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. 2 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 5 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:
immediately upon filing pursuant to paragraph (b)
X on May 31, 1994, pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on pursuant to paragraph (a) of Rule 485.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on May 16, 1994; or
intends to file the Notice required by that Rule on or about
____________; or
during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.
Copies to:
Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin
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 two portfolios: (1) Government Money
Market Fund, Institutional Shares and Institutional Service Shares and
(2) Government Qualifying Liquidity Fund, Institutional Shares and
Institutional Service Shares 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) Financial Highlights.
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) 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
(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). The Fund
invests 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 May
31, 1994, with the Securities and Exchange Commission. The information contained
in the Combined 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 May 31, 1994
/R>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES--
INSTITUTIONAL SHARES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Repurchase Agreements 4
Loans of Federal Funds 4
Restricted and Illiquid Securities 5
When-Issued and Delayed
Delivery Transactions 5
Investment Risks 5
Investment Limitations 5
Regulatory Compliance 6
TRUST INFORMATION 6
- ------------------------------------------------------
Management of the Trust 6
Board of Trustees 6
Investment Adviser 6
Advisory Fees 6
Adviser's Background 6
Distribution of Institutional Shares 7
Administration of the Fund 7
Administrative Services 7
Shareholder Services Plan 7
Other Payments to Financial Institutions 7
Custodian 8
Transfer Agent and Dividend
Disbursing Agent 8
Legal Counsel 8
Independent Auditor 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
Receipt of Orders 10
Certificates and Confirmations 10
Dividends 10
Capital Gains 10
REDEEMING INSTITUTIONAL SHARES 10
- ------------------------------------------------------
Telephone Redemption 11
Written Requests 11
Signatures 11
Receiving Payment 12
Accounts With Low Balances 12
SHAREHOLDER INFORMATION 12
- ------------------------------------------------------
Voting Rights 12
Massachusetts Partnership Law 12
TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
Pennsylvania Corporate and Personal
Property Taxes 13
PERFORMANCE INFORMATION 13
- ------------------------------------------------------
OTHER CLASSES OF SHARES 14
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES 15
- ------------------------------------------------------
FINANCIAL STATEMENTS 16
- ------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 25
- ------------------------------------------------------
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
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds as applicable).............................. None
Redemption Fee (as a percentage of amount redeemed, if applicable).................. None
Exchange Fee........................................................................ None
ANNUAL INSTITUTIONAL SHARES OPERATING EXPENSES*
(As a percentage of average net assets)
Management Fee (after waiver)(1).................................................... 0.00%
12b-1 Fee........................................................................... None
Total Other Expenses (after expense reimbursement).................................. 0.20%
Shareholder Servicing Fee(2)............................................ 0.05%
Total Institutional Shares Operating Expenses(3).......................... 0.20%
</TABLE>
(1) The 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 Shareholder Servicing Fee is 0.25%.
(3) The Total Institutional Shares Operating Expenses in the table above is
based on expenses expected during the fiscal year ending March 31, 1995. The
total Institutional Shares operating expenses were 0.07% for the period ended
March 31, 1994, and were 0.55% absent the voluntary waiver of the management fee
and the voluntary reimbursement of certain other operating expenses.
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................................................................... $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.
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 may be subject to a 12b-1 fee of up to
0.25%. See "Other Classes of Shares."
GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Independent Auditors' Report on page 25.
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 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* 1.46%
- -------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------
Expenses 0.07%(a)
- -------------------------------------------------------------------
Net investment income 3.23%(a)
- -------------------------------------------------------------------
Expense waiver/reimbursement(b) 0.48%(a)
- -------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------
Net assets, end of period (000 omitted) $219,685
- -------------------------------------------------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
** Reflects operations for the period from October 18, 1993 (date of initial
public investment) to March 31, 1994.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated 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 (the "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.
The prices of fixed income securities fluctuate inversely to the direction of
interest rates.
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 investment
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
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 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 are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
DISTRIBUTION OF 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, 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 ASSETS
MAXIMUM ADMINISTRATIVE FEE 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.
SHAREHOLDER SERVICES PLAN. The Trust has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of the Institutional Shares to obtain certain
personal services for shareholders and the maintenance of shareholder accounts
("shareholder services"). The Trust has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which Federated Shareholder Services will either perform
shareholder services directly or will select financial institutions to perform
shareholder services. Financial institutions will receive fees 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
Trust and Federated Shareholder Services.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Shareholder Services Plan, certain financial
institutions may be compensated by the
Adviser or its affiliates for the continuing investment of customers' assets in
certain funds, including the Fund, advised by those entities. These payments
will be made directly by the distributor or Adviser from their assets, and will
not be made from the assets of the Fund or by the assessment of a sales charge
on Shares.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, with offices in Boston, Massachusetts, is transfer
agent for the Shares of the Fund and dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, 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
Trustees reserve 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 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 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.
(Eastern 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; and 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, Federated Services Company, P.O. Box
8602, Boston, Massachusetts 02266-8602. An order by mail is considered received
after payment by check is converted by the transfer agent's bank, State Street
Bank and Trust Company ("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 (Eastern time), 3:00 p.m.
(Eastern time), and 4:00 p.m. (Eastern time), Monday through Friday, except on:
(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected;
(ii) days during which no Shares are tendered for redemption and no orders to
purchase Shares are received; 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, Federated Services Company maintains a Share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.
Monthly confirmations are sent to report transactions such as purchases and
redemptions, as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. 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. (Eastern time) begin earning dividends that
day. Shares purchased by check begin earning dividends on the day after the
check is converted, upon instruction of the transfer agent, 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
(Eastern 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. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
A daily dividend will be paid on Shares redeemed if the redemption request is
received after 12:00 noon (Eastern time). However, the proceeds are not wired
until the following business day. Redemption requests received before 12:00 noon
(Eastern 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.
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,
which is administered by the Federal Deposit Insurance Corporation
("FDIC");
- a member 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, 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.
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. 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 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 the
shareholders of the Fund, 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 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, as amended, 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
financial publications 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 and shareholder service expenses borne by shares of
each respective class.
The stated advisory fee is the same for both classes of the Fund.
GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Independent Auditors' Report on page 25.
