15% of the value of those assets to secure such borrowings;
- invest more than 10% of its net assets in securities subject to
restrictions on resale under federal securities law, except restricted
securities determined to be liquid under criteria established by the
Board of Trustees.
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 Combined Statement of Additional Information, in order to
comply with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940, as amended. In particular,
the Fund will comply with the various requirements of Rule 2a-7, which regulates
money market mutual funds. The Fund will also determine the effective maturity
of its investments, as well as its ability to consider a security as having
received the requisite short-term ratings by nationally recognized statistical
rating organizations, 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 THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Trust's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser (the '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, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .40 of 1% of the Fund's average daily net assets. The Adviser
has undertaken to waive a portion of its advisory fee, up to the amount of
the advisory fee, to reimburse the Fund for operating expenses in excess of
limitations established by certain states. The Adviser may further
voluntarily waive a portion of its fee or reimburse the Fund for certain
operating expenses. The Adviser can terminate such waiver or reimbursement
policy at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. Total assets
under management or administration by these and other subsidiaries of
Federated Investors is approximately $70 billion. Federated Investors,
which was founded in 1956 as Federated Investors, Inc., develops and
manages mutual funds primarily for the financial industry. Federated
Investors' track record of competitive performance and its disciplined,
risk averse investment philosophy serve approximately 3,500 client
institutions nationwide. Through these same client institutions, individual
shareholders also have access to this same level of investment expertise.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for Shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. Pursuant to the provisions of a distribution plan adopted on
behalf of Shares of the Fund in accordance with the Investment Company Act Rule
12b-l (the 'Plan'), the Fund will pay to Federated Securities Corp. an amount
computed at an annual rate of up to .25 of l% of the average daily net asset
value of the Shares to finance any activity which is principally intended to
result in the sale of Shares subject to the Plan.
Federated Securities Corp. may from time to time and for such periods as it
deems appropriate, voluntarily reduce its compensation under the Plan to the
extent the expenses attributable to the Shares exceed such lower expense
limitation as the distributor may, by notice to the Trust, voluntarily declare
to be effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to provide
sales and/or administrative services as agents for their clients or customers
who beneficially own Shares. Administrative 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.
Financial institutions will receive fees from the distributor based upon Shares
owned by their clients or customers. The schedules of such fees and the basis
upon which such fees will be paid will be determined from time to time by the
distributor.
The Fund's Plan is a compensation type plan. As such, the Fund makes no payments
to the distributor except as described above. Therefore, the Fund does not pay
for unreimbursed expenses of the distributor, including amounts expended by the
distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Fund
under the Plan.
The Trust will present the Plan for approval by shareholders of the Shares at
the first meeting of such shareholders held after the date of this prospectus.
The Glass-Steagall Act limits the ability of a depository institution (such as a
commercial bank or a savings association) to become an underwriter or
distributor of securities. In the event the Glass-Steagall Act is deemed to
prohibit depository institutions from acting in the capacities described above
or should Congress relax current restrictions on depository institutions, the
Trustees will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Inc., a subsidiary
of Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc. provides these at approximate cost.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT. State Street Bank and
Trust Company, Boston, Massachusetts, is custodian for the securities and cash
of the Fund, transfer agent for shares of the Fund, and dividend disbursing
agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, Washington, D.C.
INDEPENDENT AUDITOR. The independent auditor for the Fund is Deloitte & Touche,
Boston, Massachusetts.
EXPENSES OF THE FUND AND INSTITUTIONAL SHARES
Holders of Shares pay their allocable portion of Trust and Fund expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; the cost of meetings of Trustees;
legal fees of the Trust; association membership dues and such non-recurring and
extraordinary items as may arise.
The Fund expenses for which holders of Shares each pay their allocable portion
include, but are not limited to: registering the Fund and Shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors fees; and such non-recurring and extraordinary items as may
arise.
At present, no expenses are allocated to the Shares as a class. However, the
Board of Trustees reserves the right to allocate certain other expenses to
holders of Shares as it deems appropriate ('Class Expenses'). In any case, Class
Expenses would be limited to: transfer agent fees as identified by the transfer
agent as attributable to holders of Shares; printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders; registration fees paid to the
Securities and Exchange Commission and registration fees paid to state
securities commissions; expenses related to administrative personnel and
services as required to
support holders of Shares; legal fees relating solely to Shares; and Trustees'
fees incurred as a result of issues relating solely to Shares.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its Shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per Share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of Shares outstanding. The Fund, of
course, cannot guarantee that its net asset value will always remain at $1.00
per Share.
INVESTING IN INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold at net asset value on days on which the New York Stock Exchange
is open for business. Shares may be purchased either by wire or mail.
To purchase Shares of the Fund, open an account by calling Federated Securities
Corp. at 1-800-245-4270. Information needed to establish the account will be
taken over the telephone.
Purchases by any single investor are limited to not more than $20 million in
total Fund investment. In the event any investor exceeds this investment
limitation, the Fund reserves the right to redeem shares that exceed the
limitation and provide the investor with the proceeds of that redemption. See
'Redeeming Institutional Service Shares.'
BY WIRE. To purchase Shares of the Fund by Federal Reserve wire, call the Fund
before 3:00 p.m. (Boston time) to place an order. The order is considered
received immediately. Payment by federal funds must be received before 3:00 p.m.
(Boston time) that same day. Federal funds should be wired as follows: State
Street Bank and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For
Credit to: Trust For Financial Institutions-Government Money Market
Fund-Institutional Service Shares: Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Order Number;
Nominee or Institution Name; ABA Number 011000028. Shares cannot be purchased on
days on which the New York Stock Exchange is closed and on federal holidays
restricting wire transfers.
BY MAIL. To purchase Shares of the Fund by mail, send a check made payable to
Trust For Financial Institutions-Government Money Market Fund-Institutional
Service Shares, to the Trust's transfer agent, State Street Bank and Trust
Company, P.O. Box 8602, Boston, Massachusetts 02266-8602. An order by mail is
considered received after payment by check is converted by State Street Bank
into federal funds. This is normally the next business day after State Street
Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000. However, an account may
be opened with a smaller amount as long as the $25,000 minimum is reached within
90 days. An institutional investor's minimum investment will be calculated by
combining all accounts it maintains with the Fund.
Accounts established through a non-affiliated bank or broker may be subject to a
smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund.
The net asset value is determined at 12:00 noon (Boston time), 3:00 p.m. (Boston
time), and 4:00 p.m. (Boston time), Monday through Friday, except on: (i) days
on which there are not sufficient changes in the value of the Fund's portfolio
securities that its net asset value might be materially affected; (ii) days
during which no Shares are tendered for redemption and no orders to purchase
Shares are received; and (iii) the following holidays: New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
RECEIPT OF ORDERS
Shares are sold on days on which the New York Stock Exchange is open. Orders are
considered received after payment by check is converted by State Street Bank
into federal funds (normally the next business day after receiving the check).
When payment is made with federal funds, the order is considered received
immediately.
The Fund reserves the right to reject any purchase request.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, State Street Bank maintains a Share account for
each shareholder. Share certificates are not issued unless requested by
contacting the Fund.
Monthly confirmations are sent to report transactions such as purchases and
redemptions, as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional Shares of the Fund unless cash
payments are requested by writing or calling Federated Securities Corp. Shares
purchased by wire before 3:00 p.m. (Boston time) begin earning dividends that
day. Shares purchased by check begin earning dividends on the day after the
check is converted by State Street Bank into federal funds.
CAPITAL GAINS
Since the Fund's policy is, under normal circumstances, to hold portfolio
securities to maturity and to value portfolio securities at amortized cost, it
does not expect any capital gains or losses. If the Fund does experience gains,
however, it could result in an increase in dividends. Capital losses could
result in a decrease in dividends. If, for some extraordinary reason, the Fund
realizes net long-term capital gains, it will distribute them at least once
every 12 months.
REDEEMING INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made by telephone or in writing. Shares may also be
redeemed without a shareholder request if the total value of a single
shareholder's investment in the Fund exceeds $20 million, as described in the
section entitled 'Share Purchases.'
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Fund before 12:00 noon
(Boston time). All proceeds will be wire transferred to the shareholder's
account at a domestic commercial bank that is a member of the Federal Reserve
System. If at any time the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders will be promptly notified.
Telephone redemption instructions may be recorded.
A daily dividend will be paid on Shares redeemed if the redemption request is
received after 12:00 noon (Boston time). However, the proceeds are not wired
until the following business day. Redemption requests received before 12:00 noon
(Boston time) will be paid the same day but will not be entitled to that day's
dividends.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as written requests, should be considered. If
reasonable procedures are not followed by the Fund, it may be either for losses
due to unauthorized or fraudulent telephone instructions.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name, his account number,
and the share or dollar amount requested. If share certificates have been
issued, they must be properly endorsed and should be sent by registered or
certified mail with the written request.
SIGNATURES. . Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the BIF;
- a member firm of the New York, American, Boston, Midwest, or Pacific
Stock Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the SAIF; or
- any other 'eligible guarantor institution,' as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. 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, provided the transfer agent has received the
purchase price for the Shares from the shareholder.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When Shares are purchased by check, the proceeds from the redemption of those
Shares are not available until State Street Bank collects payment for those
Shares. It is the Fund's policy to allow up to 10 calendar days from the date
such Shares were purchased for collection.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operation and for the election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the Fund shall be called by the Trustees upon the written
request of shareholders owning at least 10% of the Fund's outstanding shares.
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 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.
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, if any, 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. The Fund will
provide detailed tax information for reporting purposes.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Fund:
- the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
- 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.
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.
The yield of the Fund represents the annualized rate of income earned on an
investment in the Fund over a seven-day period without including dividends
earned on reinvested dividends. It is the annualized dividends earned during the
period on the investment, shown as a percentage of the investment. The effective
yield is calculated similarly to the yield, but, when annualized, the income
earned by an investment in the Fund is assumed to be reinvested daily. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
From time to time, the Fund may advertise its performance using certain
reporting services and/or compare its performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Institutional Shares are sold to financial institutions and are subject to a
minimum initial investment of $25,000. Institutional Shares are sold at net
asset value and are distributed without a Rule 12b-l Plan.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation from one class of shares than from
another class of shares.
The amount of dividends payable to Institutional Shares will be greater than
those payable to Institutional Service Shares by the difference in class
expenses and distribution expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of the Fund.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Government Money Market Fund Federated Investors Tower
Institutional Service Shares Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian, Transfer Agent, and Dividend Disbursing Agent
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditor
Deloitte & Touche 2500 One PPG Place
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
</TABLE>
GOVERNMENT
MONEY MARKET FUND
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A No-Load, Open-End, Diversified
Management Investment Company
October 15, 1993
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3080503A-ISS (10/93)
GOVERNMENT MONEY MARKET FUND--
INSTITUTIONAL SHARES AND INSTITUTIONAL SERVICE SHARES
(A PORTFOLIO OF TRUST FOR FINANCIAL INSTITUTIONS)
- --------------------------------------------------------------------------------
SUPPLEMENT TO COMBINED STATEMENT OF ADDITIONAL INFORMATION DATED OCTOBER
15, 1993
A. Please insert the following information as a second paragraph under the
section entitled "Fund Ownership" on page 6:
"As of March 4, 1994, the following shareholders of record owned 5% or
more of the outstanding shares of the Institutional Service Shares of
the Fund: Peachtree Capital Corp., Atlanta, Georgia, owned approximately
1,655,114 shares (17.8%); PNC Securities Corp., Pittsburgh,
Pennsylvania, owned approximately 501,498 shares (5.4%); and RAF
Financial Corporation, Denver, Colorado, owned approximately 493,656
shares (5.3%)."
B. Please insert the following as the second paragraph of the sub-section
entitled "Advisory Fees" under the main section entitled "Investment
Advisory Services" on page 7:
"From the Fund's date of initial public investment, October 19, 1993, to
January 31, 1994, the Fund's adviser earned $339,565, all of which was
voluntarily waived."
C. Please insert the following information as the second sentence under the
section entitled "Administrative Services" on page 7:
"From the Fund's date of initial public investment, October 19, 1993, to
January 31, 1994, the Fund incurred costs for administrative services of
$21,967."
D. Please insert the following information as a final paragraph under the
sub-section entitled "Distribution Plan" on page 8:
"From the Fund's date of initial public investment, October 19, 1993, to
January 31, 1994, brokers and administrators received fees in the amount
of $11,156, of which $6,693 was voluntarily waived, pursuant to the
distribution plan."
E. Please insert the following information as the first paragraph under the
sub-section entitled "Yield" on page 10:
"The Fund's yield for Institutional Shares for the seven-day period
ended January 31, 1994 was 3.13%." The yield for Institutional Service
Shares was 3.03% for the same period.
F. Please insert the following information as the first paragraph under the
sub-section entitled "Effective Yield" on page 10:
"The Fund's effective yield for Institutional Shares for the seven-day
period ended January 31, 1994 was 3.18%." The effective yield for
Institutional Service Shares was 3.07% for the same period.
March 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- --------------------------------------------------------------------------------
Distributor
4010711B (3/94)
GOVERNMENT MONEY MARKET FUND
(A PORTFOLIO OF TRUST FOR FINANCIAL INSTITUTIONS)
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
COMBINED STATEMENT OF ADDITIONAL INFORMATION
This Combined Statement of Additional Information should be read with the
respective prospectus for Institutional Shares or Institutional Service Shares
of Government Money Market Fund, a portfolio of Trust For Financial
Institutions, dated October 15, 1993. This Statement is not a prospectus itself.
To receive a copy of the prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated October 15, 1993
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
U.S. Government Obligations 1
Bank Instruments 1
Repurchase Agreements 1
Reverse Repurchase Agreements 1
Variable Rate U.S. Government Securities 2
Demand Notes 2
When-Issued and Delayed
Delivery Transactions 2
Investment Limitations 2
TRUST MANAGEMENT 4
- ---------------------------------------------------------------
Officers and Trustees 4
The Funds 6
Fund Ownership 6
Trustee Liability 6
INVESTMENT ADVISORY SERVICES 6
- ---------------------------------------------------------------
Adviser to the Fund 6
Advisory Fees 7
Other Related Services 7
ADMINISTRATIVE SERVICES 7
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 7
- ---------------------------------------------------------------
PURCHASING SHARES 8
Distribution Plan (Institutional Service Shares) 8
Conversion to Federal Funds 8
DETERMINING NET ASSET VALUE 8
- ---------------------------------------------------------------
Use of the Amortized Cost Method 8
REDEEMING SHARES 9
- ---------------------------------------------------------------
Redemption in Kind 9
TAX STATUS 9
- ---------------------------------------------------------------
The Fund's Tax Status 9
Shareholders' Tax Status 10
YIELD 10
- ---------------------------------------------------------------
EFFECTIVE YIELD 10
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 10
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio of Trust For Financial Institutions (the "Trust"), which
was established as a Massachusetts business trust under a Declaration of Trust
dated May 28, 1993.
Shares of the Fund are offered in two classes, Institutional Shares and
Institutional Service Shares (individually and collectively referred to as
"Shares"). This Combined Statement of Additional Information relates to both
classes.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide current income consistent with
stability of principal and liquidity.
TYPES OF INVESTMENTS
The Fund invests in money market instruments which mature in twelve months or
less. The Fund may only purchase securities which qualify as short-term liquid
assets under Section 566.1(h) [12 C.F.R. sec.566.1(h)] of the federal
regulations applicable to federal savings associations. The Fund invests
primarily in U.S. government securities.
The Fund's investment objective and policies cannot be changed without approval
of shareholders.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest generally
include direct obligations of the U.S. Treasury (such as U.S. Treasury bills,
notes, and bonds) and obligations issued or guaranteed by U.S. government
agencies or instrumentalities. These securities are described more fully in the
prospectus for each class.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
- - Federal Farm Credit Banks;
- - Federal Home Loan Banks;
- - Federal National Mortgage Association.
- - Student Loan Marketing Association; and
- - Federal Home Loan Mortgage Corporation.
BANK INSTRUMENTS
The Fund may invest more than $100,000 in savings accounts and in certificates
of deposits and other time deposits in Bank Insurance Fund-insured banks and
Savings Association Insurance Fund-insured institutions. Investments in such
accounts over $100,000 and the interest paid on these investments are not
insured.
RATINGS
The Fund invests in only high quality money market instruments that are
either: (i) rated in one of the two highest short-term rating categories
by one or more nationally recognized statistical rating organizations
("NRSROs"); or (ii) of comparable quality to securities having such
ratings. A NRSRO's two highest rating categories are determined without
regard for sub-categories and gradations. For example, securities rated
A-1+, A-1 or A-2 by Standard & Poor's Corporation ('S&P'), Prime-1 or
Prime-2 by Moody's Investors Service, Inc. ('Moody's'), or F-1 (+ or -)
or F-2 (+ or -) by Fitch Investors Services ('Fitch') are all considered
rated in the one of the two highest short-term rating categories. The
Fund will limit its investments in securities rated in the second highest
short-term rating category e.g., A-2 by S&P, Prime-2 by Moody's or F-2 (+
or -) by Fitch, to not more than 5% of its total assets, with not more
than 1% invested in the securities of any one issuer. 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.
REPURCHASE AGREEMENTS
The Fund requires its custodian to take possession of the securities subject to
repurchase agreements, and these securities are marked to market daily. To the
extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are deemed by the Fund's adviser to be
creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement the Fund transfers
possession of a portfolio instrument to another person, such as a financial
- --------------------------------------------------------------------------------
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
VARIABLE RATE U.S. GOVERNMENT SECURITIES
Some of the short-term U.S. government securities the Fund may purchase carry
variable interest rates. These securities have a rate of interest subject to
adjustment at least annually. This adjusted interest rate is ordinarily tied to
some objective standard, such as the 91-day U.S. Treasury bill rate.
Variable interest rates will reduce the changes in the market value of such
securities from their original purchase prices. Accordingly, the potential for
capital appreciation or capital depreciation should not be greater than the
potential for capital appreciation or capital depreciation of fixed interest
rate U.S. government securities having maturities equal to the interest rate
adjustment dates of the variable rate U.S. government securities.
DEMAND NOTES
Demand notes are short-term borrowing arrangements between an agency or
instrumentality of the U.S. government and an institutional lender (such as the
Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. Certain demand notes permit the Fund to increase or decrease
the principal amount of the note daily within an agreed upon range. Demand notes
usually provide for floating or variable rates of interest.
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. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated on the Fund's records at the trade date. These
assets are marked to market daily and maintained until the transaction is
settled. The Fund may engage in these transactions to an extent that would cause
the segregation of an amount up to 20% of the total value of its assets.
INVESTMENT LIMITATIONS
The Fund will not change any of the investment limitations described below
without approval of shareholders.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any money market instruments short or purchase any
money market instruments on margin but may obtain such short-term credits
as may be necessary for clearance of purchases and sales of money market
instruments.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amount
borrowed. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage, but rather as a temporary,
extraordinary, or emergency measure or to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio instruments would be inconvenient or
disadvantageous.
Interest paid on borrowed funds will not be available for investment. The
Fund will liquidate any such borrowings as soon as possible and may not
purchase any portfolio instruments while borrowings in excess of 5% of
the Fund's net assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings, including reverse repurchase agreements. In
those cases, it may mortgage, pledge, or hypothecate assets having a
market value not exceeding the lesser of the dollar amounts borrowed or
15% of the value of total assets at the time of the borrowing.
- --------------------------------------------------------------------------------
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.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
UNDERWRITING
The Fund will not engage in underwriting of securities issued by others.
DIVERSIFICATION
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities issued by any one issuer
(other than 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 securities) if as a result
more that 5% of the value of its total assets would be invested in the
securities of that issuer. (For purposes of this limitation, the Fund
considers instruments issued by a U.S. branch of a domestic bank having
capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment to be "cash items.") Also, the Fund will not acquire
more than 10% of the outstanding voting securities of any one issuer.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to one-third the value of its total assets.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investments in securities of other investment
companies to no more than 3% of the total outstanding voting stock of any
investment company, invest no more than 5% of its total assets in any one
investment company, or invest no more than 10% of its total assets in
other investment companies in general. The Fund will limit its
investments in the securities of other investment companies to those of
money market funds having investment objectives and policies similar to
its own. However, these limitations are not applicable if the securities
are acquired in a merger, consolidation, reorganization or acquisition of
assets. While it is the Fund's policy to waive its investment advisory
fee on assets invested in securities of open-end investment companies, it
should be noted that investment companies incur certain expenses such as
custodian and transfer agent fees, and therefore any investment by the
Fund in shares of another investment company would be subject to such
duplicate expenses.
At the present time, the Fund does not intend to invest more than 5% of
its total assets in securities of other investment companies.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
DEALING IN PUTS AND CALLS
The Fund may invest in put options on portfolio securities to protect
against price movements in particular securities, and may write covered
call options on securities either held in its portfolio or which it has a
right to obtain without payment of further consideration or for which it
has segregated cash in an amount of any additional consideration. The
Fund shall not purchase put options that require the payment of premiums
in excess of 5% of the Fund's total assets.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together own
more than 5% of the issuer's securities.
- --------------------------------------------------------------------------------
INVESTING IN MINERALS
To comply with the restrictions of certain states, the Fund will not
purchase interests in oil, gas or other mineral exploration or
development programs or leases, except that the Fund may purchase the
securities of issuers which invest in or sponsor such programs.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Fund does not intend to borrow money or pledge securities in excess of 5% of
the value of its net assets during the current fiscal year.
As a matter of operating policy, the Fund will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding.
TRUST MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Management,
Federated Investors, Federated Securities Corp., Federated Administrative
Services, Inc. and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST/FUND DURING PAST FIVE YEARS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
John F. Donahue+* Chairman Chairman and Trustee, Federated Investors; Chairman and Trustee, Federated
Federated Investors and Trustee Advisers, Federated Management, and Federated Research; Director, AEtna Life
Tower and Casualty Company; Chief Executive Officer and Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds; formerly, Director, The Standard Fire
Insurance Company. Mr. Donahue is the father of J. Christopher Donahue, Vice
President of the Fund.
- --------------------------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice-President, John R.
Wood/IPC Commercial Wood and Associates, Inc., Realtors; President, Northgate Village
Department Development Corporation; General Partner or Trustee in private real estate
John R. Wood and ventures in Southwest Florida; Director, Trustee, or Managing General
Associates, Inc., Realtors Partner of the Funds; formerly President, Naples Property Management, Inc.
3255 Tamiami Trail North
Naples, FL
- --------------------------------------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc.;
Suite 2310, PNC Bank Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Building Chairman and Director, PNC Financial Corp and Director, Ryan Homes, Inc.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Concord, MA Cross of Massachusetts, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat 'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST/FUND DURING PAST FIVE YEARS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts; Trustee,
225 Franklin Street Lahey Clinic Foundation, Inc.; Director, Trustee, or Managing General
Boston, MA Partner of the Funds; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation.
- --------------------------------------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Eat 'N Park Restaurants, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice Chairman, Horizon Financial,
F.A.
- --------------------------------------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Management Consultant; Trustee, Carnegie Endowment for International Peace,
1202 Cathedral of RAND Corporation, and U.S. Space Foundation; Chairman, National Advisory
Learning Council for Environmental Policy and Technology; Chairman, Czecho Slovak
University of Pittsburgh Management Center; Director, Trustee, or Managing General Partner of the
Pittsburgh, PA Funds; formerly, President, University of Pittsburgh.
- --------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
Glen R. Johnson Vice President Trustee, Federated Investors; President and/or Trustee of some of the Funds;
Federated Investors staff member, Federated Securities Corp. and Federated Administrative
Tower Services, Inc.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Investors Federated Management, and Federated Research; President and Director,
Tower Federated Administrative Services, Inc. President or Vice President of the
Pittsburgh, PA 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 Fund.
- --------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher President and Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Trustee Director, Federated Securities Corp.; President or Vice President of the
Tower Funds; Director or Trustee of some of the Funds.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Vice President Vice President, Treasurer, and Trustee, Federated Investors; Vice President
Federated Investors and Treasurer and Treasurer, Federated Advisers, Federated Management, and Federated
Tower Research; Executive Vice President, Treasurer, and Director, Federated
Pittsburgh, PA Securities Corp.; Chairman, Treasurer, and Director, Federated
Administrative Services, Inc.; Trustee or Director of some of the Funds;
Vice President and Treasurer of the Funds.
- --------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors and Secretary Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Executive Vice President,
Pittsburgh, PA Secretary, and Director, Federated Administrative Services, Inc.; Director
and Executive Vice President, Federated Securities Corp.; Vice President and
Secretary of the Funds.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST/FUND DURING PAST FIVE YEARS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive Vice President,
Federated Investors Federated Securities Corp.; President and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Vice President of the Funds;
Pittsburgh, PA Director, Trustee, or Managing General Partner of some of the Funds;
formerly, Vice President, The Standard Fire Insurance Company and President
of its Federated Research Division.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940, as amended.
+ Member of the Fund's Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Trustees between meetings of
the Board.
THE FUNDS
"The Funds," and "Funds" mean the following investment companies: A.T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; California
Municipal Cash Trust; Cash Trust Series; Cash Trust Series II; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; FT Series, Inc.;
Federated ARMs Fund; Federated Bond Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Trust; Federated Income Securities
Trust; Federated Index Trust; Federated Intermediate Government Trust; Federated
Intermediate Municipal Trust; Federated Master Trust; Federated Municipal Trust;
Federated Short-Intermediate Government Trust; Federated Short-Intermediate
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated Stock
Trust; Federated Tax-Free Trust; Federated U.S. Government 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; Investment Series Funds, Inc.; Investment Series Trust;
Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty
Municipal Securities Fund, Inc.; Liberty Term Trust, Inc.-1999; Liberty U.S.
Government Money Market Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust;
Mark Twain Funds; Money Market Management; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash Trust;
111 Corcoran Funds; Portage Funds; RIMCO Monument Funds; Signet Select Funds;
Star Funds; Stock and Bond Fund, Inc.; The Boulevard Funds; The Passageway
Funds; The Shawmut Funds; The Starburst Funds; The Starburst Funds II; Targeted
Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for
Government Cash Reserves; Trust for Short-Term U.S. Government Securities; and
Trust for U.S. Treasury Obligations.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All the Class A (voting) shares of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife, and his
son, J. Christopher Donahue. John F. Donahue, Chairman and Trustee of Federated
Management, is Chairman and Trustee, Federated Investors and Chairman and
Trustee of the Trust. John A. Staley, IV, is President and Director of Federated
Research Corp.; Vice President and Trustee, Federated Investors, Executive Vice
President, Federated Securities Corp., and Vice President of the Trust. John W.
McGonigle is Vice President and Secretary of Federated Research Corp.; Trustee,
Vice President, Secretary, and General Counsel, Federated Investors; Executive
Vice President, Secretary and Director, Federated Administrative Services, Inc.;
Director and Executive Vice President, Federated Securities Corp. and Vice
President and Secretary of the Trust.
- --------------------------------------------------------------------------------
The adviser shall not be liable to the Trust, the Fund, or any shareholder for
any losses that may be sustained in the purchase, holding, or sale of any
security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus.
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 fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
OTHER RELATED SERVICES
Affiliates of the adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of shares of funds offered by Federated Securities Corp.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, Inc., a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund at approximate cost.
John A. Staley, IV, an officer and Trustee of the Trust, holds approximately 15%
of the outstanding common stock and serves as director of Commercial Data
Services, Inc., a company which provides computer processing services to
Federated Administrative Services, Inc.
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 utilize 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
review by the Board of Trustees.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the adviser
and may include:
- - advice as to the advisability of investing in securities;
- - security analysis and reports;
- - economic studies;
- - industry studies;
- - receipt of quotations for portfolio evaluations; and
- - similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors, in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange is open for business. The procedure for purchasing shares of
the Trust is explained in the respective prospectus under "Investing in
Institutional Shares" or "Investing in Institutional Service Shares."
DISTRIBUTION PLAN (INSTITUTIONAL SERVICE SHARES)
With respect to the Institutional Service Shares class of the Fund, the Trust
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 provides for payment of fees to Federated Securities Corp. to
finance any activity which is principally intended to result in the sale of the
Fund's Shares subject to the Plan. Such activities may include the advertising
and marketing of Shares; preparing, printing, and distributing of prospectuses
and sales literature to prospective shareholders, brokers, or administrators;
and implementing and operating the Plan. Pursuant to the Plan, Federated
Securities Corp may pay fees to brokers for distribution and administrative
services and to administrators for administrative services as to Shares. The
administrative services are provided by a representative who has knowledge of
the shareholder's particular circumstances and goals, and include, but are not
limited to: communicating account openings; communicating account closings;
entering purchase transactions; entering redemption transactions; providing or
arranging to provide accounting support for all transactions; wiring funds and
receiving funds for Share purchases and redemptions; confirming and reconciling
all transactions; reviewing the activity in Fund accounts and providing training
and supervision of broker personnel; posting and reinvesting dividends to Fund
accounts or arranging for this service to be performed by the Fund's transfer
agent; and maintaining and distributing current copies of prospectuses and
shareholder reports to the beneficial owners of Shares and prospective
shareholders.
The Trustees expect that the adoption of the Plan will result in the sale of a
sufficient number of Shares so as to allow the Fund to achieve economic
viability. It is also anticipated that an increase in the size of the Fund will
facilitate more efficient portfolio management and assist the Fund in seeking to
achieve its investment objective.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. State Street Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value for each Share of the Fund is stabilized at $1.00. The days
on which net asset value is calculated by the Fund are described in the
prospectus. Net asset value will not be calculated on Good Friday and on certain
federal holidays referred to in the prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule"), as
amended, promulgated under the Investment Company Act of 1940. Under the Rule,
the Trustees must establish procedures reasonably designed to stabilize the net
asset value per share, as computed for purposes of distribution and redemption,
at $1.00 per share, taking into account current market conditions and the Fund's
investment objective.
Under the Rule, the Fund is permitted to purchase instruments which are subject
to demand features or standby commitments. As defined by the Rule, a demand
feature entitles the Fund to receive the principal amount of the instrument from
the issuer or a third party on (1) no more than 30 days' notice or (2) at
specified intervals not exceeding one year on no more than 30 days' notice. A
standby commitment entitles the Fund to achieve same day settlement and to
receive an exercise price equal to the amortized cost of the underlying
instrument plus accrued interest at the time of exercise.
Although demand features and standby commitments are techniques and are defined
as "puts" under the Rule, the Fund does not consider them to be "puts" as that
term is used in the Fund's investment limitations. Demand features and standby
commitments are features which enhance an instrument's liquidity, and the
investment limitation which proscribes puts is designed to prohibit the purchase
and sale of put and call options and is not designed to prohibit the Fund from
using techniques which enhance the liquidity of portfolio instruments.
- --------------------------------------------------------------------------------
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and a 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 .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.
INVESTMENT RESTRICTIONS
The Rule requires that the Fund limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risks and
have received the requisite rating from one or more nationally recognized
statistical rating organizations. If the instruments are not rated, the
Trustees must determine that they are of comparable quality. The Rule
also requires the Fund to maintain a dollar weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per share. In addition, no
instrument with a remaining maturity of more than twelve months can be
purchased by the Fund.
Should the disposition of a portfolio security result in a dollar weighted
average portfolio maturity of more than 90 days, the Fund will invest its
available cash to reduce the average maturity to 90 days or less as soon as
possible.
It is the Fund's usual practice to hold portfolio securities to maturity and
realize par, unless the investment adviser determines that sale or other
disposition is appropriate in light of the Fund's investment objective. Under
the amortized cost method of valuation, neither the amount of daily income nor
the net asset value is affected by any unrealized appreciation or depreciation
of the portfolio.
In periods of declining interest rates, the indicated daily yield on Shares of
the Fund computed by dividing the annualized daily income on the Fund's
portfolio by the net asset value computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market prices
and estimates.
In periods of rising interest rates, the indicated daily yield on Shares of the
Fund computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
respective prospectus under "Redeeming Institutional Shares" and "Redeeming
Institutional Service Shares." Although State Street Bank does not charge for
telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Trust is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the Trust's net
asset value during any 90-day period.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Trust must, among other
requirements:
- - derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- - derive less than 30% of its gross income from the sale of securities held less
than three months;
- - invest in securities within certain statutory limits; and
- - distribute to its shareholders at least 90% of its net income earned during
the year.
- --------------------------------------------------------------------------------
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional Shares. No portion of any income dividend paid by
the Fund is eligible for the dividends received deduction available to
corporations.
CAPITAL GAINS
Because the Fund invests primarily for income and because it normally
holds portfolio instruments to maturity, it is not expected to realize
long-term capital gains.
YIELD
- --------------------------------------------------------------------------------
The Fund calculates its yield for both classes of Shares daily, based upon the
seven days ending on the day of the calculation, called the "base period." This
yield is computed by:
- - determining the net change in the value of a hypothetical account with a
balance of one share of either class of Shares at the beginning of the base
period, with the net change excluding capital changes but including the vale
of any additional shares of either class of Shares purchased with dividends
earned from the original one share;
- - dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
- - multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
the yield will be reduced for those shareholders paying those fees.
EFFECTIVE YIELD
- --------------------------------------------------------------------------------
The Fund calculates its effective yield for both classes of Shares daily, based
upon seven days ending on the day of the calculation, called the "base period."
This effective yield is computed by:
- - adding 1 to the base period return;
- - raising the sum to the 365/7th power; and
- - subtracting 1 from the result.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance for both classes of Shares depends upon such variables
as:
- - portfolio quality;
- - average portfolio maturity;
- - type of instruments in which the portfolio is invested;
- - changes in interest rates on money market instruments;
- - changes in Fund or either class of Shares' expenses; and
- - the relative amount of Fund cash flow.
From time to time the Fund may advertise its performance compared to similar
funds or portfolios using certain indices, reporting services, and financial
publications. These may include the following:
- - IBC/DONOGHUE'S MONEY FUND REPORT publishes annualized yields of hundreds of
money market funds on a weekly basis and through its Money Market Insight
publication reports monthly and 12-month-to-date investment results for the
same money funds.
- - SALOMON 30-DAY T-BILL INDEX is a weekly quote of the most representative
yields for selected securities, issued by the U.S. Treasury, maturing in 30
days.
- - LIPPER ANALYTICAL SERVICES, INC. ranks funds in various categories by making
comparative calculations using total return. Total return assumes the
reinvestment of all income, dividends, and capital gains distributions, if
any.
- --------------------------------------------------------------------------------
From time to time, the Trust will quote its Lipper Ranking in the "institutional
money market instrument funds" category in advertising and sales literature.
Investors may use such reporting services in addition to the Fund's prospectus
to obtain a more complete view of the Fund's performance before investing. Of
course, when comparing Fund performance to any index, factors such as
composition of the index and prevailing market conditions should be considered
in assessing the significance of such comparisons. When comparing funds using
reporting services, or total return and yield, investors should take into
consideration any relevant differences in funds such as permitted portfolio
compositions and methods used to value portfolio securities and compute net
asset value.
Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment in the
Fund based on the monthly reinvestment of dividends over a specified period of
time.
3080503B (10/93)
- --------------------------------------------------------------------------------
GOVERNMENT
- --------------------------------------------------------------------------------
QUALIFYING
- --------------------------------------------------------------------------------
LIQUIDITY FUND
- --------------------------------------------------------------------------------
INSTITUTIONAL SHARES
(A Portfolio of Trust for Financial Institutions)
SUPPLEMENT TO PROSPECTUS
DATED OCTOBER 15, 1993
FEDERATED SECURITIES CORP.
(LOGO)
Distributor
4010710 A-IS (3/94)
March 31, 1994
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
A. Please insert the following "Financial Highlights--Institutional Shares"
table as page 2 of the prospectus, following the "Summary of Fund Expenses"
table and before the section entitled "General Information." In addition,
please add the heading "Financial Highlights--Institutional Shares" to the
Table of Contents on page I after the heading "Summary of Fund Expenses."
GOVERNMENT QUALIFYING LIQUIDITY FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1994*
-------------------
<S> <C>
- ------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $9.96
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.14
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.03)
------------------
- ------------------------------------------------------------------------
Total from investment operations 0.11
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.14)
------------------
- ------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.93
------------------
- ------------------------------------------------------------------------
TOTAL RETURN** 1.15%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 0.00%(b)
- ------------------------------------------------------------------------
Net investment income 5.09%(b)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (a) 1.50%(b)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 9,018
- ------------------------------------------------------------------------
Portfolio turnover rate 15%
- ------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1993 (start of
performance) to January 31, 1994 (unaudited).
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
B. Please replace the sub-section entitled "Administrative Services on page 8 of
the prospectus with the following.
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, which
relates to the average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors ("Federated Funds"), as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET
MAXIMUM ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
- --------------------------------------------- ---------------------------------------------
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
C. Please insert the following at the end of the first paragraph under the
heading "Voting Rights" on page 11 of the prospectus.
As of March 4, 1994, Midland Savings Bank FSB, Des Moines, Iowa, owned
approximately 506,585 shares (83.3%) of the Institutional Shares of the Fund,
and therefore, may for certain purposes, be deemed to control the Fund and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
D. Please insert the following "Financial Highlights--Institutional Service
Shares" table as page 14 of the prospectus immediately following the section
entitled "Other Classes of Shares." In addition, please add the heading
"Financial Highlights--Institutional Service Shares" to the Table of Contents
on page I after the heading "Other Classes of Shares."
GOVERNMENT QUALIFYING LIQUIDITY FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Institutional Service Shares were not being offered as of January 31, 1994.
Accordingly, there are no Financial Highlights for such shares. The Financial
Highlights presented below are historical information for Institutional Shares.
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1994*
-------------------
<S> <C>
- ------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $9.96
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.14
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.03)
------------------
- ------------------------------------------------------------------------
Total from investment operations 0.11
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.14)
------------------
- ------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.93
------------------
- ------------------------------------------------------------------------
TOTAL RETURN** 1.15%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 0.00%(b)
- ------------------------------------------------------------------------
Net investment income 5.09%(b)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (a) 1.50%(b)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 9,018
- ------------------------------------------------------------------------
Portfolio turnover rate 15%
- ------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1993 (start of
performance) to January 31, 1994 (unaudited).
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
E. Please insert the following financial statements after the "Financial
Highlights--Institutional Service Shares" table on page 14 of the prospectus.
In addition, please add the heading "Financial Statements" to the Table of
Contents on page I, immediately before the heading "Addresses."
GOVERNMENT QUALIFYING LIQUIDITY FUND
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- -------------------------------------------------------------------- -----------
<C> <S> <C>
INTERMEDIATE-TERM GOVERNMENT OBLIGATIONS--99.2%
- ----------------------------------------------------------------------------------
$5,844,922 Federal Home Loan Mortgage Corp., 5 Year Balloon, 5.00%, 10/1/98 $ 5,879,583*
--------------------------------------------------------------------
3,015,999 Federal Home Loan Mortgage Corp., 5 Year Balloon, 5.50%, 12/1/98 3,064,044
-------------------------------------------------------------------- -----------
TOTAL INTERMEDIATE-TERM GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $8,907,517) 8,943,627
-------------------------------------------------------------------- -----------
**REPURCHASE AGREEMENT--12.0%
- ----------------------------------------------------------------------------------
1,085,000 J.P. Morgan Securities, Inc., 3.19%, dated 1/31/94, due 2/1/94
(at amortized cost) (Note 2B) 1,085,000
-------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $9,992,517) $10,028,627+
-------------------------------------------------------------------- -----------
</TABLE>
* Includes securities with a market value of $1,005,930 subject to Dollar Roll
transactions.
** Repurchase agreement is fully collateralized by U.S. government and/or agency
obligations based on market prices at the date of the portfolio. The
investment in repurchase agreement is through participation in a joint
account with other Federated funds.
+ The cost of investments for federal tax purposes amounts to $9,992,517. The
net unrealized appreciation on a federal tax basis amounts to $36,110, which
is comprised of $39,200 appreciation and $3,090 depreciation at January 31,
1994.
Note: The categories of investments are shown as a percentage of net assets
($9,017,972) at January 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Investments in other securities (Note 2A) $8,943,627
- --------------------------------------------------------------------
Investments in repurchase agreement (Note 2B) 1,085,000
- -------------------------------------------------------------------- ----------
Total investments, at amortized cost and value
(identified and tax cost $9,992,517) $10,028,627
- ---------------------------------------------------------------------------------
Cash 529
- ---------------------------------------------------------------------------------
Interest receivable 34,107
- ---------------------------------------------------------------------------------
Receivable from Adviser (Note 5) 10,750
- --------------------------------------------------------------------------------- -----------
Total assets 10,074,013
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Payable for dollar roll transactions (Note 2E) 995,547
- --------------------------------------------------------------------
Dividends payable 39,001
- --------------------------------------------------------------------
Accrued expenses 21,493
- -------------------------------------------------------------------- ----------
Total liabilities 1,056,041
- --------------------------------------------------------------------------------- -----------
NET ASSETS for 908,355 shares of beneficial interest outstanding $ 9,017,972
- --------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid-in capital $ 8,994,030
- ---------------------------------------------------------------------------------
Unrealized appreciation of investments 36,110
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments (12,168)
- --------------------------------------------------------------------------------- -----------
Total $ 9,017,972
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share
($9,017,972 / 908,355 shares of beneficial interest outstanding) $9.93
- --------------------------------------------------------------------------------- -----
</TABLE>
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JANUARY 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest income (Note 2C) $109,550**
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------
Investment advisory fee (Note 5) $10,758
- ------------------------------------------------------------------------
Administrative personnel and services (Note 5) 1,200
- ------------------------------------------------------------------------
Custodian and recordkeeper fees 14,300
- ------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 5) 1,000
- ------------------------------------------------------------------------
Fund share registration fees 1,250
- ------------------------------------------------------------------------
Legal fees 1,250
- ------------------------------------------------------------------------
Printing and postage 1,250
- ------------------------------------------------------------------------
Miscellaneous 1,250
- ------------------------------------------------------------------------ -------
Total expenses 32,258
- ------------------------------------------------------------------------
Deduct--
- --------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $10,758
- --------------------------------------------------------------
Reimbursement of other operating expenses (Note 5) 21,500 32,258
- -------------------------------------------------------------- ------- -------
Net expenses --
- ----------------------------------------------------------------------------------- ----------
Net investment income 109,550
- ----------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (12,168)
- -----------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 36,110
- ----------------------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 23,942
- ----------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $ 133,492
- ----------------------------------------------------------------------------------- ----------
</TABLE>
* For the period from October 18, 1993 (date of initial public investment) to
January 31, 1994.
** Net of interest expense of $322 (Note 2E).
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1994*
(UNAUDITED)
------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 109,550
- -------------------------------------------------------------------------
Net realized gain (loss) on investments ($12,168 net loss as computed for
federal income tax purposes) (12,168)
- -------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 36,110
- ------------------------------------------------------------------------- ---------------
Change in net assets resulting from operations 133,492
- ------------------------------------------------------------------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (109,550)
- ------------------------------------------------------------------------- ---------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- -------------------------------------------------------------------------
Net proceeds from sale of shares 10,250,500
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 843
- -------------------------------------------------------------------------
Cost of shares redeemed (1,257,313)
- ------------------------------------------------------------------------- ---------------
Change in net assets from Fund share transactions 8,994,030
- ------------------------------------------------------------------------- ---------------
Change in net assets
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------- ---------------
End of period $ 9,017,972
- ------------------------------------------------------------------------- ---------------
</TABLE>
* For the period from October 18, 1993 (date of initial public investment) to
January 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Trust for Financial Institutions (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company with three portfolios. The financial statements included
herein are only those of Government Qualifying Liquidity Fund (the "Fund"). The
financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held.
Effective October 14, 1993, the Fund established two classes of shares
("Institutional Shares" and "Institutional Service Shares"). Institutional
Service Shares are identical in all respects to Institutional Shares except that
Institutional Service Shares are sold pursuant to a distribution plan ("the
Plan") adopted in accordance with Investment Company Act Rule 12b-1. As of
January 31, 1994, only the Institutional Shares were offered.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--U.S. government obligations are valued at the mean between the
over-the-counter bid and asked prices as furnished by an independent pricing service.
Short-term obligations are valued at the mean between bid and asked prices as furnished
by an independent pricing service; however, such issues with maturities of sixty days or
less are valued at amortized cost, which approximates market value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry System or to
have segregated within the custodian bank's vault, all securities held as collateral in
support of repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's underlying securities to ensure the existence of a proper level of
collateral.
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 Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
</TABLE>
GOVERNMENT QUALIFYING LIQUIDITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
C. INCOME--Interest income is recorded on the accrual basis. Interest income includes
interest and discount earned (net of premium) on short-term obligations, and interest
earned on all other debt securities including discount (net of premium) and original
issue discount as required by the Internal Revenue Code, as amended.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Internal
Revenue Code, as amended, applicable to investment companies and to distribute to
shareholders each year all of its taxable income, including any net realized gain on
investments. Accordingly, no provision for federal income tax is necessary.
E. DOLLAR ROLL TRANSACTIONS--The Fund enters into dollar roll transactions, with respect to
mortgage securities issued by GNMA, FNMA, and FHLMC, in which the Fund sells mortgage
securities to financial institutions and simultaneously agrees to repurchase
substantially similar (same type, coupon, and maturity) securities at a later date at an
agreed upon price. During the period between the sale and repurchase, the Fund forgoes
principal and interest paid on the mortgage securities sold. The Fund is compensated by
the interest earned on the cash proceeds of the initial sale and any additional fee
income received on the sale.
F. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. To the extent the Fund engages in such transactions, it
will do so for the purpose of acquiring portfolio securities consistent with its
investment objective and policies and not for the purpose of investment leverage. The
Fund will record a when-issued security and the related liability on the trade date.
Until the securities are received and paid for, the Fund will maintain 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.
G. OTHER--Investment transactions are accounted for on the date of the transaction.
</TABLE>
(3) DIVIDENDS
The Fund computes its net income daily and, immediately prior to the calculation
of its net asset value at the close of business, declares and records dividends
to shareholders of record with respect to shares for which payment in federal
funds has been received. Payment of dividends is made monthly in cash, or in
additional shares at the net asset value on the payable date. Capital gains
realized by the Fund are distributed at least once every twelve months and are
recorded on the ex-dividend date.
GOVERNMENT QUALIFYING LIQUIDITY FUND
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
INSTITUTIONAL SHARES JANUARY 31, 1994*
- ------------------------------------------------------------------------- ------------------
<S> <C>
Shares outstanding, beginning of period --
- -------------------------------------------------------------------------
Shares sold 1,035,786
- -------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 86
- -------------------------------------------------------------------------
Shares redeemed (127,517)
--------
- -------------------------------------------------------------------------
Shares outstanding, end of period 908,355
--------
- -------------------------------------------------------------------------
</TABLE>
* For the period from October 18, 1993 (date of initial public investment) to
January 31, 1994.
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Federated Management, 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 has voluntarily agreed to waive its
fee and reimburse the Fund a portion of their annual operating expenses. The
Adviser can terminate this voluntary waiver and reimbursement at any time at its
sole discretion. For the period from October 18, 1993 (date of initial public
investment) to January 31, 1994, the Adviser earned a fee of $10,758 all of
which was voluntarily waived. In addition, the Adviser voluntarily reimbursed
$21,500 of the Fund's normal operating expenses.
Organizational expenses and start-up administrative service expenses incurred by
the Fund will be borne initially by the Adviser and are estimated at $34,100 and
$43,800, respectively. The Fund has agreed to reimburse the Adviser for the
organizational expenses and start-up administrative expenses initially borne by
the Adviser during the five year period following October 14, 1993 (date the
Trust's portfolio first became effective).
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Trust will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Trust, to finance activities intended to result in the sale of the Fund's
Institutional Service Shares. The Plan provides that the Fund may incur
distribution expenses up to .25 of 1% of the average daily net assets of the
Institutional Service Shares, annually, to compensate FSC.
Administrative personnel and services were provided at approximate cost by
Federated Administrative Services, Inc. Effective March 1, 1994, Federated
Administrative Services, ("FAS") will provide administrative personnel and
services at an annual rate of 0.15 of 1% on the first $250 million of average
aggregate net assets of the total Federated Funds; 0.125 of 1% on the next $250
million; 0.10 of 1% on the
GOVERNMENT QUALIFYING LIQUIDITY FUND
- --------------------------------------------------------------------------------
next $250 million; and 0.075 of 1% on average aggregate net assets in excess of
$750 million. The administrative fee received during any fiscal year shall be at
least $125,000 per portfolio and $30,000 per each additional class of shares.
Certain of the Officers and Directors of the Fund are Officers and Directors of
the above corporations.
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term obligations) for the
period ended January 31, 1994, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
PURCHASES $9,999,173
- -------------------------------------------------------------------------------- ----------
SALES $1,079,064
- -------------------------------------------------------------------------------- ----------
</TABLE>
GOVERNMENT QUALIFYING LIQUIDITY FUND
(A PORTFOLIO OF TRUST FOR FINANCIAL INSTITUTIONS)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional Shares offered by this prospectus represent interests in a
diversified portfolio of securities of Government Qualifying Liquidity Fund (the
"Fund"), a portfolio of Trust for Financial Institutions (the "Trust"). The
Trust is an open-end management investment company (a mutual fund).
The investment objective of the Fund is to provide current income. The Fund
invests primarily in U.S. government securities and exclusively in securities
that qualify as liquid assets under Section 566.l(g) [12 C.F.R. sec. 566.1(g)]
of the federal regulations applicable to federal savings associations. Pursuant
to current interpretation by the Office of the Comptroller of the Currency, the
Fund will also serve as an appropriate vehicle for a national bank as an
investment for its own account. Institutional Shares are sold at net asset
value.
The Fund's investors are limited to "depository institutions" as that term is
defined in Regulation D [12 C.F.R. Part 204] of the Board of Governors of the
Federal Reserve System.
The shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured by the
Federal Deposit Insurance Corporation or any other government agency.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for
Institutional Shares and Institutional Service Shares dated October 15, 1993,
with the Securities and Exchange Commission. The information contained in the
Combined Statement of Additional Information is incorporated by reference in
this prospectus. You may request a copy of the Combined Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated October 15, 1993
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
INVESTMENT INFORMATION 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Mortgage-Related Securities 3
Collateralized Mortgage
Obligations ("CMO's") 4
Real Estate Mortgage Investment
Conduits ("REMICs") 4
Types of Credit Enhancement 4
Dollar Roll Transactions 4
Repurchase Agreements 5
Reverse Repurchase Agreements 5
Restricted and Illiquid Securities 5
When-Issued and Delayed
Delivery Transactions 5
Portfolio Turnover 6
Lending of Portfolio Securities 6
Investment Limitations 6
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Board of Trustees 7
Investment Adviser 7
Advisory Fees 7
Adviser's Background 7
Distribution of Institutional Shares 8
Administration of the Fund 8
Administrative Services 8
Custodian, Transfer Agent, and
Dividend Disbursing Agent 8
Legal Counsel 8
Independent Auditors 8
Expenses of the Fund and
Institutional Shares 8
NET ASSET VALUE 8
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SHARES 9
- ------------------------------------------------------
Share Purchases 9
By Wire 9
By Mail 9
Minimum Investment Required 9
What Shares Cost 9
Certificates and Confirmations 9
Dividends 10
Capital Gains 10
REDEEMING INSTITUTIONAL SHARES 10
- ------------------------------------------------------
Telephone Redemption 10
Written Requests 10
Signatures 10
Receiving Payment 11
Redemption Before Purchase
Instruments Clear 11
Accounts With Low Balances 11
SHAREHOLDER INFORMATION 11
- ------------------------------------------------------
Voting Rights 11
Massachusetts Partnership Law 12
TAX INFORMATION 12
- ------------------------------------------------------
Federal Income Tax 12
Pennsylvania Corporate and Personal
Property Taxes 12
PERFORMANCE INFORMATION 12
- ------------------------------------------------------
OTHER CLASSES OF SHARES 13
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)............................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............................................... None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds as applicable).............................. None
Redemption Fee (as a percentage of amount redeemed, if applicable).................. None
Exchange Fee........................................................................ None
ANNUAL INSTITUTIONAL SHARES OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver)(1).................................................... 0.09%
12b-1 Fee........................................................................... None
Other Expenses...................................................................... 0.31%
Total Institutional Shares Operating Expenses(2)............................... 0.40%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can terminate
this voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.50%.
(2) The Total Institutional Shares Operating Expenses are estimated to be 0.81%
absent the anticipated voluntary waiver of a portion of the management fee.
* Total Operating Expenses are estimated based on average expenses expected to
be incurred during the period ending March 31, 1994. During the course of this
period, expenses may be more or less than the average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE INSTITUTIONAL SHARES OF THE
FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF
THE VARIOUS COSTS AND EXPENSES, SEE " TRUST INFORMATION" AND "INVESTING IN
INSTITUTIONAL SHARES." Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
------
<S> <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. As noted
in the table above, the Fund charges no redemption fees for Institutional
Shares................................................................... $4 $13
</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. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING MARCH 31,
1994.
The information set forth in the foregoing table and example relates only to
Institutional Shares of the Fund. The Fund also offers another class of shares
called Institutional Service Shares. Institutional Shares and Institutional
Service Shares are subject to certain of the same expenses; however
Institutional Service Shares are subject to a 12b-1 fee of up to 0.25%. See
"Other Classes of Shares."
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated May 28, 1993. The Declaration of Trust permits the Trust to offer
separate series of shares of beneficial interest representing interest in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Trustees
have established two classes of shares of the Fund, known as Institutional
Shares and Institutional Service Shares. This prospectus relates only to
Institutional Shares.
Institutional Shares ("Shares") of the Fund are designed to provide financial
institutions a convenient means of accumulating an interest in a professionally
managed, diversified portfolio of U.S. government securities that qualifies as a
liquid investment under regulations applicable to federal savings associations.
A minimum initial investment of $25,000 over a 90-day period is required.
Shares are currently sold and redeemed at net asset value without a sales charge
imposed by the Fund.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income. Although
certain portfolio instruments held by the Fund are collateralized by specific
assets, the Fund's shares themselves are not secured. 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. The
investment objective and the policies and limitations described below cannot be
changed without approval of shareholders.
INVESTMENT POLICIES
The Fund intends to qualify as an appropriate investment vehicle for federal
savings associations seeking to comply with the liquidity standards applicable
to these institutions. In this regard, the Fund shall limit its acquisition of
portfolio securities to those which qualify as "liquid assets" under Section
566.1(g) [12 C.F.R. sec. 566.1(g)] of the federal regulations applicable to
federal savings associations ["Section 566.1(g)"]. The Fund also complies with
the requirements of Circular 220, issued by the Office of the Comptroller of the
Currency, to provide national banks with an appropriate source of portfolio
liquidity through a mutual fund investment.
ACCEPTABLE INVESTMENTS. Under normal circumstances, at the time of purchase, at
least 65% of the Fund's total assets will be invested in securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities. The Fund
invests only in securities that qualify as liquid assets under Section 566.1(g).
These securities currently include, but are not limited to:
- direct obligations of the United States, such as U.S. Treasury securities,
maturing in five years or less;
- obligations of U.S. Government agencies or instrumentalities that mature
in five years or less, such as: Federal Home Loan Banks, Federal National
Mortgage Association ("FNMA"), Government National Mortgage Association
("GNMA"), Banks for Cooperatives, Farm Credit Banks, Export-Import Bank of
the United States, Commodity Credit Corporation, Federal Financing Bank,
Student Loan Marketing Association, Federal Home Loan Mortgage Corporation
("FHLMC"), or National Credit Union Administration;
- time deposits in a Federal Home Loan Bank; and
- savings accounts, including loans of unsecured day(s) funds to an insured
financial institution (i.e., Federal funds or similar unsecured loans)
that qualify under Section 566.1(g) and, in the case of negotiable savings
accounts, will mature in one year or less.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association participation
certificates, are backed by the full faith and credit of the U.S. Treasury. No
assurance can be given that the U.S. government will provide financial support
to other agencies or instrumentalities, since it is not obligated to do so.
These instrumentalities are supported by:
- the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
- discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
- the credit of the agency or instrumentality.
All privately-issued securities purchased by the Fund are rated in one of the
two highest rating categories by a nationally recognized statistical rating
organization ("NRSRO").
Downgraded securities will be evaluated on a case-by-case basis by the adviser.
The adviser will determine whether or not the security continues to be an
acceptable investment. If not, the security will be sold.
The Fund may also enter into repurchase agreements secured by those obligations
of the U.S. government and bank instruments which, but for their maturities,
qualify as liquid assets.
MORTGAGE-RELATED SECURITIES. The Fund invests in mortgage-related securities
that are issued or guaranteed by the U.S. government, its agencies or
instrumentalities, and which qualify as liquid assets under Section 566.1(g).
The Fund may also invest in privately-issued mortgage-related securities, rated
at the time of purchase, in one of the two highest rating categories by an
NRSRO.
Mortgage-related securities may be classified into the following principal
categories, according to the issuer or guarantor:
- Governmental mortgage-related securities that are backed by the full faith
and credit of the U.S. Government. GNMA, the principal U.S. Government
guarantor of such securities, is a wholly-owned U.S. Government
corporation within the Department of Housing and Urban Development. GNMA
is authorized to guarantee, with the full faith and credit of the United
States, the timely payment of principal and interest on securities issued
by approved institutions and backed by pools of FHA-insured or
VA-guaranteed mortgages.
- Government-related mortgage-related securities that are not backed by the
full faith and credit of the U.S. Government. Issuers include FNMA and
FHLMC. FNMA is a U.S. Government-sponsored corporation owned entirely by
private stockholders. Pass-through securities issued by FNMA are
guaranteed as to timely payment of principal and interest by FNMA. FHLMC
issues mortgage-related securities representing interests in residential
mortgage loans pooled by it. FHLMC is a U.S. Government-sponsored
corporation and guarantees the timely payment of interest and timely or
ultimate payment of principal.
- Private mortgage-related securities that represent interests in, or are
collateralized by, pools consisting principally of residential mortgage
loans created by non-government issuers. These securities generally offer
a higher rate of interest than governmental and government-related
mortgage-related securities because there are no direct government
guarantees of payment as in the former securities, although certain credit
enhancements may exist. Securities issued by certain private organizations
may not be readily marketable. Private mortgage-related securities
purchased by the Fund will be rated in one of the two highest rating
categories by at least one NRSRO.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are bonds issued by
single-purpose, stand-alone finance subsidiaries or trusts of financial
institutions, government agencies, investment bankers, or companies related to
the construction industry. CMOs purchased by the Fund may be:
- collateralized by pools of mortgages in which each mortgage is guaranteed
as to payment of principal and interest by an agency or instrumentality of
the U.S. government;
- collateralized by pools of mortgages in which payment of principal and
interest is guaranteed by the issuer and such guarantee is collateralized
by U.S. government securities; or
- securities in which the proceeds of the issuance are invested in mortgage
securities and payment of the principal and interest are supported by the
credit of an agency or instrumentality of the U.S. government.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are offerings of
multiple class real estate mortgage-backed securities which qualify and elect
treatment as such under provisions of the Internal Revenue Code. Issuers of
REMICs may take several forms, such as trusts, partnerships, corporations,
associations, or a segregated pool of mortgages. Once REMIC status is elected
and obtained, the entity is not subject to federal income taxation. Instead,
income is passed through the entity and is taxed to the person or persons who
hold interests in the REMIC. A REMIC interest must consist of one or more
classes of "regular interests," some of which may offer adjustable rates and a
single class of "residual interests" (in which the Fund does not invest). To
qualify as a REMIC, substantially all the assets of the entity must be in assets
directly or indirectly secured principally by real property.