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 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* 1.41%
- -------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------
Expenses 0.14%(a)
- -------------------------------------------------------------------
Net investment income 3.17%(a)
- -------------------------------------------------------------------
Expense waiver/reimbursement(b) 0.63%(a)
- -------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,729
- -------------------------------------------------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
** Reflects operations for the period from October 18, 1993 (date of initial
public investment) to March 31, 1994.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS--28.3%
- -----------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION,
DISCOUNT NOTES*--24.7%
---------------------------------------------------------------
$10,000,000 3.22%, 5/17/94 $ 9,958,856
---------------------------------------------------------------
8,500,000 3.30%, 6/2/94 8,451,692
---------------------------------------------------------------
3,000,000 3.29%, 6/3/94 2,982,728
---------------------------------------------------------------
4,000,000 3.29%, 6/7/94 3,975,508
---------------------------------------------------------------
5,000,000 3.38%, 7/6/94 4,954,933
---------------------------------------------------------------
2,500,000 3.34%, 8/8/94 2,470,079
---------------------------------------------------------------
2,000,000 3.41%, 8/10/94 1,966,595
---------------------------------------------------------------
6,000,000 3.93%, 9/1/94 5,925,548
---------------------------------------------------------------
10,000,000 3.42%, 9/23/94 9,833,750
---------------------------------------------------------------
5,000,000 3.34%, 11/25/94 4,889,594
--------------------------------------------------------------- ------------
Total 55,409,283
--------------------------------------------------------------- ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--1.4%
---------------------------------------------------------------
3,000,000 8.60%, 6/10/94 3,029,219
--------------------------------------------------------------- ------------
STUDENT LOAN MARKETING ASSOCIATION,
FLOATING RATE NOTE***--2.2%
---------------------------------------------------------------
5,000,000 3.76%, 4/5/94 5,004,050
--------------------------------------------------------------- ------------
TOTAL U.S. GOVERNMENT OBLIGATIONS 63,442,552
--------------------------------------------------------------- ------------
U.S. TREASURY OBLIGATIONS--7.6%
- -----------------------------------------------------------------------------------
U.S. TREASURY BILLS--1.7%
---------------------------------------------------------------
4,000,000 3.38%, 11/17/94 3,913,622
--------------------------------------------------------------- ------------
U.S. TREASURY NOTES--5.8%
---------------------------------------------------------------
8,000,000 4.25%, 8/31/94 8,029,199
---------------------------------------------------------------
5,000,000 9.50%, 10/15/94 5,158,483
--------------------------------------------------------------- ------------
Total 13,187,682
--------------------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS 17,101,304
--------------------------------------------------------------- ------------
</TABLE>
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
REPURCHASE AGREEMENTS**--64.1%
- -----------------------------------------------------------------------------------
$ 4,600,000 Barclays Bank PLC, 3.57%, dated 3/31/94, due 4/4/94 $ 4,600,000
---------------------------------------------------------------
9,990,000 Barclays Bank PLC, 3.65%, dated 3/31/94,due 4/4/94 9,990,000
---------------------------------------------------------------
300,000 BT Securities Corp., 3.50%, dated 3/31/94, due 4/1/94 300,000
---------------------------------------------------------------
9,985,000 BT Securities Corp., 3.63%, dated 3/31/94, due 4/4/94 9,985,000
---------------------------------------------------------------
10,000,000 Carroll McEntee & McGinley, Inc., 3.65%, dated 3/31/94, due
4/4/94 10,000,000
---------------------------------------------------------------
10,000,000 Deutsche Bank Government Securities, Inc., 3.62%, dated
3/31/94, due 4/4/94 10,000,000
---------------------------------------------------------------
10,000,000 Fuji Government Securities, Inc., 3.62%, dated 3/31/94, due
4/4/94 10,000,000
---------------------------------------------------------------
50,000,000 J.P. Morgan Securities, Inc., 3.60%, dated 3/31/94, due 4/4/94 50,000,000
---------------------------------------------------------------
10,000,000 Kidder, Peabody & Co., Inc., 3.62%, dated 3/31/94, due 4/4/94 10,000,000
---------------------------------------------------------------
10,000,000 Merrill Lynch, Pierce, Fenner & Smith, Inc., 3.62%, dated
3/31/94, due 4/4/94 10,000,000
---------------------------------------------------------------
10,000,000 PaineWebber, Inc., 3.825%, dated 3/31/94, due 4/4/94 10,000,000
---------------------------------------------------------------
9,000,000 @ Greenwich Capital Markets, Inc., 3.19%, dated 1/28/94, due
4/28/94 9,000,000
--------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS (NOTE 1B) 143,875,000
--------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $224,418,856+
--------------------------------------------------------------- ------------
</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. The
investments in repurchase agreements are through participation in joint
accounts with other Federated Funds.
*** 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
($224,413,911) at March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investment in other securities (Note 2A) $ 80,543,856
- -----------------------------------------------------------------
Investments in repurchase agreements (Note 2B) 143,875,000
- ----------------------------------------------------------------- ------------
Total Investments, at amortized cost and value $224,418,856
- --------------------------------------------------------------------------------
Cash 5,086,885
- --------------------------------------------------------------------------------
Receivable for Fund shares sold 582,388
- --------------------------------------------------------------------------------
Interest receivable 415,405
- --------------------------------------------------------------------------------
Deferred expenses 147,046
- -------------------------------------------------------------------------------- ------------
Total assets 230,650,580
- --------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------
Payable for Fund Shares repurchased 5,610,658
- -----------------------------------------------------------------
Dividends payable 403,395
- -----------------------------------------------------------------
Accrued expenses and other liabilities 222,616
- ----------------------------------------------------------------- ------------
Total liabilities 6,236,669
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 224,413,911 shares of beneficial interest outstanding $224,413,911
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
Institutional Shares ($219,685,420 /219,685,420 shares of beneficial
interest outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
Institutional Service Shares ($4,728,491 / 4,728,491 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
FOR THE PERIOD FROM OCTOBER 18, 1993 (DATE OF INITIAL PUBLIC INVESTMENT) TO
MARCH 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest income (Note 2C) $5,159,817
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------
Investment advisory fee (Note 4) $624,658
- -----------------------------------------------------------------------
Distribution services fee (Note 4) 14,522
- -----------------------------------------------------------------------
Administrative personnel and services fees (Note 4) 138,085
- -----------------------------------------------------------------------
Custodian and recordkeeping fees and expenses 53,950
- -----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 4) 5,635
- -----------------------------------------------------------------------
Legal fees 102
- -----------------------------------------------------------------------
Printing and postage 1,635
- -----------------------------------------------------------------------
Fund share registration costs 16,338
- -----------------------------------------------------------------------
Shareholder service fee-Institutional Shares (Note 4) 17,095
- -----------------------------------------------------------------------
Shareholder service fee-Institutional Service Shares (Note 4) 268
- -----------------------------------------------------------------------
Miscellaneous 1,423
- ----------------------------------------------------------------------- --------
Total expenses 873,711
- -----------------------------------------------------------------------
Deduct--
- ------------------------------------------------------------
Waiver of investment advisory fee (Note 4) $624,658
- ------------------------------------------------------------
Waiver of distribution services fee (Note 4) 8,713
- ------------------------------------------------------------
Reimbursement of other operating expenses (Note 4) 118,810 752,181
- ------------------------------------------------------------ -------- --------
Net expenses 121,530
- ----------------------------------------------------------------------------------- ----------
Net investment income $5,038,287
- ----------------------------------------------------------------------------------- ----------
</TABLE>
(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
MARCH 31, 1994*
------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 5,038,287
- ------------------------------------------------------------------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- -------------------------------------------------------------------------
Institutional Shares (4,854,118)
- -------------------------------------------------------------------------
Institutional Service Shares (184,169)
- ------------------------------------------------------------------------- -----------------
Change in net assets from distributions to shareholders (5,038,287)
- ------------------------------------------------------------------------- -----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- -------------------------------------------------------------------------
Proceeds from sale of shares 1,675,745,362
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 2,176,103
- -------------------------------------------------------------------------
Cost of shares redeemed (1,453,507,554)
- ------------------------------------------------------------------------- -----------------
Change in net assets from Fund share transactions 224,413,911
- ------------------------------------------------------------------------- -----------------
Change in net assets 224,413,911
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------- -----------------
End of period $ 224,413,911
- ------------------------------------------------------------------------- -----------------
</TABLE>
* For the period from October 18, 1993 (date of initial public investment) to
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT MONEY MARKET FUND
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1994
- --------------------------------------------------------------------------------
(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 two portfolios. The financial statements included herein
are only those of Government Money Market Fund (the "Fund"). The financial
statements of the other portfolio is presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held.