TYPES OF CREDIT ENHANCEMENT. Mortgage-backed securities are often backed by a
pool of assets representing the obligations of a number of different parties. To
lessen the effect of failures by obligors on underlying assets to make payments,
those securities may contain elements of credit support, which fall into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from default ensures ultimate payment of the obligations on at least a
portion of the assets in the pool. This protection may be provided through
guarantees, insurance policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the transaction
or through a combination of such approaches. The degree of credit support
provided for each issue is generally based on historical information respecting
the level of credit risk associated with the underlying assets. Delinquencies or
losses in excess of those anticipated could adversely affect the return on an
investment in a security. The Fund will not pay any additional fees for credit
support, although the existence of credit support may increase the price of a
security.
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and manage
prepayment risks, the Fund may engage in dollar roll transactions with respect
to mortgage securities issued by GNMA FNMA and FHLMC. In a dollar roll
transaction, the Fund sells a mortgage security to a financial institution, such
as a bank or broker/dealer, and simultaneously agrees to repurchase a
substantially similar (same type, coupon, and maturity) security from the
institution at a later date at an agreed upon price. The mortgage securities
that are repurchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools of mortgages with different
prepayment histories. During the period between the sale and repurchase, the
Fund will not be entitled to receive interest and principal payments on the
securities sold. Proceeds of the sale will be invested in short-term
instruments, and the income from these investments,
together with any additional fee income received on the sale, will generate
income for the Fund exceeding the yield. When the Fund enters into a dollar roll
transaction, liquid assets of the Fund, in a dollar amount sufficient to make
payment for the obligations to be repurchased, are segregated at the trade date.
These assets are marked to market daily and are maintained until the transaction
is settled.
REPURCHASE AGREEMENTS. The U.S. government 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 U.S. government securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. The Fund or its custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are deemed by the Fund's adviser to be
creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse repurchase
agreements. This transaction is similar to borrowing cash. In a reverse
repurchase agreement the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in return
for a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed upon date.
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 at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
During the period any reverse repurchase agreements are outstanding, but only to
the extent necessary to assure completion of the reverse repurchase agreements,
the Fund will restrict the purchase of portfolio instruments to money market
instruments maturing on or before the expiration date of the reverse repurchase
agreements. This policy may not be changed without the approval of the Fund's
shareholders.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 15% of its net
assets in illiquid securities, which may include restricted securities.
Restricted securities are any securities in which the Fund may otherwise invest
pursuant to its investment objective but which are subject to a restriction on
resale under federal securities laws. To the extent these securities are deemed
to be illiquid, the Fund will limit its purchases, together with other
securities considered to be illiquid, to 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. As a matter of investment policy
which can be changed without shareholder approval, the Fund may purchase U.S.
government securities on a when-issued or delayed delivery basis. In when-issued
and delayed delivery transactions, the Fund relies on the seller to complete the
transaction. The seller's failure to complete the transaction may cause the Fund
to miss a price or yield considered to be advantageous.
PORTFOLIO TURNOVER
While the Fund does not intend to engage in substantial short-term trading, from
time to time it may sell portfolio securities for investment reasons without
considering how long they have been held. For example, the Fund would do this:
- to take advantage of short-term differentials in yields or market values;
- to take advantage of new investment opportunities;
- to respond to changes in the creditworthiness of an issuer; or
- to try to preserve gains or limit losses.
Any such trading would increase the Fund's portfolio turnover and its
transaction costs. However, the Fund will not attempt to set or meet any
arbitrary turnover rate since turnover is incidental to transactions considered
necessary to achieve the Fund's investment objective.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend its portfolio
securities to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will limit the amount of portfolio securities it may lend
to not more than one-third of its total assets. The Fund will only enter into
loan arrangements with broker/ dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines established
by the Trustees and will receive collateral equal to at least 100% of the value
of the securities loaned. This policy may not be changed without the approval of
the Fund's shareholders.
INVESTMENT LIMITATIONS
The Fund will not:
- lend any of its assets except portfolio securities up to one-third of the
value of its total assets;
- sell securities short except, under strict limitations, the Fund may
maintain open short positions so long as not more than 10% of the value of
its net assets is held as collateral for those positions;
- 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 restricted securities which the Fund may purchase pursuant to its
investment objective, policies, and limitations; or
- invest more than 5% of the value of its total assets in securities of one
issuer (except repurchase agreements and U.S. government obligations).
The above limitations 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 borrow money directly or through reverse repurchase agreements
or pledge securities except, under certain circumstances, the Fund may borrow up
to one-third of the value of its total assets and pledge up to 15% of the value
of its total assets to secure such borrowings.
FUND INFORMATION
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MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Fund's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser (the "Adviser"), subject to direction
by the Trustees. The Adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The 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 waive a portion of its advisory fee, up to the amount of its
advisory fee, to reimburse the Fund for operating expenses in excess of
limitations imposed by certain states. The Adviser may further voluntarily
waive a portion of its fee or reimburse the Fund for certain operating
expenses. The Adviser can terminate such waiver or reimbursement policy at
any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to
a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956 as
Federated Investors, Inc., develops and manages mutual funds primarily for
the financial industry. Federated Investors' track record of competitive
performance and its disciplined, risk averse investment philosophy serve
approximately 3,500 client institutions nationwide. Through these same
client institutions, individual shareholders also have access to this same
level of investment expertise.
Kathleen M. Foody-Malus and Susan M. Nason are the Fund's co-portfolio
managers. Ms. Foody-Malus has been the Fund's co-portfolio manager since its
inception in 1993. She joined Federated Investors in 1983 and has been a
Vice President of the Fund's investment adviser since 1993. Ms. Foody-Malus
served as an Assistant Vice President of the investment adviser from 1990
until 1992, and from 1986 until 1989 she acted as an investment analyst. Ms.
Foody-Malus received her M.B.A. in Accounting/Finance from the University of
Pittsburgh.
Susan M. Nason has been the Fund's co-portfolio manager since its inception
in 1993. Ms. Nason joined Federated Investors in 1987 and has been a Vice
President of the Fund's investment adviser since 1993. Ms. Nason served as
an Assistant Vice President of the investment adviser from 1990 until 1992,
and from 1987 until 1990 she acted as an investment analyst. Ms. Nason is a
Chartered Financial Analyst and received her M.B.A. in Finance from Carnegie
Mellon University.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for Institutional
Shares. 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Inc., a subsidiary
of Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc. provides these at approximate cost.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT. State Street Bank and
Trust Company, Boston, Massachusetts, is custodian for the securities and cash
of the Fund, transfer agent for the shares of the Fund, and dividend disbursing
agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania and Dickstein, Shapiro and Morin, Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche, Pittsburgh, Pennsylvania .
EXPENSES OF THE FUND AND INSTITUTIONAL SHARES
Holders of Shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; the cost of meetings of Trustees;
legal fees of the Trust; association membership dues; and such non-recurring and
extraordinary items as may arise.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise.
At present, no expenses are allocated to the Shares as a class. However, the
Board of Trustees reserves the right to allocate certain other expenses to
holders of Shares as it deems appropriate ("Class Expenses"). In any case, Class
Expenses would be limited to: transfer agent fees as identified by the transfer
agent as attributable to holders of Shares; printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders; registration fees paid to the
Securities and Exchange Commission and registration fees paid to state
securities commissions; expenses related to administrative personnel and
services as required to support holders of Shares; legal fees relating solely to
Shares; and Trustees' fees incurred as a result of issues relating solely to
Shares.
NET ASSET VALUE
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The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Shares in the market value of all
securities and other assets of the Fund, subtracting the interest of the Shares
in the liabilities of the Fund and those attributable to Shares, and dividing
the remainder by the total number of Shares outstanding. The net asset value for
Shares may exceed that of
Institutional Service Shares due to the variance in daily net income realized by
each class. Such variance will reflect only accrued net income to which the
shareholders of a particular class are entitled.
INVESTING IN INSTITUTIONAL SHARES
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SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open for
business. Shares may be purchased either by wire or mail.
To purchase Shares, open an account by calling Federated Securities Corp. at
1-800-245-4270. Information needed to establish an account will be taken over
the telephone. The Fund reserves the right to reject any purchase request.
BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Boston time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Boston
time) on the next business day following the order. Federal funds should be
wired as follows: State Street Bank and Trust Company, Boston, Massachusetts;
Attention: EDGEWIRE; For Credit to: Government Qualifying Liquidity
Fund--Institutional Shares; Fund Number (this number can be found on the account
statement or by contacting the Fund); Group Number or Wire Order Number; Nominee
or Institution Name; ABA Number 011000028.
BY MAIL. To purchase Shares by mail, send a check made payable to Government
Qualifying Liquidity Fund--Institutional Shares to the Fund's transfer agent,
State Street Bank and Trust Company, P.O. Box 8602, Boston, Massachusetts
02266-8602. Orders by mail are considered received after payment by check is
converted by State Street Bank into federal funds. This is normally the next
business day after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $25,000. However, an account may be
opened with a smaller amount as long as the $25,000 minimum is reached within 90
days. An institutional investor's minimum investment will be calculated by
combining all accounts it maintains with the Fund. Accounts established through
a non-affiliated bank or broker may be subject to a smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.
The net asset value is determined at 4:00 p.m. (Boston time), Monday through
Friday, except on (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities such that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, State Street Bank maintains a share account for
each shareholder. Share certificates are not issued unless requested by
contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during the
month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are declared just prior
to determining net asset value. If an order for Shares is placed on the
preceding business day, Shares purchased by wire begin earning dividends on the
business day wire payment is received by State Street Bank. If the order for
Shares and payment by wire are received on the same day, Shares begin earning
dividends on the next business day. Shares purchased by check begin earning
dividends on the business day after the check is converted by State Street Bank
into federal funds. Dividends are automatically reinvested on payment dates in
additional Shares unless cash payments are requested by contacting the Fund.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING INSTITUTIONAL SHARES
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The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Fund before 4:00 p.m.
(Boston time). Proceeds will be sent to the shareholder's account at a domestic
commercial bank that is a member of the Federal Reserve System within seven days
after a proper request for redemption has been received, provided the transfer
agent has received the purchase price for the shares from the shareholder. If at
any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified. Telephone
redemption instructions may be recorded.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as written requests, should be considered. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name, his account number,
and the share or dollar amount requested. If share certificates have been
issued, they must be properly endorsed and should be sent by registered or
certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member firm of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. 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, provided the transfer agent has received the
purchase price for the Shares from the shareholder.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When Shares are purchased by check, the proceeds from the redemption of those
Shares are not available until State Street Bank is reasonably certain that the
purchase check has cleared, which could take up to ten calendar days. It is the
Fund's policy to allow up to 10 calendar days from the date such Shares were
purchased for collection.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 because
of changes in the Fund's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
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VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that in matters
affecting only a particular Fund or class only shares of that Fund or class are
entitled to vote. As a Massachusetts business trust, the Trust is not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust's or the Fund's operation and for the election
of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of 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 entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect the
shareholders of the Fund, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of its shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument that the Trust or its
Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them from its assets.
TAX INFORMATION
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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.
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 Fund:
- the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
- Fund shares may be subject to personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania to the extent that
the portfolio securities in the Fund would be subject to such taxes if
owned directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
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From time to time the Fund advertises its total return and yield for Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares of the Fund after reinvesting all income and
capital gain distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The yield of Shares of the Fund is calculated by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by Shares over a thirty-day period by the maximum offering price per share of
Shares on the last day of the period. This number is then annualized using semi-
annual compounding. The yield does not necessarily reflect income actually
earned by Shares and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The Fund is sold without any sales load or other similar non-recurring charges.
Total return and yield will be calculated separately for Institutional Shares
and Institutional Service Shares. Because Institutional Service Shares are
subject to 12b-1 fees, the total return and yield for Institutional Shares, for
the same period, will exceed that of Institutional Service Shares.
From time to time the Fund may advertise its performance using certain reporting
services and/or compare its performance to certain indices.
OTHER CLASSES OF SHARES
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Institutional Service Shares are sold primarily to financial institutions that
utilizes the services of brokers or dealers. Institutional Service Shares are
sold at net asset value. Investments in Institutional Service Shares are subject
to a minimum initial investment of $25,000.
Institutional Service Shares are distributed pursuant to a 12b-1 Plan adopted by
the Trust whereby the distributor is paid a fee of up to .25 of 1% of the
Institutional Service Shares' average daily net assets.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation depending upon which class of shares
of the Fund is sold.
The amount of dividends payable to Institutional Shares will exceed that of
Institutional Service Shares by the difference between class expenses and
distribution expenses borne by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Government Qualifying Liquidity Fund Federated Investors Tower
Institutional Shares Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian, Transfer Agent, and Dividend Disbursing Agent
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche 2500 One PPG Place
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
</TABLE>
GOVERNMENT QUALIFYING
LIQUIDITY FUND
INSTITUTIONAL SHARES
PROSPECTUS
An Open-End, Diversified
Management Investment Company
October 15, 1993
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3070102A-IS (10/93)
- --------------------------------------------------------------------------------
GOVERNMENT
- --------------------------------------------------------------------------------
QUALIFYING
- --------------------------------------------------------------------------------
LIQUIDITY FUND
- --------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
(A Portfolio of Trust for Financial Institutions)
SUPPLEMENT TO PROSPECTUS
DATED OCTOBER 15, 1993
FEDERATED SECURITIES CORP.
(LOGO)
Distributor
4010710 A-ISS (3/94)
March 31, 1994
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
A. Please insert the following "Financial Highlights--Institutional Service
Shares" table as page 2 of the prospectus, following the "Summary of Fund
Expenses" table and before the section entitled "General Information." In
addition, please add the heading "Financial Highlights--Institutional Service
Shares" to the Table of Contents on page I after the heading "Summary of Fund
Expenses."
GOVERNMENT QUALIFYING LIQUIDITY FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Institutional Service Shares were not being offered as of January 31, 1994.
Accordingly, there are no Financial Highlights for such Shares. The Financial
Highlights presented below are historical information for Institutional Shares.
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1994*
-------------------
<S> <C>
- ------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $9.96
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.14
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.03)
- ----------------------------------------------------------------------- ------------------
Total from investment operations 0.11
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.14)
- ----------------------------------------------------------------------- ------------------
NET ASSET VALUE, END OF PERIOD $9.93
- ----------------------------------------------------------------------- ------------------
TOTAL RETURN** 1.15%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 0.00%(b)
- ------------------------------------------------------------------------
Net investment income 5.09%(b)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (a) 1.50%(b)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 9,018
- ------------------------------------------------------------------------
Portfolio turnover rate 15%
- ------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1993 (start of
performance) to January 31, 1994 (unaudited).
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
B. Please replace the sub-section entitled "Administrative Services on page 9 of
the prospectus with the following.
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, which
relates to the average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors ("Federated Funds"), as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET
MAXIMUM ADMINISTRATIVE FEE ASSETS OF THE FEDERATED FUNDS
- --------------------------------------------- ---------------------------------------------
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
C. Please insert the following at the end of the first paragraph under the
heading "Voting Rights" on page 13 of the prospectus.
As of March 4, 1994, Midland Savings Bank FSB, Des Moines, Iowa, owned
approximately 506,585 shares (83.3%) of the Institutional Shares of the Fund,
and therefore, may for certain purposes, be deemed to control the Fund and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
D. Please insert the following "Financial Highlights--Institutional Shares"
table as page 16 of the prospectus immediately following the section entitled
"Other Classes of Shares." In addition, please add the heading "Financial
Highlights--Institutional Shares" to the Table of Contents on page I after
the heading "Other Classes of Shares."
GOVERNMENT QUALIFYING LIQUIDITY FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1994*
-------------------
<S> <C>
- ------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $9.96
- ------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
Net investment income 0.14
- ------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.03)
- ------------------------------------------------------------------------ ------------------
Total from investment operations 0.11
- ------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.14)
- ------------------------------------------------------------------------ ------------------
NET ASSET VALUE, END OF PERIOD $9.93
- ------------------------------------------------------------------------ ------------------
TOTAL RETURN** 1.15%
- ------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
Expenses 0.00%(b)
- ------------------------------------------------------------------------
Net investment income 5.09%(b)
- ------------------------------------------------------------------------
Expense waiver/reimbursement (a) 1.50%(b)
- ------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 9,018
- ------------------------------------------------------------------------
Portfolio turnover rate 15%
- ------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1993 (start of
performance) to January 31, 1994 (unaudited).
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 5).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
E. Please insert the following financial statements after the "Financial
Highlights--Institutional Shares" on page 15 of the prospectus. In addition,
please add the heading "Financial Statements" to the Table of Contents on
page I, immediately before the heading "Addresses."
GOVERNMENT QUALIFYING LIQUIDITY FUND
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- -------------------------------------------------------------------- -----------
<C> <S> <C>
INTERMEDIATE-TERM GOVERNMENT OBLIGATIONS--99.2%
- ----------------------------------------------------------------------------------
$5,844,922 Federal Home Loan Mortgage Corp., 5 Year Balloon, 5.00%, 10/1/98 $ 5,879,583*
--------------------------------------------------------------------
3,015,999 Federal Home Loan Mortgage Corp., 5 Year Balloon, 5.50%, 12/1/98 3,064,044
-------------------------------------------------------------------- -----------
TOTAL INTERMEDIATE-TERM GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $8,907,517) 8,943,627
-------------------------------------------------------------------- -----------
**REPURCHASE AGREEMENT--12.0%
- ----------------------------------------------------------------------------------
1,085,000 J.P. Morgan Securities, Inc., 3.19%, dated 1/31/94, due 2/1/94
(at amortized cost) (Note 2B) 1,085,000
-------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $9,992,517) $10,028,627+
-------------------------------------------------------------------- -----------
</TABLE>
* Includes securities with a market value of $1,005,930 subject to Dollar Roll
transactions.
** Repurchase agreement is fully collateralized by U.S. government and/or agency
obligations based on market prices at the date of the portfolio. The
investment in repurchase agreement is through participation in a joint
account with other Federated funds.
+ The cost of investments for federal tax purposes amounts to $9,992,517. The
net unrealized appreciation on a federal tax basis amounts to $36,110, which
is comprised of $39,200 appreciation and $3,090 depreciation at January 31,
1994.
Note: The categories of investments are shown as a percentage of net assets
($9,017,972) at January 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Investments in other securities (Note 2A) $8,943,627
- --------------------------------------------------------------------
Investments in repurchase agreement (Note 2B) 1,085,000
- -------------------------------------------------------------------- ----------
Total investments, at amortized cost and value
(identified and tax cost $9,992,517) $10,028,627
- ---------------------------------------------------------------------------------
Cash 529
- ---------------------------------------------------------------------------------
Interest receivable 34,107
- ---------------------------------------------------------------------------------
Receivable from Adviser (Note 5) 10,750
- --------------------------------------------------------------------------------- -----------
Total assets 10,074,013
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Payable for dollar roll transactions (Note 2E) 995,547
- --------------------------------------------------------------------
Dividends payable 39,001
- --------------------------------------------------------------------
Accrued expenses 21,493
- -------------------------------------------------------------------- ----------
Total liabilities 1,056,041
- --------------------------------------------------------------------------------- -----------
NET ASSETS for 908,355 shares of beneficial interest outstanding $ 9,017,972
- --------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid-in capital $ 8,994,030
- ---------------------------------------------------------------------------------
Unrealized appreciation of investments 36,110
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments (12,168)
- --------------------------------------------------------------------------------- -----------
Total $ 9,017,972
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share
($9,017,972 / 908,355 shares of beneficial interest outstanding) $9.93
- --------------------------------------------------------------------------------- -----
</TABLE>
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JANUARY 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest income (Note 2C) $109,550**
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------
Investment advisory fee (Note 5) $10,758
- ------------------------------------------------------------------------
Administrative personnel and services (Note 5) 1,200
- ------------------------------------------------------------------------
Custodian and recordkeeper fees 14,300
- ------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 5) 1,000
- ------------------------------------------------------------------------
Fund share registration fees 1,250
- ------------------------------------------------------------------------
Legal fees 1,250
- ------------------------------------------------------------------------
Printing and postage 1,250
- ------------------------------------------------------------------------
Miscellaneous 1,250
- ------------------------------------------------------------------------ -------
Total expenses 32,258
- ------------------------------------------------------------------------
Deduct--
- --------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $10,758
- --------------------------------------------------------------
Reimbursement of other operating expenses (Note 5) 21,500 32,258
- -------------------------------------------------------------- ------- -------
Net expenses --
- ----------------------------------------------------------------------------------- ----------
Net investment income 109,550
- ----------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (12,168)
- -----------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 36,110
- ----------------------------------------------------------------------------------- ----------
Net realized and unrealized gain on investments 23,942
- ----------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $ 133,492
- ----------------------------------------------------------------------------------- ----------
</TABLE>
* For the period from October 18, 1993 (date of initial public investment) to
January 31, 1994.
** Net of interest expense of $322 (Note 2E).
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31, 1994*
(UNAUDITED)
------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 109,550
- -------------------------------------------------------------------------
Net realized gain (loss) on investments ($12,168 net loss as computed for
federal income tax purposes) (12,168)
- -------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 36,110
- ------------------------------------------------------------------------- ---------------
Change in net assets resulting from operations 133,492
- ------------------------------------------------------------------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income (109,550)
- ------------------------------------------------------------------------- ---------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- -------------------------------------------------------------------------
Net proceeds from sale of shares 10,250,500
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 843
- -------------------------------------------------------------------------
Cost of shares redeemed (1,257,313)
- ------------------------------------------------------------------------- ---------------
Change in net assets from Fund share transactions 8,994,030
- ------------------------------------------------------------------------- ---------------
Change in net assets
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------- ---------------
End of period $ 9,017,972
- ------------------------------------------------------------------------- ---------------
</TABLE>
* For the period from October 18, 1993 (date of initial public investment) to
January 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Trust for Financial Institutions (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company with three portfolios. The financial statements included
herein are only those of Government Qualifying Liquidity Fund (the "Fund"). The
financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is limited
to the portfolio in which shares are held.
Effective October 14, 1993, the Fund established two classes of shares
("Institutional Shares" and "Institutional Service Shares"). Institutional
Service Shares are identical in all respects to Institutional Shares except that
Institutional Service Shares are sold pursuant to a distribution plan (the
"Plan") adopted in accordance with Investment Company Act Rule 12b-1. As of
January 31, 1994, only the Institutional Shares were offered.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--U.S. government obligations are valued at the mean between the
over-the-counter bid and asked prices as furnished by an independent pricing service.
Short-term obligations are valued at the mean between bid and asked prices as furnished
by an independent pricing service; however, such issues with maturities of sixty days or
less are valued at amortized cost, which approximates market value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book Entry System or to
have segregated within the custodian bank's vault, all securities held as collateral in
support of repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's underlying securities to ensure the existence of a proper level of
collateral.
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 Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
</TABLE>
GOVERNMENT QUALIFYING LIQUIDITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
C. INCOME--Interest income is recorded on the accrual basis. Interest income includes
interest and discount earned (net of premium) on short-term obligations, and interest
earned on all other debt securities including discount (net of premium) and original
issue discount as required by the Internal Revenue Code, as amended.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Internal
Revenue Code, as amended, applicable to investment companies and to distribute to
shareholders each year all of its taxable income, including any net realized gain on
investments. Accordingly, no provision for federal income tax is necessary.
E. DOLLAR ROLL TRANSACTIONS--The Fund enters into dollar roll transactions, with respect to
mortgage securities issued by GNMA, FNMA, and FHLMC, in which the Fund sells mortgage
securities to financial institutions and simultaneously agrees to repurchase
substantially similar (same type, coupon, and maturity) securities at a later date at an
agreed upon price. During the period between the sale and repurchase, the Fund forgoes
principal and interest paid on the mortgage securities sold. The Fund is compensated by
the interest earned on the cash proceeds of the initial sale and any additional fee
income received on the sale.
F. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. To the extent the Fund engages in such transactions, it
will do so for the purpose of acquiring portfolio securities consistent with its
investment objective and policies and not for the purpose of investment leverage. The
Fund will record a when-issued security and the related liability on the trade date.
Until the securities are received and paid for, the Fund will maintain 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.
G. OTHER--Investment transactions are accounted for on the date of the transaction.
</TABLE>
(3) DIVIDENDS
The Fund computes its net income daily and, immediately prior to the calculation
of its net asset value at the close of business, declares and records dividends
to shareholders of record with respect to shares for which payment in federal
funds has been received. Payment of dividends is made monthly in cash, or in
additional shares at the net asset value on the payable date. Capital gains
realized by the Fund are distributed at least once every twelve months and are
recorded on the ex-dividend date.
GOVERNMENT QUALIFYING LIQUIDITY FUND
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
INSTITUTIONAL SHARES JANUARY 31, 1994*
- ------------------------------------------------------------------------- ------------------
<S> <C>
Shares outstanding, beginning of period --
- -------------------------------------------------------------------------
Shares sold 1,035,786
- -------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 86
- -------------------------------------------------------------------------
Shares redeemed (127,517)
- ------------------------------------------------------------------------- ---------------
Shares outstanding, end of period 908,355
- ------------------------------------------------------------------------- ---------------
</TABLE>
* For the period from October 18, 1993 (date of initial public investment) to
January 31, 1994.
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Federated Management, 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 has voluntarily agreed to waive its
fee and reimburse the Fund a portion of their annual operating expenses. The
Adviser can terminate this voluntary waiver and reimbursement at any time at its
sole discretion. For the period from October 18, 1993 (date of initial public
investment) to January 31, 1994, the Adviser earned a fee of $10,758 all of
which was voluntarily waived. In addition, the Adviser voluntarily reimbursed
$21,500 of the Fund's normal operating expenses.
Organizational expenses and start-up administrative service expenses incurred by
the Fund will be borne initially by the Adviser and are estimated at $34,100 and
$43,800, respectively. The Fund has agreed to reimburse the Adviser for the
organizational expenses and start-up administrative expenses initially borne by
the Adviser during the five year period following October 14, 1993 (date the
Trust's portfolio first became effective).
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Trust will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Trust, to finance activities intended to result in the sale of the Fund's
Institutional Service Shares. The Plan provides that the Fund may incur
distribution expenses up to .25 of 1% of the average daily net assets of the
Institutional Service Shares, annually, to compensate FSC.
Administrative personnel and services were provided at approximate cost by
Federated Administrative Services, Inc. Effective March 1, 1994, Federated
Administrative Services, ("FAS") will provide administrative personnel and
services at an annual rate of 0.15 of 1% on the first $250 million of average
aggregate net assets of the total Federated Funds; 0.125 of 1% on the next $250
million; 0.10 of 1% on the
GOVERNMENT QUALIFYING LIQUIDITY FUND
- --------------------------------------------------------------------------------
next $250 million; and 0.075 of 1% on average aggregate net assets in excess of
$750 million. The administrative fee received during any fiscal year shall be at
least $125,000 per portfolio and $30,000 per each additional class of shares.
Certain of the Officers and Directors of the Fund are Officers and Directors of
the above corporations.
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term obligations) for the
period ended January 31, 1994, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
PURCHASES $9,999,173
- -------------------------------------------------------------------------------- ----------
SALES $1,079,064
- -------------------------------------------------------------------------------- ----------
</TABLE>
GOVERNMENT QUALIFYING LIQUIDITY FUND
(A PORTFOLIO OF TRUST FOR FINANCIAL INSTITUTIONS)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service Shares offered by this prospectus represent interests
in a diversified portfolio of securities of Government Qualifying Liquidity Fund
(the "Fund"), a portfolio of Trust for Financial Institutions (the "Trust"). The
Trust is an open-end management investment company (a mutual fund).
The investment objective of the Fund is to provide current income. The Fund
invests primarily in U.S. government securities and exclusively in securities
that qualify as liquid assets under Section 566.1(g) [12 C.F.R. sec. 566.1(g)]
of the federal regulations applicable to federal savings associations. Pursuant
to current interpretation by the Office of the Comptroller of the Currency, the
Fund will also serve as an appropriate vehicle for a national bank as an
investment for its own account. Institutional Service Shares are sold at net
asset value.
The Fund's investors are limited to "depository institutions" as that term is
defined in Regulation D [12 C.F.R. Part 204] of the Board of Governors of the
Federal Reserve System.
The shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board or any other
government agency.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Combined Statement of Additional Information for
Institutional Service Shares and Institutional Shares dated October 15, 1993,
with the Securities and Exchange Commission. The information contained in the
Combined Statement of Additional Information is incorporated by reference in
this prospectus. You may request a copy of the Combined Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated October 15, 1993
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
INVESTMENT INFORMATION 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Acceptable Investments 2
Mortgage-Related Securities 3
Collateralized Mortgage Obligations
("CMOs") 4
Real Estate Mortgage Investment
Conduits("REMICs") 4
Types of Credit Enhancement 4
Dollar Roll Transactions 5
Repurchase Agreements 5
Reverse Repurchase Agreements 5
Restricted and Illiquid Securities 6
When-Issued and Delayed
Delivery Transactions 6
Portfolio Turnover 6
Lending of Portfolio Securities 6
Investment Limitations 6
FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Board of Trustees 7
Investment Adviser 7
Advisory Fees 7
Adviser's Background 7
Distribution of Institutional
Service Shares 8
Distribution Plan 8
Administration of the Fund 9
Administrative Services 9
Custodian, Transfer Agent, and
Dividend Disbursing Agent 9
Legal Counsel 9
Independent Auditors 9
Expenses of the Fund and
Institutional Service Shares 9
NET ASSET VALUE 10
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SERVICE SHARES 10
- ------------------------------------------------------
Share Purchases 10
By Wire 10
By Mail 10
Minimum Investment Required 11
What Shares Cost 11
Subaccounting Services 11
Certificates and Confirmations 11
Dividends 11
Capital Gains 12
REDEEMING INSTITUTIONAL SERVICE SHARES 12
- ------------------------------------------------------
Telephone Redemption 12
Written Requests 12
Signatures 12
Receiving Payment 13
Redemption Before Purchase
Instruments Clear 13
Accounts with Low Balances 13
SHAREHOLDER INFORMATION 13
- ------------------------------------------------------
Voting Rights 13
Massachusetts Partnership Law 14
TAX INFORMATION 14
- ------------------------------------------------------
Federal Income Tax 14
Pennsylvania Corporate and
Personal Property Taxes 14
PERFORMANCE INFORMATION 15
- ------------------------------------------------------
OTHER CLASSES OF SHARES 15
- ------------------------------------------------------
ADDRESSES Inside Back Cover
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)...................................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)...................................................... None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds as applicable)..................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)......................... None
Exchange Fee............................................................................... None
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver)(1)........................................................... 0.09%
12b-1 Fee (after waiver)(2)................................................................ 0.10%
Other Expenses............................................................................. 0.31%
Total Institutional Service Shares Operating Expenses(3)............................... 0.50%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can terminate
this voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.50%.
(2) The maximum 12b-1 fee is 0.25%.
(3) The Total Institutional Service Shares Operating Expenses are estimated to
be 1.06% absent the anticipated voluntary waiver of a portion of the management
fee and a portion of the 12b-1 fee.
* Total Operating Expenses are estimated based on average expenses expected to
be incurred during the period ending March 31, 1994. During the course of this
period, expenses may be more or less than the average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE INSTITUTIONAL SERVICE
SHARES OF THE FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE
DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES, SEE " TRUST INFORMATION" AND
"INVESTING IN INSTITUTIONAL SERVICE SHARES." Wire-transferred redemptions of
less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
------
<S> <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. As noted in the table
above, the Fund charges no redemption fees for Institutional Service Shares..... $5 $16
</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. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING MARCH 31,
1994.
The information set forth in the foregoing table and example relates only to
Institutional Service Shares of the Fund. The Fund also offers another class of
shares called Institutional Shares. Institutional Service Shares and
Institutional Shares are subject to certain of the same expenses; however
Institutional Shares are not subject to a 12b-1 fee. See "Other Classes of
Shares."
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated May 28, 1993. The Declaration of Trust permits the Trust to offer
separate series of shares of beneficial interest representing interest in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Trustees
have established two classes of shares of the Fund, known as Institutional
Service Shares and Institutional Shares. This prospectus relates only to
Institutional Service Shares.
Institutional Service Shares ("Shares") of the Fund are designed primarily for
financial institutions as a convenient means of accumulating an interest in a
professionally managed, diversified portfolio of U.S. government securities that
qualifies as a liquid investment under regulations applicable to federal savings
associations. A minimum initial investment of $25,000 over a 90-day period is
required.
Shares are currently sold and redeemed at net asset value without a sales charge
imposed by the Fund.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income. Although
certain portfolio instruments held by the Fund are collateralized by specific
assets, the Fund's shares themselves are not secured. 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. The
investment objective and the policies and limitations described below cannot be
changed without approval of shareholders.
INVESTMENT POLICIES
The Fund intends to qualify as an appropriate investment vehicle for federal
savings associations seeking to comply with the liquidity standards applicable
to these institutions. In this regard, the Fund shall limit its acquisition of
portfolio securities to those which qualify as "liquid assets" under Section,
566.1(g) [12 C.F.R. sec. 566.1(g)] of the federal regulations applicable to
federal savings associations ["Section 566.1(g)]. The Fund also complies with
the requirements of Circular 220, issued by the Office of the Comptroller of the
Currency, to provide national banks with an appropriate source of portfolio
liquidity through a mutual fund investment.
ACCEPTABLE INVESTMENTS. Under normal circumstances, at the time of purchase, at
least 65% of the Fund's total assets will be invested in securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities. The Fund
invests only in securities that qualify as liquid assets under Section 566.1(g).
These securities currently include, but are not limited to:
- direct obligations of the United States, such as U.S. Treasury
securities, maturing in five years or less;
- obligations of U.S. government agencies or instrumentalities that mature
in five years or less, such as: Federal Home Loan Banks, Federal National
Mortgage Association ("FNMA"), Government National Mortgage Association
("GNMA"), Banks for Cooperatives, Farm Credit Banks,
Export-Import Bank of the United States, Commodity Credit Corporation,
Federal Financing Bank, Student Loan Marketing Association, Federal Home
Loan Mortgage Corporation ("FHLMC"), or National Credit Union
Administration;
- time deposits in a Federal Home Loan Bank; and
- savings accounts, including loans of unsecured day(s) funds to an insured
financial institution (i.e., Federal funds or similar unsecured loans)
that qualify under Section 566.1(g) and, in the case of negotiable
savings accounts, will mature in one year or less.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association participation
certificates, are backed by the full faith and credit of the U.S. Treasury. No
assurance can be given that the U.S. government will provide financial support
to other agencies or instrumentalities, since it is not obligated to do so.
These instrumentalities are supported by:
- the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
- discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
- the credit of the agency or instrumentality.
All privately-issued securities purchased by the Fund are rated in one of the
two highest rating categories by a nationally recognized statistical rating
organization ("NRSRO").
Downgraded securities will be evaluated on a case-by-case basis by the adviser.
The adviser will determine whether or not the security continues to be an
acceptable investment. If not, the security will be sold.
The Fund may also enter into repurchase agreements secured by those obligations
of the U.S. government and bank instruments which, but for their maturities,
qualify as liquid assets.
MORTGAGE-RELATED SECURITIES. The Fund invests in mortgage-related securities
that are issued or guaranteed by the U.S. government, its agencies or
instrumentalities, and which qualify as liquid assets under Section 566.1(g).
The Fund may also invest in privately-issued mortgage-related securities, rated
at the time of purchase, in one of the two highest rating categories by an
NRSRO.
Mortgage-related securities may be classified into the following principal
categories, according to the issuer or guarantor:
- Governmental mortgage-related securities that are backed by the full
faith and credit of the U.S. Government. GNMA, the principal U.S.
Government guarantor of such securities, is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban
Development. GNMA is authorized to guarantee, with the full faith and
credit of the United States, the timely payment of principal and interest
on securities issued by approved institutions and backed by pools of
FHA-insured or VA-guaranteed mortgages.
- Government-related mortgage-related securities that are not backed by the
full faith and credit of the U.S. Government. Issuers include FNMA and
FHLMC. FNMA is a U.S. Government-sponsored corporation owned entirely by
private stockholders. Pass-through securities issued by FNMA are
guaranteed as to timely payment of principal and interest by FNMA. FHLMC
issues
mortgage-related securities representing interests in residential
mortgage loans pooled by it. FHLMC is a U.S. Government-sponsored
corporation and guarantees the timely payment of interest and timely or
ultimate payment of principal.
- Private mortgage-related securities that represent interests in, or are
collateralized by, pools consisting principally of residential mortgage
loans created by non-government issuers. These securities generally offer
a higher rate of interest than governmental and government-related
mortgage-related securities because there are no direct government
guarantees of payment as in the former securities, although certain
credit enhancements may exist. Securities issued by certain private
organizations may not be readily marketable. Private mortgage-related
securities purchased by the Fund will be rated in one of the two highest
rating categories by at least one NRSRO.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are bonds issued by
single-purpose, stand-alone finance subsidiaries or trusts of financial
institutions, government agencies, investment bankers, or companies related to
the construction industry. CMOs purchased by the Fund may be:
- collateralized by pools of mortgages in which each mortgage is guaranteed
as to payment of principal and interest by an agency or instrumentality
of the U.S. government;
- collateralized by pools of mortgages in which payment of principal and
interest is guaranteed by the issuer and such guarantee is collateralized
by U.S. government securities; or
- securities in which the proceeds of the issuance are invested in mortgage
securities and payment of the principal and interest are supported by the
credit of an agency or instrumentality of the U.S. government.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). REMICs are offerings of
multiple class real estate mortgage-backed securities which qualify and elect
treatment as such under provisions of the Internal Revenue Code. Issuers of
REMICs may take several forms, such as trusts, partnerships, corporations,
associations or a segregated pool of mortgages. Once REMIC status is elected and
obtained, the entity is not subject to federal income taxation. Instead, income
is passed through the entity and is taxed to the person or persons who hold
interests in the REMIC. A REMIC interest must consist of one or more classes of
"regular interests," some of which may offer adjustable rates and a single class
of "residual interests" (in which the Fund does not invest). To qualify as a
REMIC, substantially all the assets of the entity must be in assets directly or
indirectly secured principally by real property.
TYPES OF CREDIT ENHANCEMENT. Mortgage-backed securities are often backed by a
pool of assets representing the obligations of a number of different parties. To
lessen the effect of failures by obligors on underlying assets to make payments,
those securities may contain elements of credit support, which fall into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from default ensures ultimate payment of the obligations on at least a
portion of the assets in the pool. This protection may be provided through
guarantees, insurance policies or letters of credit obtained by the issuer or
sponsor from third parties, through various means of structuring the transaction
or through a combination of
such approaches. The degree of credit support provided for each issue is
generally based on historical information respecting the level of credit risk
associated with the underlying assets. Delinquencies or losses in excess of
those anticipated could adversely affect the return on an investment in a
security. The Fund will not pay any additional fees for credit support, although
the existence of credit support may increase the price of a security.
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and manage
prepayment risks, the Fund may engage in dollar roll transactions with respect
to mortgage securities issued by GNMA, FNMA and FHLMC. In a dollar roll
transaction, the Fund sells a mortgage security to a financial institution, such
as a bank or broker/dealer, and simultaneously agrees to repurchase a
substantially similar (same type, coupon, and maturity) security from the
institution at a later date at an agreed upon price. The mortgage securities
that are repurchased will bear the same interest rate as those sold, but
generally will be collateralized by different pools of mortgages with different
prepayment histories. During the period between the sale and repurchase, the
Fund will not be entitled to receive interest and principal payments on the
securities sold. Proceeds of the sale will be invested in short-term
instruments, and the income from these investments, together with any additional
fee income received on the sale, will generate income for the Fund exceeding the
yield. When the Fund enters into a dollar roll transaction, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the obligations to be
repurchased, are segregated at the trade date. These assets are marked to market
daily and are maintained until the transaction is settled.
REPURCHASE AGREEMENTS. The U.S. government 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 U.S. government securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. The Fund or its custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are deemed by the Fund's adviser to be
creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse repurchase
agreements. This transaction is similar to borrowing cash. In a reverse
repurchase agreement the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in return
for a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed upon date.
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 at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
During the period any reverse repurchase agreements are outstanding, but only to
the extent necessary to assure completion of the reverse repurchase agreements,
the Fund will restrict the purchase of portfolio instruments to money market
instruments maturing on or before the expiration date of the reverse repurchase
agreements. This policy may not be changed without the approval of the Fund's
shareholders.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 15% of its net
assets in illiquid securities, which may include restricted securities.
Restricted securities are any securities in which the Fund may otherwise invest
pursuant to its investment objective but which are subject to a restriction on
resale under federal securities laws. To the extent these securities are deemed
to be illiquid, the Fund will limit its purchases, together with other
securities considered to be illiquid, to 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. As a matter of investment policy
which can be changed without shareholder approval, the Fund may purchase U.S.
government securities on a when-issued or delayed delivery basis. In when-issued
and delayed delivery transactions, the Fund relies on the seller to complete the
transaction. The seller's failure to complete the transaction may cause the Fund
to miss a price or yield considered to be advantageous.
PORTFOLIO TURNOVER
While the Fund does not intend to engage in substantial short-term trading, from
time to time it may sell portfolio securities for investment reasons without
considering how long they have been held. For example, the Fund would do this:
- to take advantage of short-term differentials in yields or market values;
- to take advantage of new investment opportunities;
- to respond to changes in the creditworthiness of an issuer; or
- to try to preserve gains or limit losses.
Any such trading would increase the Fund's portfolio turnover and its
transaction costs. However, the Fund will not attempt to set or meet any
arbitrary turnover rate since turnover is incidental to transactions considered
necessary to achieve the Fund's investment objective.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend its portfolio
securities to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will limit the amount of portfolio securities it may lend
to not more than one-third of its total assets. The Fund will only enter into
loan arrangements with broker/dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines established
by the Trustees and will receive collateral equal to at least 100% of the value
of the securities loaned. This policy may not be changed without the approval of
the Fund's shareholders.
INVESTMENT LIMITATIONS
The Fund will not:
- lend any of its assets except portfolio securities up to one-third of the
value of its total assets;
- sell securities short except, under strict limitations, the Fund may
maintain open short positions so long as not more than 15% of the value
of its net assets is held as collateral for those positions;
- 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 restricted securities which the Fund may purchase pursuant to its
investment objective, policies, and limitations; or
- invest more than 5% of the value of its total assets in securities of one
issuer (except repurchase agreements and U.S. government obligations).
The above investment limitations cannot be changed without shareholder approval.
The following investment 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 borrow money directly or through reverse repurchase agreements
or pledge securities except, under certain circumstances, the Fund may borrow up
to one-third of the value of its total assets and pledge up to 15% of the value
of its total assets to secure such borrowing.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Fund's powers except those reserved for the shareholders. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser (the "Adviser"), subject to direction
by the Trustees. The Adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The 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 waive a portion of its advisory fee, up to the amount of its
advisory fee, to reimburse the Fund for operating expenses in excess of
limitations imposed by certain states. The Adviser may further voluntarily
waive a portion of its fee or reimburse the Fund for certain operating
expenses. The Adviser can terminate such waiver or reimbursement policy at
any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. Total assets
under management or administration by these and other subsidiaries of
Federated Investors are approximately $70 billion. Federated Investors,
which was founded in 1956 as Federated Investors, Inc., develops and
manages mutual funds primarily for the financial industry. Federated
Investors' track record of competitive performance and its disciplined,
risk averse investment philosophy serve approximately 3,500 client
institutions nationwide. Through these same client institutions, individual
shareholders also have access to this same level of investment expertise.
Kathleen M. Foody-Malus and Susan M. Nason are the Fund's co-portfolio
managers. Ms. Foody-Malus has been the Fund's co-portfolio manager since
its inception in 1993. She joined Federated Investors in 1983 and has been
a Vice President of the Fund's investment adviser since 1993. Ms.
Foody-Malus served as an Assistant Vice President of the investment adviser
from 1990 until 1992, and from 1986 until 1989 she acted as an investment
analyst. Ms. Foody-Malus received her M.B.A. in Accounting/Finance from the
University of Pittsburgh.
Susan M. Nason has been the Fund's co-portfolio manager since its inception
in 1993. Ms. Nason joined Federated Investors in 1987 and has been a Vice
President of the Fund's investment adviser since 1993. Ms. Nason served as
an Assistant Vice President of the investment adviser from 1990 until 1992,
and from 1987 until 1990 she acted as an investment analyst. Ms. Nason is a
Chartered Financial Analyst and received her M.B.A. in Finance from
Carnegie Mellon University.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for Institutional
Service Shares. It is a Pennsylvania corporation organized on November 14, 1969,
and is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. Pursuant to the provisions of a distribution plan adopted in
accordance with Investment Company Act Rule 12b-1 (the "Plan"), the Fund will
pay to the distributor an amount computed at an annual rate of up to .25 of 1%
of the average daily net asset value of the Shares to finance any activity which
is principally intended to result in the sale of Shares subject to the Plan.
The distributor may from time to time and for such periods as its deems
appropriate, voluntarily reduce its compensation under the Plan to the extent
the expenses attributable to the Shares exceed such lower expense limitation as
the distributor may, by notice to the Fund, voluntarily declare to be effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers ("brokers")
to provide sales and/or administrative services as agents for their clients or
customers who beneficially own Shares of the Fund. Administrative services may
include, but are not limited to, the following functions: providing office
space, equipment, telephone facilities, and various clerical, supervisory,
computer and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and redemption
transactions and automatic investments of client account cash balances;
answering routine client inquiries regarding the Shares; assisting clients in
changing dividend options, account designations, and addresses; and providing
such other services as the Fund reasonably requests for Shares.
Financial institutions will receive fees from the distributor based upon Shares
owned by their clients or customers. The schedules of such fees and the basis
upon which such fees will be paid will be determined from time to time by the
distributor.
The Fund's Plan is a compensation type plan. As such, the Fund makes no payments
to the distributor except as described above. Therefore, the Fund does not pay
for unreimbursed expenses of the distributor, including amounts expended by the
distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Fund
under the Plan.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above or should Congress relax current restrictions on depository institutions,
the Board of Trustees will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Inc., a subsidiary
of Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services, Inc. provides these at approximate cost.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND DISBURSING AGENT. State Street Bank and
Trust Company, Boston, Massachusetts, is custodian for the securities and cash
of the Fund, transfer agent for the shares of the Fund, and dividend disbursing
agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania and Dickstein, Shapiro and Morin, Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche, Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND AND INSTITUTIONAL SERVICE SHARES
Holders of Shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees's fees; auditors' fees; the cost of meetings of Trustees;
legal fees of the Trust; association membership dues; and such non-recurring and
extraordinary items as may arise.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and Shares of the Fund;
investment advisory services; taxes and commissions;
custodian fees; insurance premiums; auditors' fees; and such non-recurring and
extraordinary items as may arise.
At present, the only expenses allocated to the Shares as a class are expenses
under the Fund's 12b-1 Plan which relate to the Shares. However, the Board of
Trustees reserves the right to allocate certain other expenses to holders of
Shares as it deems appropriate ("Class Expenses"). In any case, Class Expenses
would be limited to: transfer agent fees as identified by the transfer agent as
attributable to holders of Shares; printing and postage expenses related to
preparing and distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders; registration fees paid to the Securities
and Exchange Commission and registration fees paid to state securities
commissions; expenses related to administrative personnel and services as
required to support holders of Shares; legal fees relating solely to Shares; and
Trustees' fees incurred as a result of issues relating solely to Shares.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Shares in the market value of all
securities and other assets of the Fund, subtracting the interest of the Shares
in the liabilities of the Fund and those attributable to Shares, and dividing
the remainder by the total number of Shares outstanding. The net asset value for
Institutional Shares may exceed that of Institutional Service Shares due to the
variance in daily net income realized by each class. Such variance will reflect
only accrued net income to which the shareholders of a particular class are
entitled.
INVESTING IN INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open for
business. Shares may be purchased either by wire or mail.
To purchase Shares, open an account by calling Federated Securities Corp. at
1-800-245-4270. Information needed to establish an account will be taken over
the telephone. The Fund reserves the right to reject any purchase request.
BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Boston time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Boston
time) on the next business day following the order. Federal funds should be
wired as follows: State Street Bank and Trust Company, Boston, Massachusetts;
Attention: EDGEWIRE; For Credit to: Government Qualifying Liquidity
Fund--Institutional Service Shares; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Wire Order Number;
Nominee or Institution Name; ABA Number 011000028.
BY MAIL. To purchase Shares by mail, send a check made payable to Government
Qualifying Liquidity Fund--Institutional Service Shares to the Fund's transfer
agent, State Street Bank and Trust
Company, P.O. Box 8602, Boston, Massachusetts 02266-8602. Orders by mail are
considered received after payment by check is converted by State Street Bank
into federal funds. This is normally the next business day after State Street
Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $25,000. However, an account may be
opened with a smaller amount as long as the $25,000 minimum is reached within 90
days. An institutional investor's minimum investment will be calculated by
combining all accounts it maintains with the Fund. Accounts established through
a non-affiliated bank or broker may be subject to a smaller minimum investment.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.
The net asset value is determined at 4:00 p.m. (Boston time), Monday through
Friday, except on (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities such that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
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. Institutions holding
Shares in a fiduciary, agency, custodial, or similar capacity may charge or pass
through subaccounting fees as part of or in addition to normal trust or agency
account fees. They may also charge fees for other services provided which may be
related to the ownership of Shares. This prospectus should, therefore, be read
together with any agreement between the customer and the institution with regard
to the services provided, the fees charged for those services, and any
restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, State Street Bank maintains a share account for
each shareholder. Share certificates are not issued unless requested by
contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during the
month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are declared just prior
to determining net asset value. If an order for Shares is placed on the
preceding business day, Shares purchased by wire begin earning dividends on the
business day wire payment is received by State Street Bank. If the order
for Shares and payment by wire are received on the same day, Shares begin
earning dividends on the next business day. Shares purchased by check begin
earning dividends on the business day after the check is converted by State
Street Bank into federal funds. Dividends are automatically reinvested on
payment dates in additional Shares unless cash payments are requested by
contacting the Fund.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Fund before 4:00 p.m.
(Boston time). Proceeds will be sent to the shareholder's account at a domestic
commercial bank that is a member of the Federal Reserve System within seven days
after a proper request for redemption has been received, provided the transfer
agent has received the purchase price for the shares from the shareholder. If at
any time, the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified. Telephone
redemption instructions may be recorded.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as written requests, should be considered. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name, his account number,
and the share or dollar amount requested. If share certificates have been
issued, they must be properly endorsed and should be sent by registered or
certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member firm of the New York, American, Boston, Midwest, or Pacific
Stock Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. 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, provided the transfer agent has received the
purchase price for the Shares from the shareholder.
REDEMPTION BEFORE PURCHASE INSTRUMENTS CLEAR
When Shares are purchased by check, the proceeds from the redemption of those
Shares are not available until State Street Bank is reasonably certain that the
purchase check has cleared, which could take up to ten calendar days. It is the
Fund's policy to allow up to 10 calendar days from the date such Shares were
purchased for collection.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 because
of changes in the Fund's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights except that in matters
affecting only a particular Fund or class, only shares of that Fund or class are
entitled to vote. As a Massachusetts business trust, the Trust is not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust's or the Fund's operation and for the election
of Trustees under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of 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 entitled to vote.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect the
shareholders of the Fund, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of its shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument that the Trust or its
Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them from its assets.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
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 Fund:
- the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
- Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
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 total return and yield for Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Shares of the Fund after reinvesting all income and
capital gain distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The yield of Shares of the Fund is calculated by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by Shares over a thirty-day period by the maximum offering price per share of
Shares on the last day of the period. This number is then annualized using
semi-annual compounding. The yield does not necessarily reflect income actually
earned by Shares and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The Fund is sold without any sales load or other similar non-recurring charges.
Total return and yield will be calculated separately for Institutional Service
Shares and Institutional Shares. Because Institutional Service Shares are
subject to 12b-1 fees, the total return and yield for Institutional Shares, for
the same period, will exceed that of Institutional Service Shares.
From time to time the Fund may advertise its performance using certain reporting
services and/or compare its performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
Institutional Shares are sold to financial institutions that do not rely upon
the services provided by brokers or dealers. Institutional Shares are sold at
net asset value. Investments in Institutional Shares are subject to a minimum
initial investment of $25,000.
Institutional Shares are distributed without a 12b-1 Plan.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation depending upon which class of shares
of the Fund is sold.
The amount of dividends payable to Institutional Shares will exceed that of
Institutional Service Shares by the difference between class expenses and
distribution expenses by shares of each respective class.
The stated advisory fee is the same for both classes of shares.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Government Qualifying Liquidity Fund Federated Investors Tower
Institutional Service Shares Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian, Transfer Agent, and Dividend Disbursing Agent
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche 2500 One PPG Place
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
</TABLE>
GOVERNMENT
QUALIFYING
LIQUIDITY FUND
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
An Open-End, Diversified
Management Investment Company
October 15, 1993
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3070102A-ISS (10/93)
GOVERNMENT QUALIFYING LIQUIDITY FUND
INSTITUTIONAL SHARES AND INSTITUTIONAL SERVICE SHARES
(A PORTFOLIO OF TRUST FOR FINANCIAL INSTITUTIONS)
- --------------------------------------------------------------------------------
SUPPLEMENT TO COMBINED STATEMENT OF ADDITIONAL INFORMATION DATED OCTOBER
15, 1993
A. Please insert the following information as a second paragraph under the
section entitled "Fund Ownership" on page 6:
"As of March 4, 1994, the following shareholders of record owned 5% or
more of the outstanding shares of the Institutional Shares of the Fund:
Lincoln Bank & Trust Co., Ardmore, Oklahoma, owned approximately 101,729
shares (16.7%)."
B. Please insert the following as the second paragraph of the sub-section
entitled "Advisory Fees" under the main section entitled "Investment
Advisory Services" on page 7:
"From the Fund's date of initial public investment, October 18, 1993, to
January 31, 1994, the Fund's adviser earned $10,758, all of which was
voluntarily waived."
C. Please insert the following information as the second sentence under the
section entitled "Administrative Services" on page 7:
"From the Fund's date of initial public investment, October 18, 1993, to
January 31, 1994, the Fund incurred costs for administrative services of
$1,200."
D. Please insert the following information as a final paragraph under the
sub-section entitled "Distribution Plan" on page 8:
"The Institutional Service Shares were not offered as of January 31,
1994."
E. Please insert the following information as a first paragraph under the
sub-section entitled "Total Return" on page 9:
"The cumulative total return for the Institutional Shares of the Fund
from October 18, 1993, to January 31, 1994, was 1.15%. Cumulative total
return reflects the Fund's total performance over a specific period of
time. The total return of Institutional Shares is representative of only
four months of Fund activity since the Fund's effective date. The
Institutional Service Shares were not offered as of January 31, 1994."
March 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- --------------------------------------------------------------------------------
Distributor
4010710B (3/94)
GOVERNMENT QUALIFYING LIQUIDITY FUND
(A PORTFOLIO OF TRUST FOR FINANCIAL INSTITUTIONS)
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
COMBINED STATEMENT OF ADDITIONAL INFORMATION
The Institutional Shares and Institutional Service Shares represent interests in
a diversified portfolio of securities of Government Qualifying Liquidity Fund
(the "Fund"), a series of Trust for Financial Institutions (the "Trust"). This
Combined Statement of Additional Information should be read with the respective
prospectuses for Institutional Shares and Institutional Service Shares dated
October 15, 1993. This Statement is not a prospectus itself. To receive a copy
of either prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated October 15, 1993
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ----------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ----------------------------------------------------------------
Types of Investments 1
Bank Instruments 1
Loans of Federal Funds 1
U.S. Government Obligations 1
Variable Rate U.S. Government Securities 1
Demand Notes 2
When-Issued and Delayed
Delivery Transactions 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Portfolio Turnover 2
Investment Limitations 2
TRUST MANAGEMENT 4
- ----------------------------------------------------------------
Officers and Trustees 4
The Funds 6
Fund Ownership 6
Trustee Liability 6
INVESTMENT ADVISORY SERVICES 6
- ----------------------------------------------------------------
Adviser to the Fund 6
Advisory Fees 7
Other Advisory Services 7
ADMINISTRATIVE SERVICES 7
- ----------------------------------------------------------------
BROKERAGE TRANSACTIONS 7
- ----------------------------------------------------------------
PURCHASING SHARES 8
- ----------------------------------------------------------------
Distribution Plan (Institutional Service Shares) 8
Conversion to Federal Funds 8
DETERMINING NET ASSET VALUE 8
- ----------------------------------------------------------------
Determining Market Value of Securities 8
REDEEMING SHARES 9
- ----------------------------------------------------------------
Redemption in Kind 9
TAX STATUS 9
- ----------------------------------------------------------------
The Fund's Tax Status 9
Shareholders' Tax Status 9
TOTAL RETURN 9
- ----------------------------------------------------------------
YIELD 9
- ----------------------------------------------------------------
PERFORMANCE COMPARISONS 10
- ----------------------------------------------------------------
Duration 10
APPENDIX 11
- ----------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
Government Qualifying Liquidity Fund (the "Fund") is an investment portfolio of
Trust for Financial Institutions. The Trust was established as a Massachusetts
business trust under a Declaration of Trust dated May 28, 1993.
Shares of the Fund are offered in two classes, known as Institutional Shares and
Institutional Service Shares (individually and collectively referred to as
"Shares", as the context may require). This combined statement of additional
information relates to the above mentioned Shares of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide current income.
TYPES OF INVESTMENTS
The Fund invests only in securities that qualify as liquid assets under Section
566.1(g) [12C.F.R. sec.566.1(g)] of the federal regulations applicable to
federal savings associations. The Fund invests primarily in U.S. government
securities.
The Fund's investment objective and policies cannot be changed without approval
of shareholders.
BANK INSTRUMENTS
The Fund may invest more than $100,000 in savings accounts and in certificates
of deposits and other time deposits in Bank Insurance Fund-insured banks and
Savings Association Insurance Fund-insured institutions. Investments in such
accounts over $100,000 and the interest paid on these investments are not
insured.
LOANS OF FEDERAL FUNDS
Federal funds are funds held by a regional Federal Reserve Bank for the account
of a bank which is a member of that Federal Reserve Bank. The member bank can
lend federal funds to another member bank. These loans are unsecured and are
made at a negotiated interest rate for a negotiated time period, generally
overnight. Because reserves are not required to be maintained on borrowed
federal funds, member banks borrowing federal funds are willing to pay interest
rates which are generally higher than they pay on other deposits of comparable
size and maturity which are subject to reserve requirements. The Fund sells its
shares only to "depository institutions' as that term is defined in Regulation D
of the Board of Governors of the Federal Reserve Board and limits its portfolio
only to instruments which "depository institutions" can purchase directly.
Therefore, the Fund can participate in the federal funds market and in effect
make loans of federal funds by instructing any willing member bank at which the
Fund maintains an account to loan federal funds on the Fund's behalf. These
transactions permit the Fund to obtain interest rates on its assets which are
comparable to those earned by member banks when they loan federal funds. The
Fund may engage in loans of federal funds and similar loans of unsecured day(s)
funds to Bank Insurance Fund ("BIF") or Savings Association Insurance Fund
("SAIF")-insured institutions.
U.S. GOVERNMENT OBLIGATIONS
The Fund will invest at least 65% of the value of its total assets in securities
which are issued or guaranteed as to payment of principal and interest by the
U.S. government, its agencies or instrumentalities. Mortgage-related securities
that are issued or guaranteed by the U.S. government, its agencies or
instrumentalities may be considered U.S. government obligations for purposes of
this restriction. These securities and other U.S. government or agency
obligations are described more fully in the prospectus for each class of shares.
Examples of agencies and instrumentalities which may not always receive
financial support from the
U.S. government are:
- - Federal Farm Credit Banks;
- - Federal Home Loan Banks;
- - Federal National Mortgage Association.
- - Student Loan Marketing Association; and
- - Federal Home Loan Mortgage Corporation.
VARIABLE RATE U.S. GOVERNMENT SECURITIES
Some of the short-term U.S. government securities the Fund may purchase carry
variable interest rates. These securities have a rate of interest subject to
adjustment at least annually. This adjusted interest rate is ordinarily tied to
some objective standard, such as the 91-day U.S. Treasury bill rate.
Variable interest rates will reduce the changes in the market value of such
securities from their original purchase prices. Accordingly, the potential for
capital appreciation or capital depreciation should not be greater than the
potential for capital appreciation or capital depreciation of fixed interest
rate U.S. government securities having maturities equal to the interest rate
adjustment dates of the variable rate U.S. government securities.
- --------------------------------------------------------------------------------
DEMAND NOTES
Demand notes are short-term borrowing arrangements between an agency or
instrumentality of the U.S. government and an institutional lender (such as the
Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. Certain demand notes permit the Fund to increase or decrease
the principal amount of the note daily within an agreed upon range. Demand notes
usually provide for floating or variable rates of interest.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, and not for investment leverage.
The Fund may engage in these transactions to an extent that would cause the
segregation of an amount up to 20% of the total value of its assets.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates will occur no more than 120 days
after entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated on the Fund's records at the trade date. These
securities are marked to market daily and maintained until the transaction is
settled.
REPURCHASE AGREEMENTS
The Fund requires its custodian to take possession of the securities subject to
repurchase agreements, and these securities are marked to market daily. To the
extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are deemed by the Fund's adviser to be
creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The use of reverse repurchase agreements may enable the Fund to avoid selling
portfolio instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not ensure that
the Fund will be able to avoid selling portfolio instruments at a
disadvantageous time.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. During the fiscal year ending March 31, 1994,
the portfolio turnover rate is not expected to exceed 100%.
INVESTMENT LIMITATIONS
Unless indicated otherwise, the Fund will not change any of the investment
limitations described below without approval of shareholders.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of securities.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 15% of the value
of total assets at the time of the borrowing.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to one-third of the value of its total assets.
- --------------------------------------------------------------------------------
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities of any one issuer (other
than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities and
repurchase agreements collateralized by U.S. government securities) if as
a result more than 5% of the value of its total assets would be invested
in the securities of that issuer. (For the purposes of this limitation,
the Fund considers instruments issued by a U.S. branch of a domestic bank
having capital, surplus, and undivided profits in excess of $100,000,000
at the time of investment to be "cash items"). Also, the Fund will not
acquire more than 10% of the outstanding voting securities of any one
issuer.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, including limited partnership
interests in real estate, although it may invest in securities of
companies whose business involves the purchase or sale of real estate or
in securities which are secured by real estate or interests in real
estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities.
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 restricted securities which the Fund may
purchase pursuant to its investment objective, policies, and limitations.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
BORROWING MONEY
The Fund will not borrow money directly or through reverse repurchase
agreements in amounts in excess of one-third of the value of its 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.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
operating history, including the operation of any predecessor. (This
limitation does not apply to issuers of CMOs or REMICs which are
collateralized by securities or mortgages issued or guaranteed as to
prompt payment of principal and interest by an agency of the U.S.
government).
INVESTING IN MINERALS
The Fund will not purchase or sell 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 ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
Officers and Trustees of the Trust or its investment adviser owning
individually more than 1/2 of 1% of the issuer's securities together own
more than 5% of the issuer's securities.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may not own securities of open-end investment companies. The
Fund can acquire up to 3 per centum of the total outstanding stock of
closed-end investment companies. The Fund will not be subject to any
other limitations with regard to the acquisition of securities of
closed-end investment companies so long as the public offering price of
the Fund's shares does not include a sales load exceeding 1 1/2 per cent.
The Fund will purchase securities of closed-end investment companies only
in open-market transactions involving only customary broker's
commissions. However, these limitations are not applicable if the
securities are acquired in a merger, consolidation, or acquisition of
assets; nor are they applicable with respect to securities
- --------------------------------------------------------------------------------
of investment companies that have been exempted from registration under
the Investment Company Act of 1940.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for
settlement in more than seven days after notice, and certain restricted
securities.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Fund does not consider the issuance of separate classes of shares to
constitute an issuance of "senior securities" within the meaning of the
investment limitations set forth above.
TRUST MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Management,
Federated Investors, Federated Securities Corp., and Federated Administrative
Services, Inc. and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
John F. Donahue*+ Chairman and Chairman and Trustee, Federated Investors; Chairman and
Federated Investors Trustee Trustee, Federated Advisers, Federated Management, and
Tower Federated Research; Director, AEtna Life and Casualty
Pittsburgh, PA Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds; formerly Director,
The Standard Fire Insurance Company. Mr. Donahue is the
father of J. Christopher Donahue, Vice President of the
Trust.
- -----------------------------------------------------------------------------------------------------------------
John T. Conroy, Jr. Trustee President, Investment Properties Corporation, Senior Vice-
Wood/IPC Commercial President, John R. Wood and Associates, Inc., Realtors;
Department President, Northgate Village Development Corporation;
John R. Wood & General Partner or Trustee in private real estate ventures
Associates in Southwest Florida; Director, Trustee, or Managing
3255 Tamiami Trail North General Partner of the Funds, formerly, President, Naples
Naples, FL Property Management, Inc.
- -----------------------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael
Suite 2310 Baker, Inc.; Director, Trustee, or Managing General Partner
PNC Bank Building of the Funds; formerly Vice Chairman and Director, PNC
Pittsburgh, PA Financial Corp and Director, Ryan Homes, Inc.
- -----------------------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.;
571 Hayward Mill Road Director, Trustee, or Managing General Partner of the
Concord, MA Funds; formerly Director, Blue Cross of Massachusetts, Inc.
- -----------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and
3471 Fifth Avenue Montefiore Hospitals; Clinical Professor of Medicine and
Suite 1111 Trustee, University of Pittsburgh; Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds.
- -----------------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat
5916 Penn Mall 'N Park Restaurants, Inc., and Statewide Settlement Agency,
Pittsburgh, PA Inc.; Director, Trustee, or Managing General Partner of the
Funds; formerly Counsel, Horizon Financial, F.A., Western
Region.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of
225 Franklin Street Massachusetts; Trustee, Lahey Clinic Foundation, Inc.;
Boston, MA Director, Trustee, or Managing General Partner of the
Funds; formerly President, State Street Bank & Trust
Company and State Street Boston Corporation.
- -----------------------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman,
5916 Penn Mall Meritcare, Inc.; Director, Eat 'N Park Restaurants, Inc.;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the
Funds; formerly Vice Chairman, Horizon Financial, F.A.
- -----------------------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Management Consultant; Trustee, Carnegie Endowment for
1202 Cathedral of International Peace, RAND Corporation and U.S. Space
Learning Foundation; Chairman, National Advisory Council for
University of Pittsburgh Environmental Policy & Technology; Chairman, Czecho Slovak
Pittsburgh, PA Management Center; Director, Trustee or Managing General
Partner of the Funds; formerly President, University of
Pittsburgh.
- -----------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee,
4905 Bayard Street or Managing General Partner of the Funds.
Pittsburgh, PA
- -----------------------------------------------------------------------------------------------------------------
Richard B. Fisher President and Executive Vice President and Trustee, Federated Investors;
Federated Investors Trustee Chairman and Director, Federated Securities Corp.;
Tower President or Vice President of the Funds; Director or
Pittsburgh, PA Trustee of some of the Funds.
- -----------------------------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee,
Federated Investors Federated Advisers, Federated Management, and Federated
Tower Research; President and Director, Federated Administrative
Pittsburgh, PA Services, Inc.; 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.
- -----------------------------------------------------------------------------------------------------------------
Glen R. Johnson* Vice President Trustee, Federated Investors; President and/or Trustee of
Federated Investors some of the Funds; staff member, Federated Securities
Tower Corp., and Federated Administrative Services, Inc.
Pittsburgh, PA
- -----------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Vice President Vice President, Treasurer and Trustee, Federated Investors;
Federated Investors and Treasurer Vice President and Treasurer, Federated Advisers, Federated
Tower Management, and Federated Research; Executive Vice
Pittsburgh, PA President, Treasurer, and Director, Federated Securities
Corp.; Chairman, Treasurer, and Director, Federated
Administrative Services, Inc.; Trustee of some of the
Funds; Vice President and Treasurer of the Funds.
- -----------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee,
Federated Investors and Secretary Federated Investors; Vice President, Secretary, and
Tower Trustee, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Executive Vice President, Secretary,
and Director, Federated Administrative Services, Inc.;
Executive Vice President and Director, Federated Securities
Corp.; Vice President and Secretary of the Funds.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive
Federated Investors Vice President, Federated Securities Corp.; President and
Tower Trustee, Federated Advisers, Federated Management, and
Pittsburgh, PA Federated Research; Vice President of the Funds; Director,
Trustee, or Managing General Partner of some of the Funds;
formerly Vice President, The Standard Fire Insurance
Company and President of its Federated Research Division.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
+ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
THE FUNDS
"The Funds," and "Funds" mean the following investment companies: A.T. Ohio
Tax-Free Money Fund; American Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated Government Money Trust; Berry Street
Funds; California Municipal Cash Trust; Cash Trust Series; Cash Trust Series II;
Convertible Securities and Income, Inc.; 111 Corcoran Funds; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; FT Series, Inc.; Federated ARMs
Funds; Federated Bond Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust;
Federated Government Trust; Federated Growth Trust; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Intermediate Government Trust; Federated Intermediate Municipal
Trust; Federated Master Trust; Federated Municipal Trust; Federated
Short-Intermediate Government Trust; Federated Short-Intermediate Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; 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; Investment Series Funds, Inc.; Investment Series Trust;
Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty
Municipal Securities Fund, Inc.; Liberty Term Trust, Inc.-1999; Liberty U.S.
Government Money Market Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust;
Losantiville Funds; Mark Twain Funds; Money Market Management; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust; New
York Municipal Cash Trust; Portage Funds; RIMCO Monument Funds; Signet Select
Funds; The Boulevard Funds; The Passageway Funds; The Shawmut Funds; The
Starburst Funds; The Starburst Funds II; Targeted Duration Trust; Tax-Free
Instruments Trust; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; and Trust for U.S. Treasury Obligations.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Federated Management. 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, his wife, and
his son, J. Christopher Donahue. John F. Donahue is Chairman and Trustee,
Federated Management; Chairman and Trustee, Federated Investors and Chairman and
Trustee of the Trust. John A. Staley, IV, is President, Federated Management;
Vice President and Trustee, Federated Investors; Executive Vice President,
Federated Securities Corp. and Vice President of the Trust. J. Christopher
Donahue is Trustee, Federated Management; President and Trustee, Federated
Investors; President and Director, Federated Administrative Services, Inc. and
Vice President of the Trust. John W. McGonigle is Vice President, Secretary, and
Trustee, Federated Management; Trustee, Vice President, Secretary and General
Counsel, Federated Investors; Executive Vice President and Director, Federated
Administrative
- --------------------------------------------------------------------------------
Services, Inc.; Executive Vice President, Secretary, and Director, Federated
Securities Corp., and Vice President and Secretary of the Trust.
The adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus.
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 fee.
This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.
OTHER ADVISORY SERVICES
Federated Research Corp. receives fees from certain depository institutions for
providing consulting and portfolio advisory services relating to each
institution's program of asset management. Federated Research Corp. may advise
such clients to purchase or redeem shares of investment companies, such as the
Fund, which are managed, for a fee, by Federated Research Corp. or other
affiliates of Federated Investors, such as the adviser, and may advise such
clients to purchase and sell securities in the direct markets. Further,
Federated Research Corp., and other affiliates of adviser, may, from time to
time, provide certain consulting services and equipment to depository
institutions in order to facilitate the purchase of shares of funds offered by
Federated Securities Corp.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, Inc., a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund at approximate cost.
John A. Staley, IV, an officer of the Fund, and Dr. Henry Gailliot, an officer
of Federated Management, the adviser to the Fund, each hold approximately 15%
and 20%, respectively, of the outstanding common stock and serve as Directors of
Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services, Inc.
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
review by the Board of Trustees.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the adviser
and may include:
- - advice as to the advisability of investing in securities;
- - security analysis and reports;
- - economic studies;
- - industry studies;
- - receipt of quotations for portfolio evaluations; and
- - similar services.
- --------------------------------------------------------------------------------
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange is open for business. The procedure for purchasing Shares is
explained in the respective prospectus under "Investing in Institutional Shares"
or "Investing in Institutional Service Shares".
DISTRIBUTION PLAN (INSTITUTIONAL SERVICE SHARES)
With respect to the Institutional Service Shares class of the Fund, the Trust
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 administrators (including
broker/dealers and depository institutions such as commercial banks and savings
and loan associations) for distribution and administrative services. The Plan is
designed to stimulate administrators to provide distribution and administrative
support services to the Fund and its shareholders. The administrative services
are provided by a representative who has knowledge of the shareholder's
particular circumstances and goals, and include, but are not limited to:
communicating account openings; communicating account closings; entering
purchase transactions; entering redemption transactions; providing or arranging
to provide accounting support for all transactions, wiring funds and receiving
funds for Share purchases and redemptions, confirming and reconciling all
transactions, reviewing the activity in Fund accounts, and providing training
and supervision of broker personnel; posting and reinvesting dividends to Fund
accounts or arranging for this service to be performed by the Fund's transfer
agent; and maintaining and distributing current copies of prospectuses and
shareholder reports to the beneficial owners of shares of the Trust and
prospective shareholders.
By adopting the Plan, the Board of Trustees expects that the Fund will be able
to achieve a more predictable flow of cash for investment purposes and to meet
redemptions. This will facilitate more efficient portfolio management and assist
the Fund in seeking to achieve its investment objectives. By identifying
potential investors whose needs are served by the Fund's objective, and properly
servicing these accounts, the Fund may be able to curb sharp fluctuations in
rates of redemptions and sales.
Other benefits which the Fund hopes to achieve through the Plan include, but are
not limited to, the following: (1) an efficient and effective administrative
system; (2) a more efficient use of shareholder assets by having them rapidly
invested in the Fund, through an automatic transfer of funds from a demand
deposit account to an investment account, with a minimum of delay and
administrative detail; and (3) an efficient and reliable shareholder records
system and prompt responses to shareholder requests and inquiries concerning
their accounts.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. State Street Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the respective prospectuses. Net asset
value will not be calculated on the following holidays: Good Friday, New Year's
Day, Presidents' Day, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day, and Christmas Day.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
- - according to the mean between the over-the-counter bid and asked prices
provided by an independent pricing service, if available, or at fair value as
determined in good faith by the Fund's Board of Trustees; or
- - for short-term obligations with maturities of less than 60 days, at amortized
cost unless the Board of Trustees determines that particular circumstances of
the security indicate otherwise.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems Shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
respective prospectuses under "Redeeming Institutional Shares" and "Redeeming
Institutional Service Shares." Although State Street Bank does not charge for
telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
The Trust is obligated to redeem Shares solely in cash up to $250,000 or 1% of
the respective class 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 cash payments will have a material adverse effect on
remaining shareholders. In such a case, the Trust will pay all or a portion of
the remainder of the redemption in portfolio instruments, valued in the same way
as the Trust 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 receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
- - derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- - derive less than 30% of its gross income from the sale of securities held less
than three months;
- - invest in securities within certain statutory limits; and
- - distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional Shares. No portion of any income dividend paid by
the Fund is eligible for the dividends received deduction available to
corporations. These dividends, and any short-term capital gains, are taxable as
ordinary income.
CAPITAL GAINS
Long-term capital gains distributed to shareholders will be treated as
long-term capital gains regardless of how long shareholders have held
Shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The average annual total return for both classes of shares of the Fund is the
average compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of shares owned at the
end of the period by the offering price per share at the end of the period. The
number of shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, adjusted over the period
by any additional shares, assuming the monthly reinvestment of all dividends and
distributions.
YIELD
- --------------------------------------------------------------------------------
The yield for both classes of shares of the Fund is determined by dividing the
net investment income per share (as defined by the Securities and Exchange
Commission) earned by either class of shares over a thirty-day period by the
maximum offering price per share of either class on the last day of the period.
This value is annualized using semi-annual compounding. This means that the
amount of income generated during the thirty-day period is assumed to be
generated each month over a twelve month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by the
Fund because of certain adjustments required by the Securities and Exchange
Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in either
class of shares, performance will be reduced for those shareholders paying those
fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The performance of both classes of shares depends upon such variables as:
- - portfolio quality;
- - average portfolio maturity;
- - type of instruments in which the portfolio is invested;
- - changes in interest rates and market value of portfolio securities;
- - changes in the Fund's expenses or either class of share's expenses; and
- - various other factors.
Either class of shares' performance fluctuates on a daily basis largely because
net earnings and net asset value per share fluctuate daily. Both net earnings
and net asset value per share are factors in the computation of yield and total
return.
From time to time the Fund may advertise performance of both classes of shares
compared to similar funds or portfolios using certain indices, reporting
services and financial publications. These may include the following:
- - LIPPER ANALYTICAL SERVICES, INC. ranks funds in various categories by making
comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specific period of time.
From time to time, the Fund will quote its Lipper ranking in the "Short U.S.
government funds" category in advertising and sales literature.
Investors may use such indices or reporting services in addition to either class
of share's prospectus to obtain a more complete view of the of share's
performance before investing. Of course, when comparing performance of either
class to any index, conditions such as composition and prevailing market
conditions should be considered in assessing the significance of such
comparisons. When comparing funds using reporting services, or total return and
yield, investors should take into consideration any relevant differences in
funds such as permitted portfolio composition and methods used to value
portfolio securities and compute net asset value.
Advertisements and other sales literature for both classes of shares may quote
total returns which are calculated on nonstandardized base periods. These total
returns also represent the historic change in the value of an investment in
either class of shares based on monthly reinvestment of dividends over a
specified period of time.
DURATION
Duration is a commonly used measure of the potential volatility in the price of
a bond, or other fixed income security, or in a portfolio of fixed income
securities, prior to maturity. Volatility is the magnitude of the change in the
price of a bond relative to a given change in the market rate of interest. A
bond's price volatility depends on three primary variables: the bond's coupon
rate; maturity date; and the level of market yields of similar fixed-income
securities. Generally, bonds with lower coupons or longer maturities will be
more volatile than bonds with higher coupons or shorter maturities. Duration
combines these variables into a single measure.
Duration is calculated by dividing the sum of the time-weighted present values
of the cash flows of a bond or bonds, including interest and principal payments,
by the sum of the present values of the cash flows.
When the Fund invests in mortgage pass-through securities, its duration will be
calculated in a manner which requires assumptions to be made regarding future
principal prepayments. A more complete description of this calculation is
available upon request from the Fund.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD & POOR'S CORPORATION BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
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.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATING
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
edge." 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.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated 'AAA.' Because bonds rated in the 'AAA' and
'AA' categories are not significantly vulnerable to foreseeable future
developments, short-term debt of these issuers is generally rated 'F-1+.'
STANDARD AND POOR'S CORPORATION COMMERCIAL PAPER RATINGS
A-1--This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
A-2--Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
'A-1.'
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS
P-1--Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics:
conservative capitalization structures with moderate reliance on debt and ample
asset protection; broad margins in earning coverage of fixed financial charges
and high internal cash generation; well established access to a range of
financial markets and assured sources of alternate liquidity.
P-2--Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
FITCH INVESTORS SERVICE, INC., SHORT-TERM DEBT RATINGS
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of 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.
3070102B (10/93)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part A)
(b) Exhibits:
(1) Copy of Declaration of Trust of the Registrant; (1.)
(i) Conformed copy of Amendment No. 1 to Declaration
of Trust dated May 28, 1993;+
(ii) Conformed copy of Amendment No. 2 to Declaration
of Trust dated May 28, 1993;+
(2) Copy of By-Laws of the Registrant; (3.)
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant; (2.)
(5) Conformed copy of Investment Advisory Contract of the
Registrant;+
(i) Conformed copy of Exhibits to Investment Advisory
Contract of the Registrant to add Government
Money Market Fund, Government Qualifying
Liquidity Fund, and Short-Term Government
Qualifying Liquidity Fund to the present
Investment Advisory Contract;+
(6) Conformed copy of Distributor's Contract of the
Registrant;+
(i) Conformed copy of Exhibits A through F to the
Distributor's Contract;+
(7) Not applicable;
(8) Conformed copy of Custodian Agreement of the
Registrant;+
(9) Conformed copy of Fund Acounting and Transfer Agency
and Service Agreement of the Registrant;+
(10) Copy of Opinion and Consent of Counsel as
to legality of shares being registered; (3.)
(11) Copy of Consent of Independent Auditors; (2.)
(12) Not applicable;
(13) Copy of Initial Capital Understanding;
(2.)
(14) Not Applicable
(15) Conformed copy of Distribution plan;+
(i) Conformed copy of Exhibits A through
C;+
(16) Schedule for Computation of Fund
Performance Data;+
(17) Power of Attorney;(1.)
(18) Conformed Copy of Opinion and Consent of Counsel
as to Availability of Rule 485(b).+
Item 25. Persons Controlled by or Under Common Control with Registrant
None
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed July 14, 1993.
(File No. 33-49771).
2. Response is incorporated by reference to Registrant's Pre-effective
Amendment No. 1 to its Registration Statement filed on September 17,
1993. (File No. 33-4771).
3. Response in incorporated by reference to Registrant's Pre-effective
Amendment No. 2 to its Registration Statement filed on September 28,
1993. (File No. 33-49771).
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of March 7, 1994
Shares of beneficial interest -
no par value
Government Money Market Fund 106
Institutional Shares
Government Money Market Fund 9
Institutional Service Shares
Government Qualifying Liquidity Fund 6
Institutional Shares
Government Qualifying Liquidity Fund 3
Institutional Service Shares
Item 27. Indemnification: (1.)
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of the investment
adviser, see the section entitled "Trust Information -
Management of the Trust" in Part A. The affiliations with
the Registrant of four of the Trustees and one of the
Officers of the investment adviser are included in Part B of
this Registration Statement under "Trust Management -
Officers and Trustees." The remaining Trustee of the
investment adviser, his position with the investment adviser,
and, in parentheses, his principal occupation is: Mark D.
Olson, Partner, Wilson, Halbrook & Bayard, 107 W. Market
Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are:
William D. Dawson, III; J. Thomas Madden, Mark L. Mallon,
Executive Vice President; Henry J. Gailliot, Senior Vice
President-Economist, Peter R. Anderson, Gary J. Madich, and
J. Alan Minteer, Senior Vice Presidents; Randall A. Bauer;
Jonathan C. Conley, Deborah A. Cunningham, Mark E.Durbiano,
Roger A. Early, Kathleen M. Foody-Malus, David C. Francis,
Thomas M. Franks, Edward C. Gonzales, Jeff A.Kozemchek,
Marian R. Marinack, John W. McGonigle, Gregory M. Melvin,
Susan M. Nason, Mary Jo Ochson, Robert J. Ostrowski, Charles
A. Ritter and Christopher H. Wiles, Vice Presidents,
Edward C. Gonzales, Treasurer, and John W. McGonigle,
Secretary. The business address of each of the Officers of
the investment adviser is Federated Investors Tower,
Pittsburgh, PA 15222-3779. These individuals are also
officers of a majority of the investment advisers to the
Funds listed in Part B of this Registration Statement under
"The Funds."
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed July 14, 1993.
(File No. 33-49771).
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for
shares of the Registrant, also acts as principal underwriter
for the following open-end investment companies: A.T. Ohio
Municipal Money Fund; Alexander Hamilton Funds; American
Leaders Fund, Inc.; Annuity Management Series; Automated
Cash Management Trust; Automated Government Money Trust;
BayFunds; The Biltmore Funds; The Biltmore Municipal Funds;
The Boulevard Funds; California Municipal Cash Trust;
Cambridge Series Trust; Cash Trust Series, Inc.; Cash Trust
Series II; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated ARMs Fund; Federated
Exchange Fund, Ltd.; Federated GNMA Trust; Federated
Government Trust; Federated Growth Trust; Federated High
Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Intermediate
Government Trust; Federated Master Trust; Federated
Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated
Stock Trust; Federated Tax-Free Trust; Federated U.S.
Government Bond Fund; Financial Reserves Fund; First
Priority Funds; First Union Funds; Fixed Income Securities,
Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress Utility Fund,
Inc.; Fountain Square Funds; Fund for U.S. Government
Securities, Inc.; Government Income Securities, Inc.; High
Yield Cash Trust; Independence One Mutual Funds; Insight
Institutional Series, Inc.; Insurance Management Series;
Intermediate Municipal Trust; International Series,
Inc.;Investment Series Funds, Inc.; Investment Series Trust;
Liberty Equity Income Fund, Inc.; Liberty High Income Bond
Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Utility Fund,
Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain
Funds; Marshall Funds, Inc.; Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Trust; The
Monitor Funds; Municipal Securities Income Trust; New York
Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds;
The Planters Funds; Portage Funds; RIMCO Monument Funds; The
Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; SouthTrust Vulcan Funds; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.;
Sunburst Funds; Targeted Duration Trust; Tax`-Free
Instruments Trust; Tower Mutual Funds; Trademark Funds;
Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; Vision Fiduciary Funds,
Inc.; and Vision Group of Funds, Inc.
Federated Securities Corp. also acts as principal
underwriter for the following closed-end investment company:
Liberty Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Vice President and
Federated Investors Tower President, and Treasurer, Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John A. Staley, IV Executive Vice President Vice President
Federated Investors Tower and Assistant Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James R. Ball Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
Item 30. Location of Accounts and Records: (1.)
Item 31. Management Services: Not applicable.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed July 14, 1993.
(File No. 33-49771).
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, TRUST FOR FINANCIAL
INSTITUTIONS, certifies that it meets all of the requirements for
effectiveness of this Amendment to its Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Amendment to its Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, all in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 29 day of March,
1994.
TRUST FOR FINANCIAL INSTITUTIONS
BY: /s/Robert C. Rosselot
Robert C. Rosselot, Assistant Secretary
Attorney in Fact for John F. Donahue
March 29, 1994
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/Robert C. Rosselot
Robert C. Rosselot Attorney In Fact March 29, 1994
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Richard B. Fisher* President
Edward C. Gonzales* Vice President and Treasurer
(Principal Financial and
Accounting Officer)
John T. Conroy, Jr* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
HOUSTON, HOUSTON & DONNELLY
ATTORNEYS AT LAW
2510 CENTRE CITY TOWER
WILLIAM McC. HOUSTON PITTSBURGH, PA. 15222
FRED CHALMERS HOUSTON, JR. __________
THOMAS J. DONNELLY
JOHN F. MECK (412) 471-5828 FRED CHALMERS HOUSTON
FAX (412) 471-0736 (1914 - 1971)
MARIO SANTILLI, JR.
THEODORE M. HAMMER
March 28, 1994
Trust for Financial Institutions
Federated Investors Tower
Pittsburgh, PA 15222-3779
Gentlemen:
As counsel to Trust for Financial Institutions ("Trust") we
have reviewed Post-effective Amendment No. 1 to the Trust's
Registration Statement to be filed with the Securities and
Exchange Commission under the Securities Act of 1933 (File
No. 33-49771). The subject Post-effective Amendment will be filed
pursuant to Paragraph (b) of Rule 485 and become effective
pursuant to said Rule immediately upon filing.
Our review also included an examination of other relevant
portions of the amended 1933 Act Registration Statement of the
Trust and such other documents and records deemed appropriate.
On the basis of this review we are of the opinion that
Post-effective Amendment No. 1 does not contain disclosures which
would render it ineligible to become effective pursuant to
Paragraph (b) of Rule 485.
We hereby consent to the filing of this representation
letter as a part of the Trust's Registration Statement filed with
the Securities and Exchange Commission under the Securities Act
of 1933 and as part of any application or registration statement
filed under the Securities Laws of the States of the United
States.