The Fund provides two classes of shares ("Institutional Shares" and
"Institutional Service Shares"). Institutional Service Shares will be identical
in all respects to Institutional Shares except that Institutional Service Shares
will be 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. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value its portfolio
securities is in accordance with Rule 2a-7 under the Investment Company Act of 1940, 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 and reverse repurchase agreement investments. Additionally,
procedures have been established by the Fund to monitor on a daily basis, the market
value of each repurchase agreement's underlying collateral to ensure the value at least
equals the principal amount of the repurchase transaction, including accrued interest.
The Fund is also permitted to enter into reverse repurchase agreements, in which the Fund
sells U.S. government securities to financial institutions and agrees to repurchase the
securities at an agreed upon price and date.
The Fund will only enter into repurchase and reverse 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 ("Trustees"). Risks may arise from the potential inability of counterparties to
honor the terms of these agreements. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
</TABLE>
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and estimated expenses are
accrued daily. Bond premium and discount are amortized as required by the Internal
Revenue Code. Distributions to shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Internal
Revenue Code ("Code") applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income. Accordingly, no
provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities and maintains
security positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed delivery
basis are marked to market daily and begin earning interest on the settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering the shares,
have been deferred and are being amortized using the straight-line method over a period
of five years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
INSTITUTIONAL SHARES MARCH 31, 1994*
- ------------------------------------------------------------------------- ----------------
<S> <C>
Shares outstanding, beginning of period --
- -------------------------------------------------------------------------
Shares sold 1,582,439,692
- -------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 2,119,604
- -------------------------------------------------------------------------
Shares redeemed (1,364,873,876)
- ------------------------------------------------------------------------- ----------------
Shares outstanding, end of period 219,685,420
- ------------------------------------------------------------------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
INSTITUTIONAL SERVICE SHARES MARCH 31, 1994*
- ------------------------------------------------------------------------- ----------------
<S> <C>
Shares outstanding, beginning of period --
- -------------------------------------------------------------------------
Shares sold 93,305,670
- -------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 56,499
- -------------------------------------------------------------------------
Shares redeemed (88,633,678)
- ------------------------------------------------------------------------- -------------
Shares outstanding, end of period 4,728,491
- ------------------------------------------------------------------------- -------------
</TABLE>
* For the period from October 18, 1993 (date of initial public investment) to
March 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE--Federated Management, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.40 of 1% of the Fund's average daily net assets. Adviser may voluntarily
choose to waive a portion or all of its fee and reimburse certain operating
expenses of the Fund. Adviser can modify or terminate this voluntary waiver and
reimbursement at any time at its sole discretion.
ADMINISTRATION FEE--Federated Administrative Services, ("FAS") provides the Fund
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the fee is based on
the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during any fiscal year shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
DISTRIBUTION AND SERVICE PLAN--The Trust has adopted a Distribution Plan (the
"Plan"), pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
the terms of the plan, the Fund will
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund, to finance activities intended to result in the sale
of the Fund's 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.
Under the terms of a shareholder service agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25 of 1% of average net assets
for the fund for the period. This fee is to obtain certain personal services for
shareholders and the maintenance of shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEE--Federated Services Company ("FServ")
serves as transfer agent and dividend disbursing agent for the Fund. The fee is
based on the size, type and number of accounts and transactions made by
shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses ($37,513) were borne initially
by Adviser. The Fund has agreed to reimburse the Adviser for the organizational
expenses during the five year period following October 14, 1993 (date the
Trust's portfolio first became effective).
Certain of the Officers and Directors of the Fund are Officers and Directors of
the above companies.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees of Trust for Financial Institutions
and Shareholders of GOVERNMENT MONEY MARKET FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Government Money Market Fund (a Portfolio of
Trust for Financial Institutions) as of March 31, 1994, the related statement of
operations, the statement of changes in net assets and the financial highlights
(see pages 2 and 15 of the prospectus) for the period from October 18, 1993
(date of initial public investment) to March 31, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned at March 31, 1994, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Government Money
Market Fund as of March 31, 1994, the results of its operations, the changes in
its net assets and its financial highlights for the respective stated period in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Boston, Massachusetts
May 13, 1994
[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 Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditor
Deloitte & Touche 125 Summer Street
Boston, Massachusetts 02110
- ------------------------------------------------------------------------------------------------
</TABLE>
GOVERNMENT
MONEY MARKET FUND
INSTITUTIONAL SHARES
PROSPECTUS
A No-Load, Open-End, Diversified
Management Investment Company
May 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3080503A-IS (5/94)
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). The Fund invests 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 May
31, 1994, with the Securities and Exchange Commission. The information contained
in the Combined 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 May 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES--
INSTITUTIONAL SERVICE SHARES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Repurchase Agreements 4
Loans of Federal Funds 4
Restricted and Illiquid Securities 5
When-Issued and Delayed
Delivery Transactions 5
Investment Risks 5
Investment Limitations 5
Regulatory Compliance 6
TRUST INFORMATION 6
- ------------------------------------------------------
Management of the Trust 6
Board of Trustees 6
Investment Adviser 6
Advisory Fees 6
Adviser's Background 6
Distribution of Institutional
Service Shares 7
Distribution and Shareholder
Services Plans 7
Other Payments to Financial Institutions 8
Administration of the Fund 8
Administrative Services 8
Custodian 8
Transfer Agent and Dividend
Disbursing Agent 8
Legal Counsel 8
Independent Auditor 8
Expenses of the Fund and
Institutional Service Shares 8
NET ASSET VALUE 9
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SERVICE SHARES 9
- ------------------------------------------------------
Share Purchases 9
By Wire 9
By Mail 10
Minimum Investment Required 10
What Shares Cost 10
Receipt of Orders 10
Certificates and Confirmations 10
Dividends 11
Capital Gains 11
REDEEMING INSTITUTIONAL SERVICE SHARES 11
- ------------------------------------------------------
Telephone Redemption 11
Written Requests 12
Signatures 12
Receiving Payment 12
Accounts With Low Balances 12
SHAREHOLDER INFORMATION 12
- ------------------------------------------------------
Voting Rights 12
Massachusetts Partnership Law 13
TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
Pennsylvania Corporate and Personal
Property Taxes 13
PERFORMANCE INFORMATION 14
- ------------------------------------------------------
OTHER CLASSES OF SHARES 14
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 15
- ------------------------------------------------------
FINANCIAL STATEMENTS 16
- ------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 25
- ------------------------------------------------------
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
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds as applicable)................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)....................... None
Exchange Fee............................................................................. None
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)......................................................... 0.00%
12b-1 Fee(2)............................................................................. 0.00%
Total Other Expenses (after expense reimbursement)....................................... 0.30%
Shareholder Servicing Fee(3).................................................. 0.15%
Total Institutional Service Shares Operating Expenses(4)........................ 0.30%
</TABLE>
(1) The estimated management fee has been reduced to reflect the 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 Institutional Service Shares have no present intention of paying or
accruing the 12b-1 fee during the fiscal year ending March 31, 1995. If the
Institutional Service Shares were paying or accruing the 12b-1 fee, the class
would be able to pay up to 0.25% of its average daily net assets for the 12b-1
fee. "See Trust Information."