Very truly yours,
Houston, Houston & Donnelly
By: /s/Thomas J. Donnelly
TJD:smg
TRUST FOR FINANCIAL INSTITUTIONS
Amendment No. 1
DECLARATION OF TRUST
dated May 28, 1993
THIS Declaration of Trust is amended as follows:
Strike the first paragraph of Section 5 of Article III
from the Declaration of Trust and substitute in its place
the following:
"Section 5. Establishment and Designation of Series
or Class.
Without limiting the authority of the Trustees set
forth in Article XII, Section 8, inter alia, to
establish and designate any additional series or
class or to modify the rights and preferences of any
existing Series or Class, the initial series and classes
shall be, and are established and
designated as:
Government Liquidity Fund
Institutional Shares
Institutional Service Shares
Government Money Market Fund
Institutional Shares
Institutional Service Shares
Short-Term Government Liquidity Fund
Institutional Shares
Institutional Service Shares"
The undersigned Assistant Secretary of Trust for
Financial Institutions hereby certifies that the above
stated Amendment is a true and correct Amendment to the
Declaration of Trust, as adopted by the Board of Trustees on
the 25th day of August, 1993.
WITNESS the due execution hereof this 27th day of
December, 1993.
/s/Robert C.
Rosselot
Robert C. Rosselot
Assistant Secretary
TRUST FOR FINANCIAL INSTITUTIONS
Amendment No. 2
DECLARATION OF TRUST
dated May 28, 1993
THIS Declaration of Trust is amended as follows:
Strike the first paragraph of Section 5 of Article III
from the Declaration of Trust and substitute in its place
the following:
"Section 5. Establishment and Designation of Series
or Class.
Without limiting the authority of the Trustees set
forth in Article XII,
Section 8, inter alia, to establish and designate any
additional series or class or to modify the rights and
preferences of any existing Series or Class, the initial
series and classes shall be, and are established
and designated as:
Government Money Market Fund
Institutional Shares
Institutional Service Shares
Government Qualifying Liquidity Fund
Institutional Shares
Institutional Service Shares
Short-Term Government Qualifying Liquidity Fund
Institutional Shares
Institutional Service Shares"
The undersigned Assistant Secretary of Trust for
Financial Institutions hereby certifies that the above
stated Amendment is a true and correct Amendment to the
Declaration of Trust, as adopted by the Board of Trustees by
consent dated the 13th day of October, 1993.
WITNESS the due execution hereof this 27th day of
December, 1993.
/s/Robert C.
Rosselot
Robert C. Rosselot
Assistant Secretary
Exhibit 5 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
TRUST FOR FINANCIAL INSTITUTIONS
INVESTMENT ADVISORY CONTRACT
This Contract is made this 1st day of June, 1993, between Federated
Management, a Delaware business trust having its principal place of business
in Pittsburgh, Pennsylvania (the "Adviser"), and Trust for Financial
Institutions, a Massachusetts business trust having its principal place of
business in Pittsburgh, Pennsylvania (the "Trust").
WHEREAS the Trust is an open-end management investment company as that
term is defined in the Investment Company Act of 1940 and is registered
as such with the Securities and Exchange Commission; and
WHEREAS Adviser is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. The Trust hereby appoints Adviser as Investment Adviser for each of
the portfolios ("Funds") of the Trust which executes an exhibit to this
Contract, and Adviser accepts the appointments. Subject to the direction of
the Trustees of the Trust, Adviser shall provide investment research and
supervision of the investments of the Funds and conduct a continuous program
of investment evaluation and of appropriate sale or other disposition and
reinvestment of each Fund's assets.
2. Adviser, in its supervision of the investments of each of the Funds
will be guided by each of the Fund's investment objective and policies and the
provisions and restrictions contained in the Declaration of Trust and By-Laws
of the Trust and as set forth in the Registration Statements and exhibits as
may be on file with the Securities and Exchange Commission.
3. Each Fund shall pay or cause to be paid all of its own expenses and
its allocable share of Trust expenses, including, without limitation, the
expenses of organizing the Trust and continuing its existence; fees and
expenses of Trustees and officers of the Trust; fees for investment advisory
services and administrative personnel and services; fees and expenses of
preparing and printing its Registration Statements under the Securities Act of
1933 and the Investment Company Act of 1940 and any amendments thereto;
expenses of registering and qualifying the Trust, the Funds, and shares
("Shares") of the Funds under federal and state laws and regulations; expenses
of preparing, printing, and distributing prospectuses (and any amendments
thereto) to shareholders; interest expense, taxes, fees, and commissions of
every kind; expenses of issue (including cost of Share certificates),
purchase, repurchase, and redemption of Shares, including expenses
attributable to a program of periodic issue; charges and expenses of
custodians, transfer agents, dividend disbursing agents, shareholder servicing
agents, and registrars; printing and mailing costs, auditing, accounting, and
legal expenses; reports to shareholders and governmental officers and
commissions; expenses of meetings of Trustees and shareholders and proxy
solicitations therefor; insurance expenses; association membership dues and
such nonrecurring items as may arise, including all losses and liabilities
incurred in administering the Trust and the Funds. Each Fund will also pay
its allocable share of such extraordinary expenses as may arise including
expenses incurred in connection with litigation, proceedings, and claims and
the legal obligations of the Trust to indemnify its officers and Trustees and
agents with respect thereto.
4. Each of the Funds shall pay to Adviser, for all services rendered to
each Fund by Adviser hereunder, the fees set forth in the exhibits attached
hereto.
5. The net asset value of each Fund's Shares as used herein will be
calculated to the nearest 1/10th of one cent.
6. The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume expenses of
one or more of the Funds) to the extent that any Fund's expenses exceed such
lower expense limitation as the Adviser may, by notice to the Fund,
voluntarily declare to be effective.
7. This Contract shall begin for each Fund as of the date of execution
of the applicable exhibit and shall continue in effect with respect to each
Fund presently set forth on an exhibit (and any subsequent Funds added
pursuant to an exhibit during the initial term of this Contract) for two years
from the date of this Contract set forth above and thereafter for successive
periods of one year, subject to the provisions for termination and all of the
other terms and conditions hereof if: (a) such continuation shall be
specifically approved at least annually by the vote of a majority of the
Trustees of the Trust, including a majority of the Trustees who are not
parties to this Contract or interested persons of any such party (other than
as Trustees of the Trust), cast in person at a meeting called for that
purpose; and (b) Adviser shall not have notified a Fund in writing at least
sixty (60) days prior to the anniversary date of this Contract in any year
thereafter that it does not desire such continuation with respect to that
Fund. If a Fund is added after the first approval by the Trustees as
described above, this Contract will be effective as to that Fund upon
execution of the applicable exhibit and will continue in effect until the next
annual approval of this Contract by the Trustees and thereafter for successive
periods of one year, subject to approval as described above.
8. Notwithstanding any provision in this Contract, it may be terminated
at any time with respect to any Fund, without the payment of any penalty, by
the Trustees of the Trust or by a vote of the shareholders of that Fund on
sixty (60) days' written notice to Adviser.
9. This Contract may not be assigned by Adviser and shall automatically
terminate in the event of any assignment. Adviser may employ or contract with
such other person, persons, corporation, or corporations at its own cost and
expense as it shall determine in order to assist it in carrying out this
Contract.
10. In the absence of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the obligations or duties under this Contract on the
part of Adviser, Adviser shall not be liable to the Trust or to any of the
Funds or to any shareholder for any act or omission in the course of or
connected in any way with rendering services or for any losses that may be
sustained in the purchase, holding, or sale of any security.
11. This Contract may be amended at any time by agreement of the parties
provided that the amendment shall be approved both by the vote of a majority
of the Trustees of the Trust, including a majority of the Trustees who are not
parties to this Contract or interested persons of any such party to this
Contract (other than as Trustees of the Trust) cast in person at a meeting
called for that purpose, and on behalf of a Fund by a majority of the
outstanding voting securities of such Fund.
12. The Adviser acknowledges that all sales literature for investment
companies (such as the Trust) are subject to strict regulatory oversight. The
Adviser agrees to submit any proposed sales literature for the Trust (or any
Fund) or for itself or its affiliates which mentions the Trust (or any Fund)
to the Trust's distributor for review and filing with the appropriate
regulatory authorities prior to the public release of any such sales
literature, provided, however, that nothing herein shall be construed so as to
create any obligation or duty on the part of the Adviser to produce sales
literature for the Trust (or any Fund). The Trust agrees to cause its
distributor to promptly review all such sales literature to ensure compliance
with relevant requirements, to promptly advise Adviser of any deficiencies
contained in such sales literature, to promptly file complying sales
literature with the relevant authorities, and to cause such sales literature
to be distributed to prospective investors in the Trust.
13. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees
that the obligations pursuant to this Contract of a particular Fund and of the
Trust with respect to that particular Fund be limited solely to the assets of
that particular Fund, and Adviser shall not seek satisfaction of any such
obligation from any other Fund, the shareholders of any Fund, the Trustees,
officers, employees or agents of the Trust, or any of them.
14. This Contract shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
15. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.
EXHIBIT A
to the
Investment Advisory Contract
Government Money Market Fund
For all services rendered by Adviser hereunder, the above-named Fund of
the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to .40 of 1% of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of .40 of 1% applied to the
daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 1st day of September, 1993.
Attest: FEDERATED MANAGEMENT
/s/John W. McGonigle By:/s/William D. Dawson
Secretary Executive Vice President
Attest: TRUST FOR FINANCIAL INSTITUTIONS
/s/John W. McGonigle By:/s/John A. Staley, IV
Secretary Vice President
EXHIBIT B
to the
Investment Advisory Contract
Short-Term Government Qualifying Liquidity Fund
For all services rendered by Adviser hereunder, the above-named Fund of
the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to .40 of 1% of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of .40 of 1% applied to the
daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 1st day of June, 1993.
Attest: FEDERATED MANAGEMENT
/s/John W. McGonigle By:/s/William D. Dawson
Secretary Executive Vice President
Attest: TRUST FOR FINANCIAL INSTITUTIONS
/s/John W. McGonigle By:/s/John A. Staley, IV
Secretary Vice President
EXHIBIT C
to the
Investment Advisory Contract
Government Qualifying Liquidity Fund
For all services rendered by Adviser hereunder, the above-named Fund of
the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to .50 of 1% of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of .50 of 1% applied to the
daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 1st day of September, 1993.
Attest: FEDERATED MANAGEMENT
/s/John W. McGonigle By:/s/William D. Dawson
Secretary Executive Vice President
Attest: TRUST FOR FINANCIAL INSTITUTIONS
/s/John W. McGonigle By:/s/John A. Staley, IV
Secretary Vice President
Exhibit 6 under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 1st day of June, 1993, by and between TRUST FOR
FINANCIAL INSTITUTIONS (the "Trust"), a Massachusetts business trust, and
FEDERATED SECURITIES CORP. ("FSC"), a Pennsylvania corporation.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Trust hereby appoints FSC as its agent to sell and distribute
shares of the Trust which may be offered in one or more series (the "Funds")
consisting of one or more classes (the "Classes") of shares (the "Shares") as
described and set forth on one or more exhibits to this Agreement at the
current offering price thereof as described and set forth in the current
Prospectuses of the Trust. FSC hereby accepts such appointment and agrees to
provide such other services for the Trust, if any, and accept such
compensation from the Trust, if any, as set forth in the applicable exhibit to
this Agreement.
2. The sale of any Shares may be suspended without prior notice
whenever in the judgment of the Trust it is in its best interest to do so.
3. Neither FSC nor any other person is authorized by the Trust to give
any information or to make any representation relative to any Shares other
than those contained in the Registration Statement, Prospectuses, or
Statements of Additional Information ("SAIs") filed with the Securities and
Exchange Commission, as the same may be amended from time to time, or in any
supplemental information to said Prospectuses or SAIs approved by the Trust.
FSC agrees that any other information or representations other than those
specified above which it or any dealer or other person who purchases Shares
through FSC may make in connection with the offer or sale of Shares, shall be
made entirely without liability on the part of the Trust. No person or
dealer, other than FSC, is authorized to act as agent for the Trust for any
purpose. FSC agrees that in offering or selling Shares as agent of the Trust,
it will, in all respects, duly conform to all applicable state and federal
laws and the rules and regulations of the National Association of Securities
Dealers, Inc., including its Rules of Fair Practice. FSC will submit to the
Trust copies of all sales literature before using the same and will not use
such sales literature if disapproved by the Trust.
4. This Agreement is effective with respect to each Class as of the date
of execution of the applicable exhibit and shall continue in effect with
respect to each Class presently set forth on an exhibit and any subsequent
Classes added pursuant to an exhibit during the initial term of this Agreement
for one year from the date set forth above, and thereafter for successive
periods of one year if such continuance is approved at least annually by the
Trustees of the Trust including a majority of the members of the Board of
Trustees of the Trust who are not interested persons of the Trust and have no
direct or indirect financial interest in the operation of any Distribution
Plan relating to the Trust or in any related documents to such Plan
("Disinterested Trustees") cast in person at a meeting called for that
purpose. If a Class is added after the first annual approval by the Trustees
as described above, this Agreement will be effective as to that Class upon
execution of the applicable exhibit and will continue in effect until the next
annual approval of this Agreement by the Trustees and thereafter for
successive periods of one year, subject to approval as described above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Trustees or by a majority of the outstanding
voting securities of the particular Fund or Class on not more than sixty (60)
days' written notice to any other party to this Agreement. This Agreement may
be terminated with regard to a particular Fund or Class by FSC on sixty (60)
days' written notice to the Trust.
6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment by FSC as defined in the Investment
Company Act of 1940, provided, however, that FSC may employ such other person,
persons, corporation or corporations as it shall determine in order to assist
it in carrying out its duties under this Agreement.
7. FSC shall not be liable to the Trust 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 by this Agreement.
8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is approved by
the Trustees of the Trust including a majority of the Disinterested Trustees
of the Trust cast in person at a meeting called for that purpose.
9. This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Trust agrees to
indemnify and hold harmless FSC and each person, if any, who controls FSC
within the meaning of Section 15 of the Securities Act of 1933 and Section 20
of the Securities Exchange Act of 1934, as amended, against any and all loss,
liability, claim, damage and expense whatsoever (including but not limited to
any and all expenses whatsoever reasonably incurred in investigating,
preparing or defending against any litigation, commenced or threatened, or any
claim whatsoever) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement,
any Prospectuses or SAI's (as from time to time amended and supplemented) or
the omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon and in conformity
with written information furnished to the Trust about FSC by or on behalf of
FSC expressly for use in the Registration Statement, any Prospectuses and SAIs
or any amendment or supplement thereof.
If any action is brought against FSC or any controlling person thereof
with respect to which indemnity may be sought against the Trust pursuant to
the foregoing paragraph, FSC shall promptly notify the Trust in writing of the
institution of such action and the Trust shall assume the defense of such
action, including the employment of counsel selected by the Trust and payment
of expenses. FSC or any such controlling person thereof shall have the right
to employ separate counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of FSC or such controlling person unless the
employment of such counsel shall have been authorized in writing by the Trust
in connection with the defense of such action or the Trust shall not have
employed counsel to have charge of the defense of such action, in any of which
events such fees and expenses shall be borne by the Trust. Anything in this
paragraph to the contrary notwithstanding, the Trust shall not be liable for
any settlement of any such claim of action effected without its written
consent. The Trust agrees promptly to notify FSC of the commencement of any
litigation or proceedings against the Trust or any of its officers or Trustees
or controlling persons in connection with the issue and sale of Shares or in
connection with the Registration Statement, Prospectuses, or SAIs.
(b) FSC agrees to indemnify and hold harmless the Trust, each of its
Trustees, each of its officers who have signed the Registration Statement and
each other person, if any, who controls the Trust within the meaning of
Section 15 of the Securities Act of 1933, but only with respect to statements
or omissions, if any, made in the Registration Statement or any Prospectus,
SAI, or any amendment or supplement thereof in reliance upon, and in
conformity with, information furnished to the Trust about FSC by or on behalf
of FSC expressly for use in the Registration Statement or any Prospectus, SAI,
or any amendment or supplement thereof. In case any action shall be brought
against the Trust or any other person so indemnified based on the Registration
Statement or any Prospectus, SAI, or any amendment or supplement thereof, and
with respect to which indemnity may be sought against FSC, FSC shall have the
rights and duties given to the Trust, and the Trust and each other person so
indemnified shall have the rights and duties given to FSC by the provisions of
subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Trust or its shareholders to which such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the duties of such person or by reason of the
reckless disregard by such person of the obligations and duties of such person
under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted pursuant
to Section 17 of the Investment Company Act of 1940 for Trustees, officers,
FSC and controlling persons of the Trust by the Trust pursuant to this
Agreement, the Trust is aware of the position of the Securities and Exchange
Commission as set forth in the Investment Company Act Release No. IC-11330.
Therefore, the Trust undertakes that in addition to complying with the
applicable provisions of this Agreement, in the absence of a final decision on
the merits by a court or other body before which the proceeding was brought,
that an indemnification payment will not be made unless in the absence of such
a decision, a reasonable determination based upon factual review has been made
(i) by a majority vote of a quorum of non-party Disinterested Trustees, or
(ii) by independent legal counsel in a written opinion that the indemnitee was
not liable for an act of willful misfeasance, bad faith, gross negligence or
reckless disregard of duties. The Trust further undertakes that advancement
of expenses incurred in the defense of a proceeding (upon undertaking for
repayment unless it is ultimately determined that indemnification is
appropriate) against an officer, Trustee, FSC or controlling person of the
Trust will not be made absent the fulfillment of at least one of the following
conditions: (i) the indemnitee provides security for his undertaking; (ii) the
Trust is insured against losses arising by reason of any lawful advances; or
(iii) a majority of a quorum of non-party Disinterested Trustees or
independent legal counsel in a written opinion makes a factual determination
that there is reason to believe the indemnitee will be entitled to
indemnification.
11. FSC is hereby expressly put on notice of the limitation of liability
as set forth in Article XI of the Declaration of Trust and agrees that the
obligations assumed by the Trust pursuant to this agreement shall be limited
in any case to the Trust and its assets and FSC shall not seek satisfaction of
any such obligation from the shareholders of the Trust, the Trustees,
officers, employees or agents of the Trust, or any of them.
12. If at any time the Shares of any Fund are offered in two or more
Classes, FSC agrees to adopt compliance standards as to when a class of shares
may be sold to particular investors.
13. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
DISTRIBUTOR'S CONTRACT
Exhibit A
TRUST FOR FINANCIAL INSTITUTIONS
Government Money Market Fund
Institutional Shares
In consideration of the mutual covenants set forth in the Distributor's
Contract dated June 1, 1993 between Trust for Financial Institutions (the
"Trust") and Federated Securities Corp., the Trust executes and delivers this
Exhibit on behalf of the fund, and with respect to the separate Class of
Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of September, 1993.
ATTEST: TRUST FOR FINANCIAL INSTITUTIONS
/s/John W. McGonigle By:/s/Richard B. Fisher
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/S. Elliott Cohan By:/s/John A. Staley, IV
Secretary Executive Vice President
(SEAL)
DISTRIBUTOR'S CONTRACT
Exhibit B
TRUST FOR FINANCIAL INSTITUTIONS
Short-Term Government Qualifying Liquidity Fund
Institutional Shares
In consideration of the mutual covenants set forth in the Distributor's
Contract dated June 1, 1993 between Trust for Financial Institutions (the
"Trust") and Federated Securities Corp., the Trust executes and delivers this
Exhibit on behalf of the fund, and with respect to the separate Class of
Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of June, 1993.
ATTEST: TRUST FOR FINANCIAL INSTITUTIONS
/s/John W. McGonigle By:/s/Richard B. Fisher
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/S. Elliott Cohan By:/s/John A. Staley, IV
Secretary Executive Vice President
(SEAL)
DISTRIBUTOR'S CONTRACT
Exhibit C
TRUST FOR FINANCIAL INSTITUTIONS
Government Qualifying Liquidity Fund
Institutional Shares
In consideration of the mutual covenants set forth in the Distributor's
Contract dated June 1, 1993 between Trust for Financial Institutions (the
"Trust") and Federated Securities Corp., the Trust executes and delivers this
Exhibit on behalf of the fund, and with respect to the separate Class of
Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 1st day of September, 1993.
ATTEST: TRUST FOR FINANCIAL INSTITUTIONS
/s/John W. McGonigle By:/s/Richard B. Fisher
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/S. Elliott Cohan By:/s/John A. Staley, IV
Secretary Executive Vice President
(SEAL)
DISTRIBUTOR'S CONTRACT
Exhibit D
TRUST FOR FINANCIAL INSTITUTIONS
Government Money Market Fund
Institutional Service Shares
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 1st day of June, 1993, between Trust for
Financial Institutions (the "Trust") and Federated Securities Corp. ("FSC")
with respect to the Class of the Fund set forth above.
1. The Trust hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the Class. Pursuant to this
appointment FSC is authorized to select a group of brokers ("Brokers") to sell
shares of the above-listed Class ("Shares"), at the current offering price
thereof as described and set forth in the respective prospectuses of the
Trust, and to render administrative support services to the Trust and its
shareholders. In addition, FSC is authorized to select a group of
Administrators ("Administrators") to render administrative support services
to the Trust and its shareholders.
2. Administrative support services may include, but are not limited to,
the following eleven functions: (1) account openings: the Broker or
Administrator communicates account openings via computer terminals located on
the Broker or Administrator's premises; 2) account closings: the Broker or
Administrator communicates account closings via computer terminals; 3) enter
purchase transactions: purchase transactions are entered through the Broker
or Administrator's own personal computer or through the use of a toll-free
telephone number; 4) enter redemption transactions: Broker or Administrator
enters redemption transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges to provide
accounting support for all transactions. Broker or Administrator also wires
funds and receives funds for Trust share purchases and redemptions, confirms
and reconciles all transactions, reviews the activity in the Trust's accounts,
and provides training and supervision of its personnel; 6) interest posting:
Broker or Administrator posts and reinvests dividends to the Trust's accounts;
7) prospectus and shareholder reports: Broker or Administrator maintains and
distributes current copies of prospectuses and shareholder reports; 8)
advertisements: the Broker or Administrator continuously advertises the
availability of its services and products; 9) customer lists: the Broker or
Administrator continuously provides names of potential customers; 10) design
services: the Broker or Administrator continuously designs material to send
to customers and develops methods of making such materials accessible to
customers; and 11) consultation services: the Broker or Administrator
continuously provides information about the product needs of customers.
3. During the term of this Agreement, the Trust will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the annual rate
of up to .25% of the average aggregate net asset value of the Shares held
during the month. For the month in which this Agreement becomes effective or
terminates, there shall be an appropriate proration of any fee payable on the
basis of the number of days that the Agreement is in effect during the month.
4. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Classes' expenses exceed
such lower expense limitation as FSC may, by notice to the Trust, voluntarily
declare to be effective.
5. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC, in its
sole discretion, may pay Brokers and Administrators a periodic fee in respect
of Shares owned from time to time by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid shall
be determined from time to time by FSC in its sole discretion.
6. FSC will prepare reports to the Board of Trustees of the Trust on a
quarterly basis showing amounts expended hereunder including amounts paid to
Brokers and Administrators and the purpose for such payments.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated June 1, 1993 between Trust for Financial Institutions and
Federated Securities Corp., the Trust executes and delivers this Exhibit on
behalf of the Funds, and with respect to the separate Classes of Shares
thereof, set forth in this Exhibit.
Witness the due execution hereof this 1st day of September, 1993.
ATTEST: TRUST FOR FINANCIAL INSTITUTIONS
/s/John W. McGonigle By:/s/Richard B. Fisher
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/S. Elliott Cohan By:/s/John A. Staley, IV
Secretary Executive Vice President
(SEAL)
DISTRIBUTOR'S CONTRACT
Exhibit E
TRUST FOR FINANCIAL INSTITUTIONS
Short-Term Government Qualifying Liquidity Fund
Institutional Service Shares
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 1st day of June, 1993, between Trust for
Financial Institutions (the "Trust") and Federated Securities Corp. ("FSC")
with respect to the Class of the Fund set forth above.
1. The Trust hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the Class. Pursuant to this
appointment FSC is authorized to select a group of brokers ("Brokers") to sell
shares of the above-listed Class ("Shares"), at the current offering price
thereof as described and set forth in the respective prospectuses of the
Trust, and to render administrative support services to the Trust and its
shareholders. In addition, FSC is authorized to select a group of
Administrators ("Administrators") to render administrative support services
to the Trust and its shareholders.
2. Administrative support services may include, but are not limited to,
the following eleven functions: (1) account openings: the Broker or
Administrator communicates account openings via computer terminals located on
the Broker or Administrator's premises; 2) account closings: the Broker or
Administrator communicates account closings via computer terminals; 3) enter
purchase transactions: purchase transactions are entered through the Broker
or Administrator's own personal computer or through the use of a toll-free
telephone number; 4) enter redemption transactions: Broker or Administrator
enters redemption transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges to provide
accounting support for all transactions. Broker or Administrator also wires
funds and receives funds for Trust share purchases and redemptions, confirms
and reconciles all transactions, reviews the activity in the Trust's accounts,
and provides training and supervision of its personnel; 6) interest posting:
Broker or Administrator posts and reinvests dividends to the Trust's accounts;
7) prospectus and shareholder reports: Broker or Administrator maintains and
distributes current copies of prospectuses and shareholder reports; 8)
advertisements: the Broker or Administrator continuously advertises the
availability of its services and products; 9) customer lists: the Broker or
Administrator continuously provides names of potential customers; 10) design
services: the Broker or Administrator continuously designs material to send
to customers and develops methods of making such materials accessible to
customers; and 11) consultation services: the Broker or Administrator
continuously provides information about the product needs of customers.
3. During the term of this Agreement, the Trust will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the annual rate
of up to .25% of the average aggregate net asset value of the Shares held
during the month. For the month in which this Agreement becomes effective or
terminates, there shall be an appropriate proration of any fee payable on the
basis of the number of days that the Agreement is in effect during the month.
4. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Classes' expenses exceed
such lower expense limitation as FSC may, by notice to the Trust, voluntarily
declare to be effective.
5. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC, in its
sole discretion, may pay Brokers and Administrators a periodic fee in respect
of Shares owned from time to time by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid shall
be determined from time to time by FSC in its sole discretion.
6. FSC will prepare reports to the Board of Trustees of the Trust on a
quarterly basis showing amounts expended hereunder including amounts paid to
Brokers and Administrators and the purpose for such payments.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated June 1, 1993 between Trust for Financial Institutions and
Federated Securities Corp., the Trust executes and delivers this Exhibit on
behalf of the Funds, and with respect to the separate Classes of Shares
thereof, set forth in this Exhibit.
Witness the due execution hereof this 1st day of June, 1993.
ATTEST: TRUST FOR FINANCIAL INSTITUTIONS
/s/John W. McGonigle By:/s/Richard B. Fisher
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/S. Elliott Cohan By:/s/John A. Staley, IV
Secretary Executive Vice President
(SEAL)
DISTRIBUTOR'S CONTRACT
Exhibit F
TRUST FOR FINANCIAL INSTITUTIONS
Government Qualifying Liquidity Fund
Institutional Service Shares
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 1st day of June, 1993, between Trust for
Financial Institutions (the "Trust") and Federated Securities Corp. ("FSC")
with respect to the Class of the Fund set forth above.
1. The Trust hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the Class. Pursuant to this
appointment FSC is authorized to select a group of brokers ("Brokers") to sell
shares of the above-listed Class ("Shares"), at the current offering price
thereof as described and set forth in the respective prospectuses of the
Trust, and to render administrative support services to the Trust and its
shareholders. In addition, FSC is authorized to select a group of
Administrators ("Administrators") to render administrative support services
to the Trust and its shareholders.
2. Administrative support services may include, but are not limited to,
the following eleven functions: (1) account openings: the Broker or
Administrator communicates account openings via computer terminals located on
the Broker or Administrator's premises; 2) account closings: the Broker or
Administrator communicates account closings via computer terminals; 3) enter
purchase transactions: purchase transactions are entered through the Broker
or Administrator's own personal computer or through the use of a toll-free
telephone number; 4) enter redemption transactions: Broker or Administrator
enters redemption transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges to provide
accounting support for all transactions. Broker or Administrator also wires
funds and receives funds for Trust share purchases and redemptions, confirms
and reconciles all transactions, reviews the activity in the Trust's accounts,
and provides training and supervision of its personnel; 6) interest posting:
Broker or Administrator posts and reinvests dividends to the Trust's accounts;
7) prospectus and shareholder reports: Broker or Administrator maintains and
distributes current copies of prospectuses and shareholder reports; 8)
advertisements: the Broker or Administrator continuously advertises the
availability of its services and products; 9) customer lists: the Broker or
Administrator continuously provides names of potential customers; 10) design
services: the Broker or Administrator continuously designs material to send
to customers and develops methods of making such materials accessible to
customers; and 11) consultation services: the Broker or Administrator
continuously provides information about the product needs of customers.
3. During the term of this Agreement, the Trust will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the annual rate
of up to .25% of the average aggregate net asset value of the Shares held
during the month. For the month in which this Agreement becomes effective or
terminates, there shall be an appropriate proration of any fee payable on the
basis of the number of days that the Agreement is in effect during the month.
4. FSC may from time-to-time and for such periods as it deems
appropriate reduce its compensation to the extent any Classes' expenses exceed
such lower expense limitation as FSC may, by notice to the Trust, voluntarily
declare to be effective.
5. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC, in its
sole discretion, may pay Brokers and Administrators a periodic fee in respect
of Shares owned from time to time by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid shall
be determined from time to time by FSC in its sole discretion.
6. FSC will prepare reports to the Board of Trustees of the Trust on a
quarterly basis showing amounts expended hereunder including amounts paid to
Brokers and Administrators and the purpose for such payments.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated June 1, 1993 between Trust for Financial Institutions and
Federated Securities Corp., the Trust executes and delivers this Exhibit on
behalf of the Funds, and with respect to the separate Classes of Shares
thereof, set forth in this Exhibit.
Witness the due execution hereof this 1st day of September, 1993.
ATTEST: TRUST FOR FINANCIAL INSTITUTIONS
/s/John W. McGonigle By:/s/Richard B. Fisher
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/S. Elliott Cohan By:/s/John A. Staley, IV
Secretary Executive Vice President
(SEAL)
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
CUSTODIAN CONTRACT
Between
Trust for Financial Institutions
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property
to be Held by It......................................1
2. Duties of the Custodian With Respect to
Property of the Funds Held by the Custodian 1
2.1 Holding Securities 1
2.2 Delivery of Securities 2
2.3 Registration of Securities 4
2.4 Bank Accounts 4
2.5 Payments for Shares 5
2.6 Availability of Federal Funds 5
2.7 Collection of Income 5
2.8 Payment of Fund Moneys 6
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased. 7
2.10 Payments for Repurchases or
Redemptions of Shares of a Fund 7
2.11 Appointment of Agents 7
2.12 Deposit of Fund Assets in
Securities System 7
2.13 Segregated Account 8
2.14 Joint Repurchase Agreements 9
2.15 Ownership Certificates for
Tax Purposes 9
2.16 Proxies 9
2.17 Communications Relating to Fund
Portfolio Securities 9
2.18 Proper Instructions 10
2.19 Actions Permitted Without
Express Authority 10
2.20 Evidence of Authority 10
2.21 Reserved 11
3. Duties of Custodian With Respect to the
Books of Account and Calculation of Net
Asset Value and Net Income 11
4. Records 11
5. Opinion of Funds' Independent Auditors 11
6. Reports to Trust by Independent Auditors 12
7. Compensation of Custodian 12
8. Responsibility of Custodian 12
9. Effective Period, Termination and Amendment 13
10. Successor Custodian 14
11. Interpretive and Additional Provisions 15
12. Massachusetts Law to Apply 15
13. Notices 15
14. Counterparts 15
15. Limitations of Liability 15
CUSTODIAN CONTRACT
This Contract between Trust for Financial Institutions (the "Trust"),
a Massachusetts business trust, on behalf of the portfolios (hereinafter
collectively called the "Funds" and individually referred to as a "Fund") of
the Trust, organized and existing under the laws of the Commonwealth of
Massachusetts, having its principal place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania, 15222-3779, and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian",
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the assets
of each of the Funds of the Trust. Except as otherwise expressly provided
herein, the securities and other assets of each of the Funds shall be
segregated from the assets of each of the other Funds and from all other
persons and entities. The Trust will deliver to the Custodian all
securities and cash owned by the Funds and all payments of income, payments
of principal or capital distributions received by them with respect to all
securities owned by the Funds from time to time, and the cash consideration
received by them for shares of beneficial interest of the Funds as may be
issued or sold from time to time ("Shares"). The Custodian shall not be
responsible for any property of the Funds held or received by the Funds and
not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.18), the Custodian shall from time to time employ one or more
sub-custodians upon the terms specified in the Proper Instructions, provided
that the Custodian shall have no more or less responsibility or liability to
the Trust or any of the Funds on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the Custodian.
2. Duties of the Custodian With Respect to Property of the Funds Held
by the Custodian
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of each Fund all non-cash property, including all
securities owned by each Fund, other than securities which are
maintained pursuant to Section 2.12 in a clearing agency which acts as
a securities depository or in a book-entry system authorized by the
U.S. Department of the Treasury, collectively referred to herein as
"Securities System", or securities which are subject to a joint
repurchase agreement with affiliated funds pursuant to Section 2.14.
The Custodian shall maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory
thereof, and shall conduct periodic physical inspections of
certificates representing stocks, bonds and other securities held by
it under this Contract in such manner as the Custodian shall determine
from time to time to be advisable in order to verify the accuracy of
such inventory. With respect to securities held by any agent
appointed pursuant to Section 2.11 hereof, and with respect to
securities held by any sub-custodian appointed pursuant to Section 1
hereof, the Custodian may rely upon certificates from such agent as to
the holdings of such agent and from such sub-custodian as to the
holdings of such sub-custodian, it being understood that such reliance
in no way relieves the Custodian of its responsibilities under this
Contract. The Custodian will promptly report to the Trust the results
of such inspections, indicating any shortages or discrepancies
uncovered thereby, and take appropriate action to remedy any such
shortages or discrepancies.
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by a Fund held by the Custodian or in a Securities
System account of the Custodian only upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(1) Upon sale of such securities for the account of a Fund and
receipt of payment therefor;
(2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Trust;
(3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
(4) To the depository agent in connection with tender or other
similar offers for portfolio securities of a Fund, in accordance
with the provisions of Section 2.17 hereof;
(5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
(6) To the issuer thereof, or its agent, for transfer into the name
of a Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.11 or into the name or nominee
name of any sub-custodian appointed pursuant to Section 1; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
(7) Upon the sale of such securities for the account of a Fund, to
the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery custom";
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own failure
to act in accordance with the standard of reasonable care or any
higher standard of care imposed upon the Custodian by any
applicable law or regulation if such above-stated standard of
reasonable care were not part of this Contract;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered
to the Custodian;
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
(10) For delivery in connection with any loans of portfolio
securities of a Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified by
the Trust, (b) certificated securities of a description
specified by the Trust, registered in the name of the Fund or in
the name of a nominee of the Custodian referred to in Section
2.3 hereof or in proper form for transfer, or (c) securities of
a description specified by the Trust, transferred through a
Securities System in accordance with Section 2.12 hereof;
(11) For delivery as security in connection with any borrowings
requiring a pledge of assets by a Fund, but only against receipt
of amounts borrowed, except that in cases where additional
collateral is required to secure a borrowing already made,
further securities may be released for the purpose;
(12) For delivery in accordance with the provisions of any agreement
among the Trust or a Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934, as
amended, (the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation
and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions for a Fund;
(13) For delivery in accordance with the provisions of any agreement
among the Trust or a Fund, the Custodian, and a Futures
Commission Merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures
Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transaction for a Fund;
(14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for a Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
in satisfaction of requests by holders of Shares for repurchase
or redemption; and
(15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Trust on behalf of
a Fund signed by an officer of the Trust and certified by its
Secretary or an Assistant Secretary, specifying the securities
to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom
delivery of such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of a
particular Fund or in the name of any nominee of the Fund or of any
nominee of the Custodian which nominee shall be assigned exclusively
to the Fund, unless the Trust has authorized in writing the
appointment of a nominee to be used in common with other registered
investment companies affiliated with the Fund, or in the name or
nominee name of any agent appointed pursuant to Section 2.11 or in the
name or nominee name of any sub-custodian appointed pursuant to
Section 1. All securities accepted by the Custodian on behalf of a
Fund under the terms of this Contract shall be in "street name" or
other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of each Fund, subject only to draft or
order by the Custodian acting pursuant to the terms of this Contract,
and shall hold in such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account of each Fund,
other than cash maintained in a joint repurchase account with other
affiliated funds pursuant to Section 2.14 of this Contract or by a
particular Fund in a bank account established and used in accordance
with Rule 17f-3 under the Investment Company Act of 1940, as amended,
(the "1940 Act"). Funds held by the Custodian for a Fund may be
deposited by it to its credit as Custodian in the Banking Department
of the Custodian or in such other banks or trust companies as it may
in its discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to act as a
custodian under the 1940 Act and that each such bank or trust company
and the funds to be deposited with each such bank or trust company
shall be approved by vote of a majority of the Board of Trustees
("Board") of the Trust. Such funds shall be deposited by the
Custodian in its capacity as Custodian for the Fund and shall be
withdrawable by the Custodian only in that capacity. If requested by
the Trust, the Custodian shall furnish the Trust, not later than
twenty (20) days after the last business day of each month, an
internal reconciliation of the closing balance as of that day in all
accounts described in this section to the balance shown on the daily
cash report for that day rendered to the Trust.
2.5 Payments for Shares. The Custodian shall make such arrangements with
the Transfer Agent of each Fund, as will enable the Custodian to
receive the cash consideration due to each Fund and will deposit into
each Fund's account such payments as are received from the Transfer
Agent. The Custodian will provide timely notification to the Trust
and the Transfer Agent of any receipt by it of payments for Shares of
the respective Fund.
2.6 Availability of Federal Funds. Upon mutual agreement between the
Trust and the Custodian, the Custodian shall make federal funds
available to the Funds as of specified times agreed upon from time to
time by the Trust and the Custodian in the amount of checks, clearing
house funds, and other non-federal funds received in payment for
Shares of the Funds which are deposited into the Funds' accounts.
2.7 Collection of Income.
(1) The Custodian shall collect on a timely basis all income and
other payments with respect to registered securities held
hereunder to which each Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall collect
on a timely basis all income and other payments with respect to
bearer securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent thereof and
shall credit such income, as collected, to each Fund's custodian
account. Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons and
other income items requiring presentation as and when they
become due and shall collect interest when due on securities
held hereunder. The collection of income due the Funds on
securities loaned pursuant to the provisions of Section 2.2 (10)
shall be the responsibility of the Trust. The Custodian will
have no duty or responsibility in connection therewith, other
than to provide the Trust with such information or data as may
be necessary to assist the Trust in arranging for the timely
delivery to the Custodian of the income to which each Fund is
properly entitled.
(2) The Custodian shall promptly notify the Trust whenever income due
on securities is not collected in due course and will provide the
Trust with monthly reports of the status of past due income
unless the parties otherwise agree.
2.8 Payment of Fund Moneys. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the parties,
the Custodian shall pay out moneys of each Fund in the following cases
only:
(1) Upon the purchase of securities, futures contracts or options on
futures contracts for the account of a Fund but only (a) against
the delivery of such securities, or evidence of title to futures
contracts, to the Custodian (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the 1940 Act to act as a custodian and has been
designated by the Custodian as its agent for this purpose)
registered in the name of the Fund or in the name of a nominee of
the Custodian referred to in Section 2.3 hereof or in proper form
for transfer, (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth in
Section 2.12 hereof or (c) in the case of repurchase agreements
entered into between the Trust and any other party, (i) against
delivery of the securities either in certificate form or through
an entry crediting the Custodian's account at the Federal Reserve
Bank with such securities or (ii) against delivery of the receipt
evidencing purchase for the account of the Fund of securities
owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from the
Fund;
(2) In connection with conversion, exchange or surrender of
securities owned by a Fund as set forth in Section 2.2 hereof;
(3) For the redemption or repurchase of Shares of a Fund issued by
the Trust as set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability incurred by a Fund,
including but not limited to the following payments for the
account of the Fund: interest; taxes; management, accounting,
transfer agent and legal fees; and operating expenses of the
Fund, whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
(5) For the payment of any dividends on Shares of a Fund declared
pursuant to the governing documents of the Trust;
(6) For payment of the amount of dividends received in respect of
securities sold short;
(7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the Executive Committee of the Trust on behalf of a Fund
signed by an officer of the Trust and certified by its Secretary
or an Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased.
In any and every case where payment for purchase of securities for the
account of a Fund is made by the Custodian in advance of receipt of
the securities purchased, in the absence of specific written
instructions from the Trust to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of a Fund. From
such funds as may be available for the purpose of repurchasing or
redeeming Shares of a Fund, but subject to the limitations of the
Declaration of Trust and any applicable votes of the Board of the
Trust pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment
to holders of Shares of such Fund who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares including
without limitation through bank drafts, automated clearinghouse
facilities, or by other means. In connection with the redemption or
repurchase of Shares of the Funds, the Custodian is authorized upon
receipt of instructions from the Transfer Agent to wire funds to or
through a commercial bank designated by the redeeming shareholders.
2.11 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act and any
applicable state law or regulation, to act as a custodian, as its
agent to carry out such of the provisions of this Section 2 as the
Custodian may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities System. The Custodian may
deposit and/or maintain securities owned by the Funds in a clearing
agency registered with the Securities and Exchange Commission ("SEC")
under Section 17A of the Exchange Act, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with
applicable Federal Reserve Board and SEC rules and regulations, if
any, and subject to the following provisions:
(1) The Custodian may keep securities of each Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
(2) The records of the Custodian with respect to securities of the
Funds which are maintained in a Securities System shall identify
by book-entry those securities belonging to each Fund;
(3) The Custodian shall pay for securities purchased for the account
of each Fund upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian
to reflect such payment and transfer for the account of the Fund.
The Custodian shall transfer securities sold for the account of a
Fund upon (i) receipt of advice from the Securities System that
payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian
to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Securities System of transfers of
securities for the account of a Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be provided to the
Trust at its request. Upon request, the Custodian shall furnish
the Trust confirmation of each transfer to or from the account of
a Fund in the form of a written advice or notice and shall
furnish to the Trust copies of daily transaction sheets
reflecting each day's transactions in the Securities System for
the account of a Fund.
(4) The Custodian shall provide the Trust with any report obtained by
the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
(5) The Custodian shall have received the initial certificate,
required by Section 9 hereof;
(6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to
a Fund resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from failure
of the Custodian or any such agent to enforce effectively such
rights as it may have against the Securities System; at the
election of the Trust, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that a Fund has not been made whole for any such loss or
damage.
(7) The authorization contained in this Section 2.12 shall not relieve
the Custodian from using reasonable care and diligence in making
use of any Securities System.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts
for and on behalf of each Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.12 hereof, (i) in
accordance with the provisions of any agreement among the Trust, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions for a Fund, (ii) for purpose of
segregating cash or government securities in connection with options
purchased, sold or written for a Fund or commodity futures contracts
or options thereon purchased or sold for a Fund, (iii) for the purpose
of compliance by the Trust or a Fund with the procedures required by
any release or releases of the SEC relating to the maintenance of
segregated accounts by registered investment companies and (iv) for
other proper corporate purposes, but only, in the case of clause (iv),
upon receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board or of the Executive Committee signed by
an officer of the Trust and certified by the Secretary or an Assistant
Secretary, setting forth the purpose or purposes of such segregated
account and declaring such purposes to be proper corporate purposes.
2.14 Joint Repurchase Agreements. Upon the receipt of Proper Instructions,
the Custodian shall deposit and/or maintain any assets of a Fund and
any affiliated funds which are subject to joint repurchase
transactions in an account established solely for such transactions
for the Fund and its affiliated funds. For purposes of this Section
2.14, "affiliated funds" shall include all investment companies and
their portfolios for which subsidiaries or affiliates of Federated
Investors serve as investment advisers, distributors or administrators
in accordance with applicable exemptive orders from the SEC. The
requirements of segregation set forth in Section 2.1 shall be deemed
to be waived with respect to such assets.
2.15 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of a Fund held by it and in
connection with transfers of securities.
2.16 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in
the name of a Fund or a nominee of a Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Trust such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.17 Communications Relating to Fund Portfolio Securities. The Custodian
shall transmit promptly to the Trust all written information
(including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund and
the maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the securities being held
for the Fund. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Trust all written information
received by the Custodian from issuers of the securities whose tender
or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Trust desires to take action with
respect to any tender offer, exchange offer or any other similar
transaction, the Trust shall notify the Custodian in writing at least
three business days prior to the date on which the Custodian is to
take such action. However, the Custodian shall nevertheless exercise
its best efforts to take such action in the event that notification is
received three business days or less prior to the date on which action
is required.
2.18 Proper Instructions. Proper Instructions as used throughout this
Section 2 means a writing signed or initialed by one or more person or
persons as the Board shall have from time to time authorized. Each
such writing shall set forth the specific transaction or type of
transaction involved. Oral instructions will be deemed to be Proper
Instructions if (a) the Custodian reasonably believes them to have
been given by a person previously authorized in Proper Instructions to
give such instructions with respect to the transaction involved, and
(b) the Trust promptly causes such oral instructions to be confirmed
in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of the Trust
accompanied by a detailed description of procedures approved by the
Board, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided
that the Board and the Custodian are satisfied that such procedures
afford adequate safeguards for a Fund's assets.
2.19 Actions Permitted Without Express Authority. The Custodian may in its
discretion, without express authority from the Trust:
(1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Contract, provided that all such payments shall be accounted
for to the Trust in such form that it may be allocated to the
affected Fund;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of a Fund, checks, drafts and
other negotiable instruments; and
(4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of each Fund
except as otherwise directed by the Trust.
2.20 Evidence of Authority. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or other
instrument or paper reasonably believed by it to be genuine and to
have been properly executed on behalf of a Fund. The Custodian may
receive and accept a certified copy of a vote of the Board of the
Trust as conclusive evidence (a) of the authority of any person to act
in accordance with such vote or (b) of any determination of or any
action by the Board pursuant to the Declaration of Trust as described
in such vote, and such vote may be considered as in full force and
effect until receipt by the Custodian of written notice to the
contrary.
2.21 Reserved.
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of the Trust to keep the books
of account of each Fund and/or compute the net asset value per share of the
outstanding Shares of each Fund or, if directed in writing to do so by the
Trust, shall itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also calculate daily
the net income of a Fund as described in the Fund's currently effective
prospectus and Statement of Additional Information ("Prospectus") and shall
advise the Trust and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the Trust to do
so, shall advise the Transfer Agent periodically of the division of such net
income among its various components. The calculations of the net asset
value per share and the daily income of a Fund shall be made at the time or
times described from time to time in the Fund's currently effective
Prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will meet
the obligations of the Trust and the Funds under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder, and specifically including identified cost records used for tax
purposes. All such records shall be the property of the Trust and shall at
all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Trust and
employees and agents of the SEC. In the event of termination of this
Contract, the Custodian will deliver all such records to the Trust, to a
successor Custodian, or to such other person as the Trust may direct. The
Custodian shall supply daily to the Trust a tabulation of securities owned
by a Fund and held by the Custodian and shall, when requested to do so by
the Trust and for such compensation as shall be agreed upon between the
Trust and the Custodian, include certificate numbers in such tabulations
5. Opinion of Funds' Independent Auditors.
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions from
each Fund's independent auditors with respect to its activities hereunder in
connection with the preparation of the Fund's registration statement,
periodic reports, or any other reports to the SEC and with respect to any
other requirements of such Commission.
6. Reports to Trust by Independent Auditors.
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by for each Fund independent auditors on
the accounting system, internal accounting control and procedures for
safeguarding securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities System,
relating to the services provided by the Custodian for the Fund under this
Contract; such reports shall be of sufficient scope and in sufficient
detail, as may reasonably be required by the Trust, to provide reasonable
assurance that any material inadequacies would be disclosed by such
examination and, if there are no such inadequacies, the reports shall so
state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time between
the Trust and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in
carrying out the provisions of this Contract; provided, however, that the
Custodian shall be held to any higher standard of care which would be
imposed upon the Custodian by any applicable law or regulation if such above
stated standard of reasonable care was not part of this Contract. The
Custodian shall be entitled to rely on and may act upon advice of counsel
(who may be counsel for the Trust) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such
advice, provided that such action is not in violation of applicable federal
or state laws or regulations, and is in good faith and without negligence.
Subject to the limitations set forth in Section 15 hereof, the Custodian
shall be kept indemnified by the Trust but only from the assets of the Fund
involved in the issue at hand and be without liability for any action taken
or thing done by it in carrying out the terms and provisions of this
Contract in accordance with the above standards.
In order that the indemnification provisions contained in this
Section 8 shall apply, however, it is understood that if in any case the
Trust may be asked to indemnify or save the Custodian harmless, the Trust
shall be fully and promptly advised of all pertinent facts concerning the
situation in question, and it is further understood that the Custodian will
use all reasonable care to identify and notify the Trust promptly concerning
any situation which presents or appears likely to present the probability of
such a claim for indemnification. The Trust shall have the option to defend
the Custodian against any claim which may be the subject of this
indemnification, and in the event that the Trust so elects it will so notify
the Custodian and thereupon the Trust shall take over complete defense of
the claim, and the Custodian shall in such situation initiate no further
legal or other expenses for which it shall seek indemnification under this
Section. The Custodian shall in no case confess any claim or make any
compromise in any case in which the Trust will be asked to indemnify the
Custodian except with the Trust's prior written consent.
Notwithstanding the foregoing, the responsibility of the Custodian
with respect to redemptions effected by check shall be in accordance with a
separate Agreement entered into between the Custodian and the Trust.
If the Trust requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may,
in the reasonable opinion of the Custodian, result in the Custodian or its
nominee assigned to a Fund being liable for the payment of money or
incurring liability of some other form, the Custodian may request the Trust,
as a prerequisite to requiring the Custodian to take such action, to provide
indemnity to the Custodian in an amount and form satisfactory to the
Custodian.
Subject to the limitations set forth in Section 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee from and
against all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) (referred to herein as authorized charges) incurred
or assessed against it or its nominee in connection with the performance of
this Contract, except such as may arise from it or its nominee's own failure
to act in accordance with the standard of reasonable care or any higher
standard of care which would be imposed upon the Custodian by any applicable
law or regulation if such above-stated standard of reasonable care were not
part of this Contract. To secure any authorized charges and any advances of
cash or securities made by the Custodian to or for the benefit of a Fund for
any purpose which results in the Fund incurring an overdraft at the end of
any business day or for extraordinary or emergency purposes during any
business day, the Trust hereby grants to the Custodian a security interest
in and pledges to the Custodian securities held for the Fund by the
Custodian, in an amount not to exceed 10 percent of the Fund's gross assets,
the specific securities to be designated in writing from time to time by the
Trust or the Fund's investment adviser. Should the Trust fail to make such
designation, or should it instruct the Custodian to make advances exceeding
the percentage amount set forth above and should the Custodian do so, the
Trust hereby agrees that the Custodian shall have a security interest in all
securities or other property purchased for a Fund with the advances by the
Custodian, which securities or property shall be deemed to be pledged to the
Custodian, and the written instructions of the Trust instructing their
purchase shall be considered the requisite description and designation of
the property so pledged for purposes of the requirements of the Uniform
Commercial Code. Should the Trust fail to cause a Fund to repay promptly
any authorized charges or advances of cash or securities, subject to the
provision of the second paragraph of this Section 8 regarding
indemnification, the Custodian shall be entitled to use available cash and
to dispose of pledged securities and property as is necessary to repay any
such advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided,
may be amended at any time by mutual agreement of the parties hereto and may
be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect
not sooner than sixty (60) days after the date of such delivery or mailing;
provided, however that the Custodian shall not act under Section 2.12 hereof
in the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of the Trust has approved the initial use
of a particular Securities System as required in each case by Rule 17f-4
under the 1940 Act; provided further, however, that the Trust shall not
amend or terminate this Contract in contravention of any applicable federal
or state regulations, or any provision of the Declaration of Trust, and
further provided, that the Trust may at any time by action of its Board
(i) substitute another bank or trust company for the Custodian by giving
notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver
for the Custodian by the appropriate banking regulatory agency or upon the
happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the Trust,
the Custodian shall, upon termination, deliver to such successor custodian
at the office of the Custodian, duly endorsed and in the form for transfer,
all securities then held by it hereunder for each Fund and shall transfer to
separate accounts of the successor custodian all of each Fund's securities
held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of the
Board of the Trust, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board shall have been delivered to the
Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or
trust company, which is a "bank" as defined in the 1940 Act, doing business
in Boston, Massachusetts, of its own selection, having an aggregate capital,
surplus, and undivided profits, as shown by its last published report, of
not less than $100,000,000, all securities, funds and other properties held
by the Custodian and all instruments held by the Custodian relative thereto
and all other property held by it under this Contract for each Fund and to
transfer to separate accounts of such successor custodian all of each
Fund's securities held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Trust to procure the certified copy of the vote referred to
or of the Board to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties
and the provisions of this Contract relating to the duties and obligations
of the Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and
the Trust may from time to time agree on such provisions interpretive of or
in addition to the provisions of this Contract as may in their joint opinion
be consistent with the general tenor of this Contract. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Declaration of Trust. No interpretive
or additional provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the Custodian
at: 225 Franklin Street, Boston, Massachusetts, 02110, or to such other
address as the Trust or the Custodian may hereafter specify, shall be deemed
to have been properly delivered or given hereunder to the respective
address.
14. Counterparts.
This Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees
that the obligations and liabilities assumed by the Trust and any Fund
pursuant to this Contract, including, without limitation, any obligation or
liability to indemnify the Custodian pursuant to Section 8 hereof, shall be
limited in any case to the relevant Fund and its assets and that the
Custodian shall not seek satisfaction of any such obligation from the
shareholders of the relevant Fund, from any other Fund or its shareholders
or from the Trustees, Officers, employees or agents of the Trust, or any of
them. In addition, in connection with the discharge and satisfaction of any
claim made by the Custodian against the Trust, for whatever reasons,
involving more than one Fund, the Trust shall have the exclusive right to
determine the appropriate allocations of liability for any such claim
between or among the Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the 1st day of June, 1993.
ATTEST: TRUST FOR FINANCIAL INSTITUTIONS
/s/Robert C. Rosselot By: /s/John A. Staley, IV
Assistant Secretary Vice President
ATTEST: STATE STREET BANK AND TRUST COMPANY
/s/Edward J. McKenzie By /s/Ronald E. Logue
Assistant Secretary Executive Vice President
STATE STREET BANK
CUSTODY /
PORTFOLIO RECORD KEEPING
FEE SCHEDULE
Federated Investors
_ Federated Funds _
I. Custody Services
Maintain Custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make cash
disbursements and report cash transactions. Monitor corporate actions.
ANNUAL FEES
ASSET
First $500 Million 1.0 Basis Point
Excess .5 Basis Point
Minimum fee per year $15,000
Maximum fee per year $90,000
Wire Fees $2.70 per wire
Settlements:
- - Each DTC Commercial Paper $9.00
- - Each DTC Transaction $9.00
- - Each Federal Reserve Book Entry
Transaction (Repo) $4.50
- - Each Repo with Banks Other than
State Street Bank $7.50
- - Each Physical Transaction
(NY/Boston, Private Placement) $21.75
- - Each Option Written/Exercised/Expired $18.75
- - Each Stock Loan Transaction $12.00
- - Each Book Entry Muni (Sub-custody)
Transaction $15.00
- - Index Fund/ETD Cost + 15%
II. Portfolio Record keeping / Fund Accounting Services
Maintain investment ledgers, provide selected portfolio transactions, position
and income reports. Maintain general ledger and capital stock accounts.
Prepare daily trial balance. Provide selected general ledger reports.
Calculate net asset value daily. Securities yield or market value quotations
will be provided to State Street by the fund or via State Street Bank
automated pricing services.
ANNUAL FEES
ASSET
First $250 Million 2.0 Basis Points
Next $250 Million 1.5 Basis Points
Next $250 Million 1.0 Basis Point
Excess .5 Basis Point
Minimum fee per year $39,000
Maximum fee per year $120,000
Additional class of shares per year $12,000
III. Out-Of-Pocket Expenses
Pricing Fees
Telephone
Postage & Insurance
Armored carrier costs
Legal fees
Supplies related to fund records
Processing validation certificates
Forms, envelopes, Xerox copies, supplies, etc.
Travel and setup expenses related to Horizon Remote
Lease and multiplex switching lines related to Horizon Remote
IV. Special Services
Fees for activities of a non-recurring nature such as fund consolidation or
reorganization, extraordinary security shipments and the preparation of
special reports will be subject to negotiation.
V. Coupon Clipping
Monitoring for calls and processing for each monthly issue held
Monthly Charge $5.00
VI. Balance Credit
A balance credit equal to 75% of the average balance in the custodian account
for the month billed times the 30-day T-Bill Rate on the last Monday of the
month billed will be applied against Section I through V above.
VII. Term of the Contract
The parties agree that this fee schedule shall become effective June 1, 1993
and will remain in effect until it is revised as a result of negotiations
initiated by either party.
Exhibit 9 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
FUND ACCOUNTING
AND
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 1st day of June, 1993, by and between
Trust for Financial Institutions, a Massachusetts business trust, having
its principal office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 (the "Trust"), on behalf of the portfolios
(individually referred to herein as a "Fund" and collectively as
"Funds") of the Trust, and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company having its principal office and place of
business at 225 Franklin Street, Boston, Massachusetts 02110 (the
"Company").
WHEREAS, the Trust is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"), with authorized and issued shares of beneficial
interest ("Shares");
WHEREAS, the Trust desires to appoint the Company as its transfer
agent, dividend disbursing agent, and agent in connection with certain
other activities, and the Company desires to accept such appointment;
and
WHEREAS, from time to time the Trust may desire and may instruct
the Company to subcontract for the performance of its duties and
responsibilities hereunder with another agent (the "Agent").
NOW THEREFORE, in consideration of the promises and mutual
covenants herein contained, the parties hereto agree as follows:
SECTION ONE: Fund Accounting.
Article 1. Reserved.
Article 2. Reserved.
Article 3. Reserved.
SECTION TWO: Shareholder Recordkeeping.
Article 4. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement,
the Trust hereby employs and appoints the Company to act as, and the
Company agrees to act as, transfer agent for each Fund's Shares,
dividend disbursing agent, and agent in connection with any
accumulation, open-account or similar plans provided to the shareholders
of any Fund ("Shareholders"), including without limitation any periodic
investment plan or periodic withdrawal program.
Proper Instructions as used throughout Section Two of this
Agreement means a writing signed or initialed by one or more person or
persons as the Board shall have from time to time authorized. Each such
writing shall set forth the specific transaction or type of transaction
involved. Oral instructions will be considered Proper Instructions if
the Company reasonably believes them to have been given by a person
previously authorized in Proper Instructions to give such instructions
with respect to the transaction involved. The Trust and the Company
shall cause all oral instructions to be confirmed in writing. Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Trust and the
Company are satisfied that such procedures afford adequate safeguards
for a Fund's assets. Proper Instructions may only be amended in
writing.
Article 5. Duties of the Company.
The Company agrees that it will perform the following services in
accordance with Proper Instructions as may be provided from time to time
by the Trust as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the
purchase of shares and promptly deliver payment and
appropriate documentation therefore to the custodian of
the relevant Fund (the "Custodian"). The Company shall
notify the Trust and the Custodian on a daily basis of
the total amount of orders and payments so delivered.
(2) Pursuant to purchase orders and in accordance with the
Fund's current Prospectus, the Company shall compute and
issue the appropriate number of shares and hold such
shares in the appropriate Shareholder accounts.
(3) If a Shareholder or its agent requests a certificate, the
Company, as Transfer Agent, shall countersign and mail by
first class mail, a certificate to the Shareholder at his
address as set forth on the transfer books of the Fund,
subject to any Proper Instructions regarding the delivery
of certificates.
(4) In the event that any check or other order for the
purchase of Shares of the Fund is returned unpaid for any
reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited
to his account upon receipt of the check or other order,
promptly mail a debit advice to the Shareholder, and
notify the Trust of its action. In the event that the
amount paid for such Shares exceeds proceeds of the
redemption of such Shares plus the amount of any dividends
paid with respect to such Shares, the Company will receive
reimbursement of such excess from the Fund or its
distributor.
B. Distribution
(1) Upon notification by the Trust of the declaration of any
distribution to Shareholders, the Company shall act as
Dividend Disbursing Agent for the Fund in accordance with
the provisions of its governing document and the then
current Prospectus of the Fund and as such shall prepare
and mail or credit income, capital gain, or any other
payments to Shareholders. As the Dividend Disbursing
Agent, the Company shall, on or before the payment date of
any such distribution, notify the Custodian of the
estimated amount required to pay any portion of said
distribution which is payable in cash and request the
Custodian to make available sufficient funds for the cash
amount to be paid out. The Company shall reconcile the
amounts so requested and the amounts actually received
with the Custodian on a daily basis. If a Shareholder is
entitled to receive additional Shares by virtue of any
such distribution or dividend, appropriate credits shall
be made to the Shareholder's account and certificates
delivered where requested; and
(2) The Company shall maintain records of account for each
Fund and advise the Trust and its Shareholders as to the
foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and
redemption directions and, if such redemption requests
comply with the procedures as may be described in the Fund
Prospectus or set forth in Proper Instructions, deliver
the appropriate instructions therefore to the Custodian.
The Company shall notify the Trust on a daily basis of the
total amount of redemption requests processed and monies
paid to the Company by the Custodian for redemptions.
(2) At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any
redemption, the Company shall pay over or cause to be paid
over in the appropriate manner such monies as instructed
by the redeeming Shareholders, pursuant to procedures
described in the then current Prospectus of the Fund.
(3) If any such certificate or request for redemption does not
comply with the procedures for redemption approved by the
Trust, the Company shall promptly notify the Shareholder
and the Trust of such fact, together with the reason
therefor, and shall effect such redemption at the price
applicable to the date and time of receipt of documents
complying with said procedures.
(4) The Company shall effect transfers of Shares by the
registered owners thereof.
(5) The Company shall identify and process abandoned accounts
and uncashed checks for state escheat requirements on an
annual basis and report such actions to the Trust.
D. Recordkeeping
(1) The Company shall record the issuance of shares of the
Fund and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the
total number of shares of the Fund which are authorized,
based upon data provided to it by the Trust, and issued
and outstanding. The Company shall also provide the Trust
on a regular basis or upon reasonable request with the
total number of Shares which are authorized and issued and
outstanding, but shall have no obligation when recording
the issuance of Shares, except as otherwise set forth
herein, to monitor the issuance of such shares or to take
cognizance of any laws relating to the issue or sale of
such Shares, which functions shall be the sole
responsibility of the Trust.
(2) The Company shall establish and maintain records pursuant
to applicable rules of the SEC relating to the services to
be performed hereunder in the form and manner as agreed to
by the Trust to include a record for each Shareholder's
account of the following:
(a) Name, address and tax identifying number (and whether
such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account,
including dividends paid and date and price for all
transactions;
(d) Any stop or restraining order placed against the
account;
(e) Information with respect to withholdings in the case
of a foreign account or an account for which
withholding is required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application,
dividend address and correspondence relating to the
current maintenance of the account;
(g) Certificate numbers and denominations for any
Shareholder holding certificates;
(h) Any information required in order for the Company to
perform the calculations contemplated or required by
this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the
periods prescribed in said rules as specifically noted
below. Such record retention shall be at the expense of
the Fund, and such records may be inspected by the Trust
at reasonable times. The Company may, at its option at
any time, and shall forthwith upon the Trust's demand,
turn over to the Trust and cease to retain in the
Company's files, records and documents created and
maintained by the Company pursuant to this Agreement,
which are no longer needed by the Company in performance
of its services or for its protection. If not so turned
over to the Trust, such records and documents will be
retained by the Company for six years from the year of
creation, during the first two of which such documents
will be in readily accessible form. At the end of the six
year period, such records and documents will either be
turned over to the Trust or destroyed in accordance with
Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Trust periodically the
following information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in
each state for "blue sky" purposes as determined
according to Proper Instructions delivered from time
to time by the Trust to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption
fees, or other transaction- or sales-related
payments;
(f) Such other information as may be agreed upon from
time to time.
(2) The Company shall prepare in the appropriate form, file
with the Internal Revenue Service and appropriate state
agencies, and, if required, mail to Shareholders, such
notices for reporting dividends and distributions paid as
are required to be so filed and mailed and shall withhold
such sums as are required to be withheld under applicable
federal and state income tax laws, rules and regulations.
(3) In addition to and not in lieu of the services set forth
above, the Company shall:
(a) Perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant,
agent in connection with accumulation, open-account
or similar plans (including without limitation any
periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining
all Shareholder accounts, mailing Shareholder reports
and Prospectuses to current Shareholders, withholding
taxes on accounts subject to back-up or other
withholding (including non-resident alien accounts),
preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms
required with respect to dividends and distributions
by federal authorities for all Shareholders,
preparing and mailing confirmation forms and
statements of account to Shareholders for all
purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts,
preparing and mailing activity statements for
Shareholders, and providing Shareholder account
information; and
(b) provide a system which will enable the Trust to
monitor the total number of Shares of each Fund sold
in each state ("blue sky reporting"). The Trust
shall by Proper Instructions (i) identify to the
Company those transactions and assets to be treated
as exempt from the blue sky reporting for each state
and (ii) verify the classification of transactions
for each state on the system prior to activation and
thereafter monitor the daily activity for each state.
The responsibility of the Company for each Fund's
state blue sky registration status is limited solely
to the recording of the initial classification of
transactions or accounts with regard to blue sky
compliance and the reporting of such transactions and
accounts to the Trust as provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other
correspondence as may from time to time be addressed to
the Company;
(2) The Company shall prepare Shareholder meeting lists, mail
proxy cards and other material supplied to it by the Trust
in connection with Shareholder Meetings of each Fund;
receive, examine and tabulate returned proxies; and
certify the vote of the Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check
forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account
of, such certificates, forms and devices.
Article 6. Duties of the Trust.
A. Compliance
The Trust assumes full responsibility for the preparation,
contents and distribution of each Prospectus of the Fund and
for complying with all applicable requirements of the
Securities Act of 1933, as amended (the "1933 Act"), the 1940
Act and any laws, rules and regulations of government
authorities having jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of
blank Share certificates and from time to time shall renew such
supply upon request of the Company. Such blank Share
certificates shall be properly signed, manually or by
facsimile, if authorized by the Trust and shall bear the seal
of the Trust or facsimile thereof; and notwithstanding the
death, resignation or removal of any officer of the Trust
authorized to sign certificates, the Company may continue to
countersign certificates which bear the manual or facsimile
signature of such officer until otherwise directed by the
Trust.
C. Distributions
The Trust shall promptly inform the Company of the declaration
of any dividend or distribution on account of any Fund's
shares.
Article 7. Fees and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Trust agrees to pay the Company an annual
maintenance fee for each Shareholder account as set out in the
fee schedule, attached hereto. Such fees may be changed from
time to time subject to mutual written agreement between the
Trust and the Company.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust
agrees to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items set out in the
schedule attached hereto. In addition, any other expenses
incurred by the Company at the request or with the consent of
the Trust, will be reimbursed by the appropriate Fund.
C. Payment
The Company shall issue billing notices with respect to fees
and reimbursable expenses on a timely basis, generally within
15 days following the end of the month in which the fees and
expenses have been incurred. The Trust agrees to pay all fees
and reimbursable expenses within 30 days following the receipt
of the respective billing notices.
Article 8. Assignment of Shareholder Recordkeeping.
Except as provided below, neither this Agreement nor any rights
or obligations hereunder may be assigned by either party
without the written consent of the other party.
(1) This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted
successors and assigns.
(2) The Company may without further consent on the part of the
Trust subcontract for the performance hereof with
(A) Boston Financial Data Services, Inc., a Massachusetts
Trust ("BFDS"), which is duly registered as a transfer
agent pursuant to Section 17A(c)(1) of the Securities
Exchange Act of 1934, as amended, or any succeeding
statute ("Section 17A(c)(1)"), or (B) a BFDS subsidiary
duly registered as a transfer agent pursuant to
Section 17A(c)(1), or (C) a BFDS affiliate; provided,
however, that the Company shall be as fully responsible to
the Trust for the acts and omissions of any subcontractor
as it is for its own acts and omissions; or
(3) The Company may without further instruction or consent on
the part of the Trust subcontract for the performance
hereof with Federated Services Company, with offices at
Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779, which is duly registered as a transfer agent
pursuant to Section 17A(c)(1) or any succeeding statutes;
provided, however, that the Company shall in no way be
responsible to the Trust for the acts and omissions of
Federated Services Company; or
(4) The Company shall upon instruction from the Trust
subcontract for the performance hereof with an Agent,
other than Federated Services Company or BFDS as described
in (2) above, which is duly registered as a transfer agent
pursuant to Section 17A(c)(1) or any succeeding statutes;
provided, however, that the Company shall in no way be
responsible to the Trust for the acts and omissions of the
Agent.
SECTION THREE: General Provisions.
Article 9. Documents.
A. In connection with the appointment of the Company under this
Agreement, the Trust shall file with the Company the following
documents:
(1) A copy of the Declaration of Trust and By-Laws of the
Trust and all amendments thereto;
(2) A copy of the resolution of the Board of the Trust
authorizing this Agreement;
(3) Specimens of all forms of outstanding Share certificates
of the Funds in the forms approved by the Board of the
Trust with a certificate of the Secretary of the Trust as
to such approval;
(4) All account application forms and other documents relating
to Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Trust will also furnish from time to time the following
documents:
(1) Each resolution of the Board of the Trust authorizing the
original issuance of each Fund's Shares;
(2) Each Registration Statement filed with the SEC and
amendments thereof and orders relating thereto in effect
with respect to the sale of Shares of any Fund;
(3) A certified copy of each amendment to the governing
document and the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing
officers to give Proper Instructions to the Transfer
Agent;
(5) Specimens of all new Share certificates representing
Shares of any Fund, accompanied by Board resolutions
approving such forms;
(6) Such other certificates, documents or opinions which the
Company may, in its discretion, deem necessary or
appropriate in the proper performance of its duties; and
(7) Revisions to the Prospectus of any Fund.
Article 10. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) it is a trust company duly organized and existing and in
good standing under the laws of the Commonwealth of
Massachusetts.
(2) It is duly qualified to carry on its business in the
Commonwealth of Massachusetts.
(3) It is empowered under applicable laws and by its charter
and by-laws to enter into and perform this Agreement.
(4) All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties
and obligations under this Agreement.
(6) It is in compliance with federal securities law
requirements and in good standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is a business trust duly organized and existing and in
good standing under the laws of the Commonwealth of
Massachusetts.
(2) It is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and perform
this Agreement.
(3) All corporate proceedings required by said Declaration of
Trust and By-Laws have been taken to authorize it to enter
into and perform this Agreement.
(4) The Trust is an open-end investment company registered
under the 1940 Act.
(5) A registration statement under the 1933 Act will be
effective, and appropriate state securities law filings
have been made and will continue to be made, with respect
to all Shares of each Fund being offered for sale.
Article 11. Standard of Care/Indemnification.
A. Standard of Care
The Company shall be held to a standard of reasonable care in
carrying out the provisions of this Agreement; provided,
however that the Company shall be held to any higher standard
of care which would be imposed upon the Company by any
applicable law or regulation even though such stated standard
of care was not part of this Agreement.
B. Indemnification by Trust
The Company shall not be responsible for and the Trust shall
indemnify and hold the Company harmless against any and all
losses, damages, costs, charges, counsel fees, payments,
expenses and liabilities arising out of or attributable to:
(1) The Trust's refusal or failure to comply with the terms of
this Agreement, or which arise out of the Trust's lack of
good faith, negligence or willful misconduct or which
arise out of the breach of any representation or warranty
of the Trust hereunder.
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in
proper form which
(a) are received by the Company or its agents or
subcontractors and furnished to it by or on behalf of
the Trust, its Shareholders or investors regarding
the purchase, redemption or transfer of shares and
Shareholder account information, or
(b) have been prepared and/or maintained by the Trust or
its affiliates or any other person or firm on behalf
of the Trust.
(3) The reliance on, or the carrying out by the Company or its
agents or subcontractors of Proper Instructions of the
Trust.
(4) The offer or sale of Shares in violation of any
requirement under the federal securities laws or
regulations or the securities laws or regulations of any
state that such Shares be registered in such state or in
violation of any stop order or other determination or
ruling by any federal agency or any state with respect to
the offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by
this Article 11.B. from liability for any act or omission
resulting from the Company's lack of good faith, negligence,
willful misconduct, or failure to meet the standard of care set
forth in Article 11.A., above.
C. Indemnification by the Company
The Company shall indemnify and hold each Fund harmless from
and against any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liabilities arising out of
or attributable to any action or failure or omission to act by
the Company as a result of the Company's lack of good faith,
negligence, willful misconduct, or failure to meet the standard
of care set forth in Article 11.A above.
D. Reliance
At any time the Company may apply to any officer of the Trust
for instructions, and may consult with legal counsel with
respect to any matter arising in connection with the services
to be performed by the Company under this Agreement, and the
Company and its agents or subcontractors shall not be liable
and shall be indemnified by the appropriate Fund for any action
reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such
action is not in violation of applicable Federal or state laws
or regulations. The Company, its agents and subcontractors
shall be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper
manual or facsimile signatures of the officers of the Trust,
and the proper countersignature of any former transfer agent or
registrar, or of a co-transfer agent or co-registrar.
E. Notification
In order that the indemnification provisions contained in this
Article 11 shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party
seeking indemnification shall promptly notify the other party
of such assertion, and shall keep the other party advised with
respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to
participate with the party seeking indemnification in the
defense of such claim. The party seeking indemnification shall
in no case confess any claim or make any compromise in any case
in which the other party may be required to indemnify it except
with the other party's prior written consent.
Article 12. Termination of Agreement.
This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other. Should the Trust
exercise its rights to terminate, all out-of-pocket expenses associated
with the movement of records and materials will be borne by the
appropriate Fund. Additionally, the Company reserves the right to
charge for any other reasonable expenses associated with such
termination.
Article 13. Amendment.
This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 14. Reserved.
Article 15. Governing Law. Massachusetts Law to Apply
This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
Article 16. Reserved
Article 17. Reserved.
Article 18. Limitations of Liability of Trustees and Shareholders of
the Trust.
The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an authorized officer of the
Trust, acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any
of them personally, and the obligations of this Agreement are not
binding upon any of the Trustees or Shareholders of the Trust, but bind
only the appropriate property of a Fund or Class as provided in the
Declaration of Trust.
Article 19. Reserved.
Article 20. Reserved.
Article 21. Merger of Agreement.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
Article 22. Reserved.
Article 23. Reserved.
Article 24. Reserved.
Article 25. Severability.
In the event any provision of this Agreement is held illegal, void
or unenforceable, the balance shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in their names and on their behalf under their seals by
and through their duly authorized officers, as of the day and year first
above written.
ATTEST: TRUST FOR FINANCIAL INSTITUTIONS
/s/Robert C. Rosselot_____ By:/s/John A. Staley, IV
Assistant Secretary Vice President
ATTEST: STATE STREET BANK AND TRUST COMPANY
/s/Edward J. McKenzie By:/s/Ronald E. Logue
Assistant Secretary Executive Vice President
STATE STREET BANK/BFDS
TRANSFER
and
DIVIDEND DISBURSING
AGENT
Federated Investors
_ Federated Funds _
I. Annual Maintenance Charge
The annual maintenance charge includes the processing of all
transactions and correspondence. The fee is billable on a monthly basis
at the rate of 1/12 of the annual fee. A charge is made for an account
in the month that an account opens or closes.
Basic Annual per Account Fee
The individual per account charges will be billed as follows:
- Money Market Fund/Daily Accrual $16.65
- Money Market Fund/Sweep Account $10.00
- Fluctuating NAV/Daily Accrual
_ Non FundServe $16.65
_ Non Networked FundServe $14.65
- CDSC/Declared Dividend
_ Non FundServe $13.75
_ Non Networked FundServe $11.75
_ Networking Levels 1, 2, and 4 $11.75
_ Networking Level 3 $9.00
- Declared Dividend
_ Non FundServe $8.75
_ Non Networked FundServe $6.75
_ Networked FundServe Levels 1, 2, 3, and 4 $6.75
Taxpayer Identification Processing (TIN)
The charge for TIN solicitation includes maintenance and
certification and complies to all known government regulations
regarding TIN processing.
- Maintenance $.25 per
item
- Certification $.10 per
item
I. Annual Maintenance Charge (con't.)
Closed Account Fee $.10 per account per month
(No fee assessed for $0 balance open accounts)
Minimum Charges
- The monthly maintenance charge for each fund will be the actual
account fees or $1000, whichever is greater.
- All funds will be subject to the minimum monthly fee of $1,000
except that the minimum will be waived for the initial six months
or until the fund's net assets exceed $50,000,000, whichever
occurs first.
- The "clone" funds will be subject to a monthly minimum fee of
$600.
II. Out-of-Pocket Expenses
Out-of-pocket expenses include but are not limited to: postage, forms,
telephone, microfilm, microfiche, and expenses incurred at the specific
direction of the fund. Postage for mass mailings is due seven days in
advance of the mailing date.
III. Payment
Payment is due thirty days after the date of the invoice.
Exhibit 6(a) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
TRUST FOR FINANCIAL INSTITUTIONS
PLAN
This Plan ("Plan") is adopted as of this 1st day of June, 1993, by the
Board of Trustees of Trust for Financial Institutions (the "Trust"), a
Massachusetts business trust with respect to certain classes of shares
("Classes") of the portfolios of the Trust (the "Funds") set forth in exhibits
hereto.
1. This Plan is adopted pursuant to Rule 12b-1 under the Investment
Company Act of 1940 ("Act") so as to allow the Trust to make payments as
contemplated herein, in conjunction with the distribution of Classes of the
Funds ("Shares").
2. This Plan is designed to finance activities of Federated Securities
Corporation ("FSC") principally intended to result in the sale of Shares to
include: (a) providing incentive to broker/dealers ("Brokers") to sell Shares
and to provide administrative support services to the Funds and their
shareholders; (b) compensating other participating financial institutions and
other persons ("Administrators") for providing administrative support services
to the Funds and their shareholders; (c) paying for the costs incurred in
conjunction with advertising and marketing of Shares to include expenses of
preparing, printing and distributing prospectuses and sales literature to
prospective shareholders, Brokers or Administrators, and; (d) other costs
incurred in the implementation and operation of the Plan. In compensation for
services provided pursuant to this Plan, FSC will be paid a fee in respect of
the following Classes set forth on the applicable exhibit.
3. Any payment to FSC in accordance with this Plan will be made pursuant
to the "Distributor's Contract" entered into by the Trust and FSC. Any
payments made by FSC to Brokers and Administrators with funds received as
compensation under this Plan will be made pursuant to the "Rule 12b-1
Agreement" entered into by FSC and the Broker or Administrator.
4. FSC has the right (i) to select, in its sole discretion, the Brokers
and Administrators to participate in the Plan and (ii) to terminate without
cause and in its sole discretion any Rule 12b-1 Agreement.
5. Quarterly in each year that this Plan remains in effect, FSC shall
prepare and furnish to the Board of Trustees of the Trust, and the Board of
Trustees shall review, a written report of the amounts expended under the Plan
and the purpose for which such expenditures were made.
6. This Plan shall become effective with respect to each Class (i) after
approval by majority votes of: (a) the Trust's Board of Trustees; (b) the
Disinterested Trustees of the Trust, cast in person at a meeting called for
the purpose of voting on the Plan; and (c) the outstanding voting securities
of the particular Class, as defined in Section 2(a)(42) of the Act and
(ii) upon execution of an exhibit adopting this Plan with respect to such
Class.
7. This Plan shall remain in effect with respect to each Class presently
set forth on an exhibit and any subsequent Classes added pursuant to an
exhibit during the initial year of this Plan for the period of one year from
the date set forth above and may be continued thereafter if this Plan is
approved with respect to each Class at least annually by a majority of the
Trust's Board of Trustees and a majority of the Disinterested Trustees, cast
in person at a meeting called for the purpose of voting on such Plan. If this
Plan is adopted with respect to a Class after the first annual approval by the
Trustees as described above, this Plan will be effective as to that Class upon
execution of the applicable exhibit pursuant to the provisions of
paragraph 6(ii) above and will continue in effect until the next annual
approval of this Plan by the Trustees and thereafter for successive periods of
one year subject to approval as described above.
8. All material amendments to this Plan must be approved by a vote of
the Board of Trustees of the Trust and of the Disinterested Trustees, cast in
person at a meeting called for the purpose of voting on it.
9. This Plan may not be amended in order to increase materially the
costs which the Classes may bear for distribution pursuant to the Plan without
being approved by a majority vote of the outstanding voting securities of the
Classes as defined in Section 2(a)(42) of the Act.
10. This Plan may be terminated with respect to a particular Class at
any time by: (a) a majority vote of the Disinterested Trustees; or (b) a vote
of a majority of the outstanding voting securities of the particular Class as
defined in Section 2(a)(42) of the Act; or (c) by FSC on 60 days notice to the
Trust.
11. While this Plan shall be in effect, the selection and nomination of
Disinterested Trustees of the Trust shall be committed to the discretion of
the Disinterested Trustees then in office.
12. All agreements with any person relating to the implementation of
this Plan shall be in writing and any agreement related to this Plan shall be
subject to termination, without penalty, pursuant to the provisions of
Paragraph 10 herein.
13. This Plan shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania.
EXHIBIT A
to the
Plan
TRUST FOR FINANCIAL INSTITUTIONS
Government Money Market Fund -
Institutional Service Shares
This Plan is adopted by Trust for Financial Institutions with respect to
the Class of Shares of the portfolio(s) of the Trust set forth above.
In compensation for the services provided pursuant to this Plan, FSC will
be paid a monthly fee computed at the annual rate of up to .25 of 1% of the
average aggregate net asset value of the Institutional Service Shares of
Government Money Market Fund held during the month.
Witness the due execution hereof this 1st day of September, 1993.
TRUST FOR FINANCIAL INSTITUTIONS
By:/s/Richard B. Fisher
President
EXHIBIT B
to the
Plan
TRUST FOR FINANCIAL INSTITUTIONS
Short-Term Government Qualifying Liquidity Fund -
Institutional Service Shares
This Plan is adopted by Trust for Financial Institutions with respect to
the Class of Shares of the portfolio(s) of the Trust set forth above.
In compensation for the services provided pursuant to this Plan, FSC will
be paid a monthly fee computed at the annual rate of up to .25 of 1% of the
average aggregate net asset value of the Institutional Service Shares of
Short-Term Government Liquidity Fund held during the month.
Witness the due execution hereof this 1st day of June, 1993.
TRUST FOR FINANCIAL INSTITUTIONS
By:/s/Richard B. Fisher
President
EXHIBIT C
to the
Plan
TRUST FOR FINANCIAL INSTITUTIONS
Government Qualifying Liquidity Fund -
Institutional Service Shares
This Plan is adopted by Trust for Financial Institutions with respect to
the Class of Shares of the portfolio(s) of the Trust set forth above.
In compensation for the services provided pursuant to this Plan, FSC will
be paid a monthly fee computed at the annual rate of up to .25 of 1% of the
average aggregate net asset value of the Institutional Service Shares of
Government Liquidity Fund held during the month.
Witness the due execution hereof this 1st day of September, 1993.
TRUST FOR FINANCIAL INSTITUTIONS
By:/s/Richard B. Fisher
President
<TABLE>
<CAPTION>
Schedule for computation of Yield Calculation
<S> <C>
Government Money Market Fund - Institutional Shares
31-Jan-94
This example illustrates the yield quotation for the
seven-day period ended:
Value of a hypothetical pre-existing account
with exactly $1.000000000
one share at the beginning of the base period
Value of same account (excluding capital changes) at end $1.000600089
of the seven-day base period*
$0.000600089
Net change in account value
Base Period Return:
Net change in account value divided by the
beginning account value $0.000600089
($ .000600089 / $1.000000000)
3.13%
Annualized Current Net Yield ( .000600089 x 365/7)
3.18%
Effective Yield ** (.000600089 + 1 ) ^ (365/7) - 1
* This value includes the value of additional shares purchased with
dividends from the original share, and dividends declared on both the
original share and any such additional shares.
** This value may change to include shares purchased with dividends
reinvested on a less frequent basis.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Schedule for computation of Yield Calculation
Government Money Market Fund
- - Institutional Service Shares
31-Jan-94
This example illustrates the yield quotation for the
seven-day period ended:
Value of a hypothetical pre-existing account with exactly $1.000000000
one share at the beginning of the base period
Value of same account (excluding capital changes) at end $1.000580909
of the seven-day base period*
$0.000580909
Net change in account value
Base Period Return:
Net change in account value divided by the
beginning account value $0.000580909
($ .000580909 / $1.000000000)
3.03%
Annualized Current Net Yield ( .000580909 x 365/7)
3.07%
Effective Yield ** (.000580909 + 1 ) ^ (365/7) - 1
* This value includes the value of additional shares purchased with
dividends from the original share, and dividends declared on both the
original share and any such additional shares.
** This value may change to include shares purchased with dividends
reinvested on a less frequent basis.
</TABLE>
[CAPTION]
<TABLE>
<S> <C> <C>
Gov't Liquidity Fund - IS Yield = 2{( $40,825.71 - $0.00)+1)^6-1} =
Computation of SEC Yield 908,197*( $9.93- 0.00000)
As of: January 31, 1994
SEC Yield = 5.49%
Dividend and/or Interest
Inc for the 30 days ended $40,825.71
Net Expenses for $0.00
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 908,197
Maxium offering price $9.93
per share as of 1-31-94
Undistributed net income 0.00000
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Gov't Liquidity Fund: IS Price/
Share= $9.96
Return Since Inception
ending 1/31/94 NAV= $9.93
FYE: March 31
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Begin Capital Reinvest Ending Total
DECLARED: DAILY Reinvest Period Dividend Gain Price Period Ending Invest
PAID: MONTHLY Dates Shares /Share /Share /Share Shares Price Value
10/31/93 100.402 0.017817898 0.00000 $9.94 100.582 $9.94 $999.78
11/30/93 100.582 0.041324589 0.00000 $9.81 101.005 $9.81 $990.86
12/31/93 101.005 0.041059254 0.00000 $9.84 101.427 $9.84 $998.04
1/31/94 101.427 0.042795052 0.00000 $9.93 101.864 $9.93 $1,011.51
</TABLE>
[CAPTION]
<TABLE>
<S> <C> <C> <C> <C>
Gov't Liquidity Fund - SS Yield = 2{( $40,825.71 - $750.00 )+1)^6-1}=
Computation of SEC Yield 908,197 * $9.93 - 0.00000 )
As of: January 31, 1994
SEC Yield = 5.39%
Dividend and/or Interest
Inc for the 30 days ended $40,825.71
Net Expenses for $750.00
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 908,197
Maximum offering price $9.93
per share as of 1-31-94
Undistributed net income 0.00000
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Gov't Liquidity Fund: SS Price/
Share= $9.96
Return Since Inception
ending 1/31/94 NAV= $9.93
</TABLE>
[CAPTION]
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Begin Capital Reinvest Ending Total
DECLARED: DAILY Reinvest Period Dividend Gain Price Period Ending Invest
PAID: MONTHLY Dates Shares /Share /Share /Share Shares Price Value
10/31/93 100.402 0.017443277 0.00000 $9.94 100.578 $9.94 $999.74
11/30/93 100.578 0.040504143 0.00000 $9.81 100.993 $9.81 $990.74
12/31/93 100.993 0.040239070 0.00000 $9.84 101.406 $9.84 $997.84
1/31/94 101.406 0.041971044 0.00000 $9.93 101.835 $9.93 $1,011.22
</TABLE>