(3) The maximum Shareholder Servicing Fee is 0.25%.
(4) The total Institutional Service Shares Operating Expenses in the table above
is based on expenses expected during the fiscal year ending March 31, 1995. The
total Institutional Service Shares operating expenses were 0.14% for the fiscal
year ended March 31, 1994, and were 0.77% absent the voluntary waivers of the
management fee and a portion of the 12b-1 fee and the voluntary reimbursement of
certain other operating expenses.
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............... $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.
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."
GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Independent Auditors' Report on page 25.
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 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* 1.41%
- -------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------
Expenses 0.14%(a)
- -------------------------------------------------------------------
Net investment income 3.17%(a)
- -------------------------------------------------------------------
Expense waiver/reimbursement(b) 0.63%(a)
- -------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,729
- -------------------------------------------------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
** Reflects operations for the period from October 18, 1993 (date of initial
public investment) to March 31, 1994.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated 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 (the "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.
The prices of fixed income securities fluctuate inversely to the direction of
interest rates.
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 investment
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
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 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 are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
DISTRIBUTION OF 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 AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-l (the "Distribution Plan"),
the Fund may pay to the distributor an amount, computed at an annual rate of .25
of l% of the average daily net asset value of the Institutional Service Shares
to finance any activity which is principally intended to result in the sale of
Shares subject to the Distribution Plan. The distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide sales support services as agents for
their clients or customers.
The Distribution 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 amount or may earn a profit from future payments made by the Fund
under the Distribution Plan.
In addition, the Trust has adopted a Shareholder Services Plan (the "Services
Plan") under which it may make payments up to 0.25 of 1% of the average daily
net asset value of the Institutional Service Shares to obtain certain personal
services for shareholders and the maintenance of shareholder accounts
("shareholder services"). The Trust has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which Federated Shareholder Services will either perform
shareholder services directly or will select financial institutions to perform
shareholder services. Financial institutions will receive fees 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
Trust and Federated Shareholder Services.
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.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Distribution and Shareholder Services Plans,
certain financial institutions may be compensated by the Adviser or its
affiliates for the continuing investment of customers' assets in certain funds,
including the Fund, advised by those entities. These payments will be made
directly by the distributor or Adviser from their assets, and will not be made
from the assets of the Fund or by the assessment of a sales charge on Shares.
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 ASSETS
MAXIMUM ADMINISTRATIVE FEE 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.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, with offices in Boston, Massachusetts, is transfer
agent for the Shares of the Fund and dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, 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 SERVICE 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
Trustees reserve 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.
(Eastern 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; and 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, Federated Services Company, P.O.
Box 8602, Boston, Massachusetts 02266-8602. An order by mail is considered
received after payment by check is converted by the transfer agent's bank, State
Street Bank and Trust Company ("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 (Eastern time), 3:00 p.m.
(Eastern time), and 4:00 p.m. (Eastern time), Monday through Friday, except on:
(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no Shares are tendered for redemption and no orders to
purchase Shares are received; 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, Federated Services Company maintains a Share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.
Monthly confirmations are sent to report transactions such as purchases and
redemptions, as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. 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. (Eastern time) begin earning dividends that
day. Shares purchased by check begin earning dividends on the day after the
check is converted, upon instruction of the transfer agent, 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
(Eastern 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. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
A daily dividend will be paid on Shares redeemed if the redemption request is
received after 12:00 noon (Eastern time). However, the proceeds are not wired
until the following business day. Redemption requests received before 12:00 noon
(Eastern 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.
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,
which is administered by the Federal Deposit Insurance Corporation
("FDIC");
- a member 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, 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.
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. 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. As of
May 9, 1994, Peachtree Capital Corp., Atlanta, GA, owned (66.1%) of the voting
securities of the Fund, and, therefore, may, for certain purposes, be deemed to
control the Fund and be able to affect the outcome of certain matters presented
for a vote of shareholders.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the 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 the
shareholders of the Fund, 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 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, as amended, 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
financial publications 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 and shareholder service expenses borne by shares of
each respective class.
The stated advisory fee is the same for both classes of the Fund.
GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Independent Auditors' Report on page 25.
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 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* 1.46%
- -------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------
Expenses 0.07%(a)
- -------------------------------------------------------------------
Net investment income 3.23%(a)
- -------------------------------------------------------------------
Expense waiver/reimbursement(b) 0.48%(a)
- -------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------
Net assets, end of period (000 omitted) $219,685
- -------------------------------------------------------------------
</TABLE>
* Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
** Reflects operations for the period from October 18, 1993 (date of initial
public investment) to March 31, 1994.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS--28.3%
- -----------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION,
DISCOUNT NOTES*--24.7%
---------------------------------------------------------------
$10,000,000 3.22%, 5/17/94 $ 9,958,856
---------------------------------------------------------------
8,500,000 3.30%, 6/2/94 8,451,692
---------------------------------------------------------------
3,000,000 3.29%, 6/3/94 2,982,728
---------------------------------------------------------------
4,000,000 3.29%, 6/7/94 3,975,508
---------------------------------------------------------------
5,000,000 3.38%, 7/6/94 4,954,933
---------------------------------------------------------------
2,500,000 3.34%, 8/8/94 2,470,079
---------------------------------------------------------------
2,000,000 3.41%, 8/10/94 1,966,595
---------------------------------------------------------------
6,000,000 3.93%, 9/1/94 5,925,548
---------------------------------------------------------------
10,000,000 3.42%, 9/23/94 9,833,750
---------------------------------------------------------------
5,000,000 3.34%, 11/25/94 4,889,594
--------------------------------------------------------------- ------------
Total 55,409,283
--------------------------------------------------------------- ------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--1.4%
---------------------------------------------------------------
3,000,000 8.60%, 6/10/94 3,029,219
--------------------------------------------------------------- ------------
STUDENT LOAN MARKETING ASSOCIATION,
FLOATING RATE NOTE***--2.2%
---------------------------------------------------------------
5,000,000 3.76%, 4/5/94 5,004,050
--------------------------------------------------------------- ------------
TOTAL U.S. GOVERNMENT OBLIGATIONS 63,442,552
--------------------------------------------------------------- ------------
U.S. TREASURY OBLIGATIONS--7.6%
- -----------------------------------------------------------------------------------
U.S. TREASURY BILLS--1.7%
---------------------------------------------------------------
4,000,000 3.38%, 11/17/94 3,913,622
--------------------------------------------------------------- ------------
U.S. TREASURY NOTES--5.9%
---------------------------------------------------------------
8,000,000 4.25%, 8/31/94 8,029,199
---------------------------------------------------------------
5,000,000 9.50%, 10/15/94 5,158,483
--------------------------------------------------------------- ------------
Total 13,187,682
--------------------------------------------------------------- ------------
TOTAL U.S. TREASURY OBLIGATIONS 17,101,304
--------------------------------------------------------------- ------------
</TABLE>
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
REPURCHASE AGREEMENTS**--64.1%
- -----------------------------------------------------------------------------------
$ 4,600,000 Barclays Bank PLC, 3.57%, dated 3/31/94, due 4/4/94 $ 4,600,000
---------------------------------------------------------------
9,990,000 Barclays Bank PLC, 3.65%, dated 3/31/94,due 4/4/94 9,990,000
---------------------------------------------------------------
300,000 BT Securities Corp., 3.50%, dated 3/31/94, due 4/1/94 300,000
---------------------------------------------------------------
9,985,000 BT Securities Corp., 3.63%, dated 3/31/94, due 4/4/94 9,985,000
---------------------------------------------------------------
10,000,000 Carroll McEntee & McGinley, Inc., 3.65%, dated 3/31/94, due
4/4/94 10,000,000
---------------------------------------------------------------
10,000,000 Deutsche Bank Government Securities, Inc., 3.62%, dated
3/31/94, due 4/4/94 10,000,000
---------------------------------------------------------------
10,000,000 Fuji Government Securities, Inc., 3.62%, dated 3/31/94, due
4/4/94 10,000,000
---------------------------------------------------------------
50,000,000 J.P. Morgan Securities, Inc., 3.60%, dated 3/31/94, due 4/4/94 50,000,000
---------------------------------------------------------------
10,000,000 Kidder, Peabody & Co., Inc., 3.62%, dated 3/31/94, due 4/4/94 10,000,000
---------------------------------------------------------------
10,000,000 Merrill Lynch, Pierce, Fenner & Smith, Inc., 3.62%, dated
3/31/94, due 4/4/94 10,000,000
---------------------------------------------------------------
10,000,000 PaineWebber, Inc., 3.825%, dated 3/31/94, due 4/4/94 10,000,000
---------------------------------------------------------------
9,000,000 @ Greenwich Capital Markets, Inc., 3.19%, dated 1/28/94, due
4/28/94 9,000,000
--------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS (NOTE 1B) 143,875,000
--------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $224,418,856+
--------------------------------------------------------------- ------------
</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. The
investments in repurchase agreements are through participation in joint
accounts with other Federated Funds.
*** 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
($224,413,911) at March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investment in other securities (Note 2A) $ 80,543,856
- -----------------------------------------------------------------
Investments in repurchase agreements (Note 2B) 143,875,000
- ----------------------------------------------------------------- ------------
Total Investments, at amortized cost and value $224,418,856
- --------------------------------------------------------------------------------
Cash 5,086,885
- --------------------------------------------------------------------------------
Receivable for Fund shares sold 582,388
- --------------------------------------------------------------------------------
Interest receivable 415,405
- --------------------------------------------------------------------------------
Deferred expenses 147,046
- -------------------------------------------------------------------------------- ------------
Total assets 230,650,580
- --------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------
Payable for Fund Shares repurchased 5,610,658
- -----------------------------------------------------------------
Dividends payable 403,395
- -----------------------------------------------------------------
Accrued expenses and other liabilities 222,616
- ----------------------------------------------------------------- ------------
Total liabilities 6,236,669
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 224,413,911 shares of beneficial interest outstanding $224,413,911
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
Institutional Shares ($219,685,420 /219,685,420 shares of beneficial
interest outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
Institutional Service Shares ($4,728,491 / 4,728,491 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
FOR THE PERIOD FROM OCTOBER 18, 1993 (DATE OF INITIAL PUBLIC INVESTMENT) TO
MARCH 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest income (Note 2C) $5,159,817
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------
Investment advisory fee (Note 4) $624,658
- -----------------------------------------------------------------------
Distribution services fee (Note 4) 14,522
- -----------------------------------------------------------------------
Administrative personnel and services fees (Note 4) 138,085
- -----------------------------------------------------------------------
Custodian and recordkeeping fees and expenses 53,950
- -----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 4) 5,635
- -----------------------------------------------------------------------
Legal fees 102
- -----------------------------------------------------------------------
Printing and postage 1,635
- -----------------------------------------------------------------------
Fund share registration costs 16,338
- -----------------------------------------------------------------------
Shareholder service fee--Institutional Shares (Note 4) 17,095
- -----------------------------------------------------------------------
Shareholder service fee--Institutional Service Shares (Note 4) 268
- -----------------------------------------------------------------------
Miscellaneous 1,423
- ----------------------------------------------------------------------- --------
Total expenses 873,711
- -----------------------------------------------------------------------
Deduct--
- ------------------------------------------------------------
Waiver of investment advisory fee (Note 4) $624,658
- ------------------------------------------------------------
Waiver of distribution services fee (Note 4) 8,713
- ------------------------------------------------------------
Reimbursement of other operating expenses (Note 4) 118,810 752,181
- ------------------------------------------------------------ -------- --------
Net expenses 121,530
- ----------------------------------------------------------------------------------- ----------
Net investment income $5,038,287
- ----------------------------------------------------------------------------------- ----------
</TABLE>
(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
MARCH 31, 1994*
------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 5,038,287
- ------------------------------------------------------------------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- -------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- -------------------------------------------------------------------------
Institutional Shares (4,854,118)
- -------------------------------------------------------------------------
Institutional Service Shares (184,169)
- ------------------------------------------------------------------------- ----------------
Change in net assets from distributions to shareholders (5,038,287)
- ------------------------------------------------------------------------- ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- -------------------------------------------------------------------------
Proceeds from sale of shares 1,675,745,362
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends
declared 2,176,103
- -------------------------------------------------------------------------
Cost of shares redeemed (1,453,507,554)
- ------------------------------------------------------------------------- ----------------
Change in net assets from Fund share transactions 224,413,911
- ------------------------------------------------------------------------- ----------------
Change in net assets 224,413,911
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period --
- ------------------------------------------------------------------------- ----------------
End of period $ 224,413,911
- ------------------------------------------------------------------------- ----------------
</TABLE>
* For the period from October 18, 1993 (date of initial public investment) to
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT MONEY MARKET FUND
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 1994
- --------------------------------------------------------------------------------
(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 two portfolios. The financial statements included herein
are only those of Government Money Market Fund (the "Fund"). The financial
statements of the other portfolio is presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held.
The Fund provides two classes of shares ("Institutional Shares" and
"Institutional Service Shares"). Institutional Service Shares will be identical
in all respects to Institutional Shares except that Institutional Service Shares
will be 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. These
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value its portfolio
securities is in accordance with Rule 2a-7 under the Investment Company Act of 1940, 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 and reverse repurchase agreement investments. Additionally,
procedures have been established by the Fund to monitor on a daily basis, the market
value of each repurchase agreement's underlying collateral to ensure the value at least
equals the principal amount of the repurchase transaction, including accrued interest.
The Fund is also permitted to enter into reverse repurchase agreements, in which the Fund
sells U.S. government securities to financial institutions and agrees to repurchase the
securities at an agreed upon price and date.
The Fund will only enter into repurchase and reverse 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 ("Trustees"). Risks may arise from the potential inability of counterparties to
honor the terms of these agreements. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
</TABLE>
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and estimated expenses are
accrued daily. Bond premium and discount are amortized as required by the Internal
Revenue Code. Distributions to shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Internal
Revenue Code ("Code") applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income. Accordingly, no
provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities and maintains
security positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed delivery
basis are marked to market daily and begin earning interest on the settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering the shares,
have been deferred and are being amortized using the straight-line method over a period
of five years from the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
INSTITUTIONAL SHARES MARCH 31, 1994*
- ------------------------------------------------------------------------- ----------------
<S> <C>
Shares outstanding, beginning of period --
- -------------------------------------------------------------------------
Shares sold 1,582,439,692
- -------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 2,119,604
- -------------------------------------------------------------------------
Shares redeemed (1,364,873,876)
- ------------------------------------------------------------------------- ----------------
Shares outstanding, end of period 219,685,420
- ------------------------------------------------------------------------- ----------------
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
INSTITUTIONAL SERVICE SHARES MARCH 31, 1994*
- ------------------------------------------------------------------------- ----------------
<S> <C>
Shares outstanding, beginning of period --
- -------------------------------------------------------------------------
Shares sold 93,305,670
- -------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 56,499
- -------------------------------------------------------------------------
Shares redeemed (88,633,678)
- ------------------------------------------------------------------------- -------------
Shares outstanding, end of period 4,728,491
- ------------------------------------------------------------------------- -------------
</TABLE>
* For the period from October 18, 1993 (date of initial public investment) to
March 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE--Federated Management, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.40 of 1% of the Fund's average daily net assets. Adviser may voluntarily
choose to waive a portion or all of its fee and reimburse certain operating
expenses of the Fund. Adviser can modify or terminate this voluntary waiver and
reimbursement at any time at its sole discretion.
ADMINISTRATION FEE--Federated Administrative Services, ("FAS") provides the Fund
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the fee is based on
the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during any fiscal year shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
DISTRIBUTION AND SERVICE PLAN--The Trust has adopted a Distribution Plan (the
"Plan"), pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under
the terms of the plan, the Fund will
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
compensate Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund, to finance activities intended to result in the sale
of the Fund's 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.
Under the terms of a shareholder service agreement with Federated Shareholder
Services ("FSS") the Fund will pay FSS up to 0.25 of 1% of average net assets
for the fund for the period. This fee is to obtain certain personal services for
shareholders and the maintenance of shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEE--Federated Services Company ("FServ")
serves as transfer agent and dividend disbursing agent for the Fund. Their fee
is based on the size, type and number of accounts and transactions made by
shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses ($37,513) were borne initially
by Adviser. The Fund has agreed to reimburse the Adviser for the organizational
expenses during the five year period following October 14, 1993 (date the
Trust's portfolio first became effective).
Certain of the Officers and Directors of the Fund are Officers and Directors of
the above companies.
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees of TRUST FOR FINANCIAL INSTITUTIONS
and Shareholders of GOVERNMENT MONEY MARKET FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Government Money Market Fund (a Portfolio of
Trust for Financial Institutions) as of March 31, 1994, the related statement of
operations, the statement of changes in net assets, and the financial highlights
(see pages 2 and 15 of the prospectus) for the period from October 18, 1993
(date of initial public investment) to March 31, 1994. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned at March 31, 1994, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Government Money
Market Fund as of March 31, 1994, the results of its operations, the changes in
its net assets and its financial highlights for the respective stated period in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Boston, Massachusetts
May 13, 1994
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
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditor
Deloitte & Touche 125 Summer Street
Boston, Massachusetts 02110
- ------------------------------------------------------------------------------------------------
</TABLE>
GOVERNMENT
MONEY MARKET FUND
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A No-Load, Open-End, Diversified
Management Investment Company
May 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3080503A-ISS (5/94)
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 (the "Fund"), a portfolio of Trust for Financial
Institutions (the "Trust"), dated May 31, 1994. This Statement is not a
prospectus itself. To receive a copy of the prospectus, write or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated May 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
U.S. Government Obligations 1
Bank Instruments 1
Repurchase Agreements 1
Reverse Repurchase Agreements 2
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 7
- ---------------------------------------------------------------
Adviser to the Fund 7
Advisory Fees 7
Other Related Services 7
ADMINISTRATIVE SERVICES 7
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 7
- ---------------------------------------------------------------
PURCHASING SHARES 8
- ---------------------------------------------------------------
Distribution and Shareholder Services Plans 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 10
- ---------------------------------------------------------------
The Fund's Tax Status 10
Shareholders' Tax Status 10
YIELD 10
- ---------------------------------------------------------------
EFFECTIVE YIELD 10
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 11
- ---------------------------------------------------------------
APPENDIX 12
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio of Trust For Financial Institutions, 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", as the context may require). 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. An 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 investment
adviser to be creditworthy pursuant to guidelines established by the Board of
Trustees (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. 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.
For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings and loan having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items."
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 Services Company,
Federated Administrative Services and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
John F. Donahue+* Chairman Chairman and Trustee, Federated Investors; Chairman and 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.;
One PNC Plaza Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
23rd Floor Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; and Director,
Pittsburgh, PA Ryan Homes, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
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 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 Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace, RAND Corporation, Online Computer Library
Learning Center, Inc., and U.S. Space Foundation; Chairman, National Advisory Council
University of Pittsburgh for Environmental Policy and Technology; Chairman, Czecho Slovak Management
Pittsburgh, PA Center; Director, Trustee, or Managing General Partner of the Funds;
President Emeritus, 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.
Pittsburgh, PA
- --------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Investors Federated Management, and Federated Research; Trustee, Federated
Tower Administrative Services; Trustee, Federated Services Company; President or
Pittsburgh, PA 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 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.; Trustee, Federated Services Company; Chairman, Treasurer,
and Trustee, Federated Administrative Services; Trustee or Director of some
of the Funds; Vice President and Treasurer of the Funds.
- --------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors and Secretary Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Trustee, Federated Services
Pittsburgh, PA Company; Executive Vice President, Secretary, and Trustee, Federated
Administrative Services; Director and Executive Vice President, Federated
Securities Corp.; Vice President and Secretary of the Funds.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<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 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: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.;
High Yield Cash Trust; Insight Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc.-1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain
Funds; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash Trust;
111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II, Stock and Bond
Fund, Inc.; The Boulevard Funds; The Passageway Funds; The Shawmut Funds; Stock
and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Trademark Funds; Trust for Financial Institutions, Trust for
Government Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust
for U.S. Treasury Obligations; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of May 9, 1994, the following shareholders of record owned 5% or more of the
outstanding Institutional Shares of the Fund: Heritage Federal Bank, Kingsport,
TN, owned approximately 8,000,000 Shares (8.4%); Community Savings FA, Riviera
Beach, FL, owned approximately 16,000,000 Shares (16.9%); Stafford Savings Bank,
Stafford Springs, CT, owned approximately 8,638,543 Shares (9.1%); and Imperial
Thrift & Loan Co., Burbank, CA, owned approximately 6,662,873 Shares (7.0%).
As of May 9, 1994, the following shareholders of record owned 5% or more of the
outstanding Institutional Service Shares of the Fund: Peachtree Capital Corp.,
Atlanta, Georgia owned approximately 1,413,386 Shares (66.1%); Theatrical
Entertainment Services, Inc., Los Angeles, CA, owned approximately 200,287
Shares (9.4%); and Local union 1186 IBEW Federal Credit Union, Honolulu, HI,
owned approximately 497,318 Shares (23.3%).
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Federated Management (the "Adviser"). It is a
subsidiary of Federated Investors. All 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 Trustee
of Federated Management; 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. J. Christopher
Donahue, is Trustee, Federated Management; President and Trustee, Federated
Investors; Trustee, Federated Administrative Services; Trustee, Federated
Services Company; and Vice President of the Trust. John W. McGonigle is Vice
President, Secretary, and Trustee Federated Management; Vice President and
Secretary of Federated Research Corp.; Trustee, Vice President, Secretary, and
General Counsel, Federated Investors; Executive Vice President, Secretary and
Trustee, Federated Administrative Services; Director and Executive Vice
President, Federated Securities Corp.; Trustee, Federated Services Company; and
Vice President and Secretary of the Trust.
The Adviser shall not be liable to the Trust, the Fund, or any shareholder for
any losses that may be sustained in the purchase, holding, or sale of any
security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus. For the period from October 18, 1993 (date
of initial public investment) to March 31, 1994, the Adviser earned $624,658, of
which all was voluntarily waived.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1 1/2% per
year of the remaining average net assets, the adviser will reimburse the
Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory 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, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Fund's administrator.
(For purposes of this statement of Additional Information, Federated
Administrative Services and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the "Administrators.") For the period
from October 18, 1993 (date of initial public investment) to March 31, 1994, the
Administrators earned $138,085. John A. Staley, IV, an officer of the Trust, 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., and Federated Administrative Services.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally 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 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 AND SHAREHOLDER SERVICES PLANS
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; 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; and assisting
clients in changing dividend options, account designations, and addresses.
With respect to the Institutional Service Shares class of the Fund, by adopting
the Distribution Plan, the Trustees expect 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
pursuing its investment objectives. By identifying potential investors whose
needs are served by the Fund's objectives, and properly servicing these
accounts, it may be possible to curb sharp fluctuations in rates of redemptions
and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; and (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
For the period from October 18, 1993 (date of initial public investment) to
March 31, 1994, the Fund incurred $14,522 in distribution services fees
(Institution Service Shares only) of which $8,713 was waived. In addition, for
this period, the Fund paid $17,363 in shareholder services fees.
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. Federated Services Company
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
respective prospectuses.
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.
The Fund acquires instruments subject to demand features and standby commitments
to enhance the instruments liquidity. The Fund treats demand features and
standby commitments as part of the underlying instruments, because the Fund does
not acquire them for speculative purposes and cannot transfer them separately
from the underlying 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, as amended,
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.
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 yields for the seven day period ending March 31, 1994, for Institutional
Shares and Institutional Service Shares were 3.35% and 3.25%, respectively.
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 effective yield for the seven day period ending March 31, 1994, for
Institutional Shares and Institutional Service Shares was 3.40% and 3.30%,
respectively.
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 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.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
- - 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 Fund will quote its Lipper Ranking in the
"institutional money market instrument funds" category in advertising and
sales literature.
Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment in the
Fund based on the monthly reinvestment of dividends over a specified period of
time.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD & POOR'S CORPORATION COMMERCIAL PAPER RATING DEFINITIONS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated 'A-1.'
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATING DEFINITIONS
P-1--Issuers (or supporting institutions) rated Prime-1 (P-1) have a superior
ability for repayment of senior short-term debt obligations. P-1 repayment
ability will often be evidenced by many of the following characteristics:
Leading market positions in well established industries.
High rates of return on funds employed.
Conservative capitalization structure with moderate reliance debt and ample
asset protection.
Broad margins in earnings 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 (or supporting institutions) rated Prime-2 (P-2) 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 RATING DEFINITIONS
F-1+--(Exceptionally Strong Credit Quality). Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--(Very Strong Credit Quality). Issues assigned this rating reflect an
assurance 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, but the margin of safety is not as great
as the "F-1+" and "F-1" categories.
3080503B (5/94)
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, THE FEDERAL RESERVE BOARD OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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 May 31, 1994, with
the Securities and Exchange Commission. The information contained in the
Combined 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 May 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES --
INSTITUTIONAL SHARES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS --
INSTITUTIONAL SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Mortgage-Related Securities 4
Collateralized Mortgage
Obligations ("CMO's") 5
Real Estate Mortgage Investment
Conduits ("REMICs") 5
Types of Credit Enhancement 5
Dollar Roll Transactions 6
Repurchase Agreements 6
Reverse Repurchase Agreements 6
Restricted and Illiquid Securities 7
When-Issued and Delayed
Delivery Transactions 7
Portfolio Turnover 7
Lending of Portfolio Securities 7
Investment Limitations 8
FUND INFORMATION 8
- ------------------------------------------------------
Management of the Fund 8
Board of Trustees 8
Investment Adviser 8
Advisory Fees 8
Adviser's Background 8
Distribution of Institutional Shares 9
Administration of the Fund 9
Administrative Services 9
Shareholder Services Plan 10
Other Payments to Financial Institutions 10
Custodian 10
Transfer Agent and
Dividend Disbursing Agent 10
Legal Counsel 10
Independent Auditors 10
Expenses of the Fund and
Institutional Shares 10
NET ASSET VALUE 11
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SHARES 11
- ------------------------------------------------------
Share Purchases 11
By Wire 11
By Mail 11
Minimum Investment Required 12
What Shares Cost 12
Certificates and Confirmations 12
Dividends 12
Capital Gains 12
REDEEMING INSTITUTIONAL SHARES 13
- ------------------------------------------------------
Telephone Redemption 13
Written Requests 13
Signatures 13
Receiving Payment 14
Accounts With Low Balances 14
SHAREHOLDER INFORMATION 14
- ------------------------------------------------------
Voting Rights 14
Massachusetts Partnership Law 14
TAX INFORMATION 15
- ------------------------------------------------------
Federal Income Tax 15
Pennsylvania Corporate and Personal
Property Taxes 15
PERFORMANCE INFORMATION 15
- ------------------------------------------------------
OTHER CLASSES OF SHARES 16
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS --
INSTITUTIONAL SERVICE SHARES 17
- ------------------------------------------------------
FINANCIAL STATEMENTS 18
- ------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 26
- ------------------------------------------------------
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
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds as applicable).............................. None
Redemption Fee (as a percentage of amount redeemed, if applicable).................. None
Exchange Fee........................................................................ None
ANNUAL INSTITUTIONAL SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1).................................................... 0.00%
12b-1 Fee........................................................................... None
Total Other Expenses (after expense reimbursement).................................. 0.40%
Total Shareholder Servicing Fee(2)...................................... 0.00%
Total Institutional Shares Operating Expenses(3).......................... 0.40%
</TABLE>
(1) The management fee has been reduced to reflect the 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 0.50%.
(2) The maximum Shareholder Servicing Fee is 0.25%.
(3) The total Institutional Shares operating expenses in the table above are
based on expenses expected during the fiscal year ending March 31, 1995. The
total Institutional Shares operating expenses were 0.00% for the fiscal year
ended March 31, 1994, and were 1.56% absent the voluntary waiver of the
management fee and the voluntary reimbursement of certain other operating
expenses.
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" AND "TRUST INFORMATION." 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.......... $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.
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 maybe subject to a 12b-1 fee of up to 0.25%. See
"Other Classes of Shares."
GOVERNMENT QUALIFYING LIQUIDITY FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Independent Auditors' Report on page 26.
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
-------------------
<S> <C>
- --------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- --------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------
Net investment income 0.23
- --------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.45)
-----
- --------------------------------------------------------------------
Total from investment operations (0.22)
- --------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------
Dividends to shareholders from net investment income (0.23)
- -------------------------------------------------------------------- -------------------
NET ASSET VALUE, END OF PERIOD $9.55
-----
- --------------------------------------------------------------------
TOTAL RETURN** (1.80)%
- --------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------
Expenses 0.00%(b)
- --------------------------------------------------------------------
Net investment income 5.30%(b)
- --------------------------------------------------------------------
Expense waiver/reimbursement(a) 1.56%(b)
- --------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 5,807
- --------------------------------------------------------------------
Portfolio turnover rate 120%
- --------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1993 (date of initial
public investment) to March 31, 1994.
** 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 4).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated March 31, 1994, which can be obtained free of charge.
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 Board of
Trustees (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 (the "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
investment adviser. The investment 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.
The prices of fixed income securities fluctuate inversely to the direction of
interest rates.
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, as amended.
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 investment
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 on a short-term or a long-term basis 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
- --------------------------------------------------------------------------------
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 Adviser since 1993. Ms. Foody-Malus served as an
Assistant Vice President of the Adviser from 1990 until 1992, and from 1986
until 1989, she served 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 Adviser since 1993. Ms. Nason served as an Assistant Vice
President of the Adviser from 1990 until 1992, and from 1987 until 1990,
she served 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, 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>
MAXIMUM AVERAGE AGGREGATE DAILY NET ASSETS
ADMINISTRATIVE FEE 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.
SHAREHOLDER SERVICES PLAN. The Trust has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of the Institutional Shares to obtain certain
personal services for shareholders and the maintenance of shareholder accounts
("shareholder services"). The Trust has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which Federated Shareholder Services will either perform
shareholder services directly or will select financial institutions to perform
shareholder services. Financial institutions will receive fees 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
Trust and Federated Shareholder Services.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Shareholder Services Plan, certain financial
institutions may be compensated by the Adviser or its affiliates for the
continuing investment of customers' assets in certain funds, including the Fund,
advised by those entities. These payments will be made directly by the
distributor or Adviser from their assets, and will not be made from the assets
of the Fund or by the assessment of a sales charge on Shares.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, with offices in Boston, Massachusetts, is transfer
agent for the Shares of the Fund and dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania and Dickstein, Shapiro and Morin, Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche, Boston, Massachusetts.
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
Trustees reserve the right to allocate certain other expenses to holders of
Shares as it deems appropriate (the "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
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
- --------------------------------------------------------------------------------
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, 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. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Eastern
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: Trust for Financial Institutions--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; and 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,
Federated Services Company, P.O. Box 8602, Boston, Massachusetts 02266-8602.
Orders by mail are considered received after payment by check is converted by
the transfer agents bank, State Street Bank and Trust Company ("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. (Eastern time), Monday through
Friday, except on (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities 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, Federated Services Company 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, upon instruction of
the transfer agent, 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
- --------------------------------------------------------------------------------
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.
(Eastern 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. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
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.
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, which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
- a member 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, 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.
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. As of May 9, 1994, Midland Financial
S&L, Des Moines, IA, owned (91.2%) of the voting Securities of the Fund, and,
therefore, may, for certain purposes, be deemed to control the Fund and be able
to affect the outcome of certain matters presented for a vote of shareholders.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust 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, as amended, 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.
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 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 financial
publications and/or compare its performance to certain indices.
OTHER CLASSES OF SHARES
Institutional Service Shares are sold primarily to financial institutions that
utilize 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 and shareholder service expenses borne by shares of each respective
class.
The stated advisory fee is the same for both classes of shares.
GOVERNMENT QUALIFYING LIQUIDITY FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
As of March 31, 1994, the Institutional Service Shares did not receive any
public investment. Accordingly, there are no Financial Highlights for such
shares. The Financial Highlights presented below are historical information for
Institutional Shares.
Reference is made to the Independent Auditors' Report on page 26.
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
-------------------
<S> <C>
- -----------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- -----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------
Net investment income 0.23
- -----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.45)
- ----------------------------------------------------------------------------- -------------------
Total from investment operations (0.22)
- -----------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.23)
- ----------------------------------------------------------------------------- ------------
NET ASSET VALUE, END OF PERIOD $9.55
- ----------------------------------------------------------------------------- ------------
TOTAL RETURN** (1.80)%
- -----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------
Expenses 0.00%(b)
- -----------------------------------------------------------------------------
Net investment income 5.30%(b)
- -----------------------------------------------------------------------------
Expense waiver/reimbursement(a) 1.56%(b)
- -----------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 5,807
- -----------------------------------------------------------------------------
Portfolio turnover rate 120%
- -----------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1993 (date of initial
public investment) to March 31, 1994.
** 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 4).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated March 31, 1994, which can be obtained free of charge.
GOVERNMENT QUALIFYING LIQUIDITY FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- --------------------------------------------------------------------- ----------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS--96.9%
- -----------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.--96.9%
---------------------------------------------------------------------
$3,670,000 6.00%, 3/1/99 $3,647,063
---------------------------------------------------------------------
2,012,651 5.50%, 9/1/98 1,980,569**
--------------------------------------------------------------------- ----------
TOTAL U.S. GOVERNMENT OBLIGATIONS 5,627,632
--------------------------------------------------------------------- ----------
*REPURCHASE AGREEMENT--20.6%
- -----------------------------------------------------------------------------------
1,195,000 J.P. Morgan Securities, Inc., dated 3/31/94, due 4/4/94
(at amortized cost)(Note 2B) 1,195,000
--------------------------------------------------------------------- ----------
TOTAL INVESTMENTS (IDENTIFIED COST $6,925,152) $6,822,632+
--------------------------------------------------------------------- ----------
</TABLE>
+ The cost for federal tax purposes amounts to $6,925,152. The net unrealized
depreciation on a federal tax basis amounts to $102,520.
* The 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 the repurchase agreement was through participation in joint
accounts with other Federated Funds.
** Includes securities with the market value of $984,060 subject to dollar roll
transactions.
Note: The categories of investments are shown as a percentage of net assets
($5,807,193) at
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------
Investments in other securities (Note 2A) $5,627,632
- --------------------------------------------------------------------
Investments in repurchase agreement (Note 2B) 1,195,000
- -------------------------------------------------------------------- ----------
Total investments, at value (identified and tax cost
$6,925,152) $ 6,822,632
- ---------------------------------------------------------------------------------
Cash 883
- ---------------------------------------------------------------------------------
Interest receivable 23,458
- ---------------------------------------------------------------------------------
Deferred expenses (Note 2G) 5,698
- --------------------------------------------------------------------------------- -----------
Total assets 6,852,671
- ---------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------
Payable for dollar roll transactions (Note 2E) 988,672
- --------------------------------------------------------------------
Dividends payable 28,759
- --------------------------------------------------------------------
Accrued expenses and other liabilities 28,047
- -------------------------------------------------------------------- ----------
Total liabilities 1,045,478
- --------------------------------------------------------------------------------- -----------
NET ASSETS for 608,366 shares of beneficial interest outstanding $ 5,807,193
- --------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------
Paid-in capital $ 6,051,133
- ---------------------------------------------------------------------------------
Unrealized depreciation of investments (102,520)
- ---------------------------------------------------------------------------------
Accumulated net realized loss on investments (141,420)
- --------------------------------------------------------------------------------- -----------
Total $ 5,807,193
- --------------------------------------------------------------------------------- -----------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($5,807,193 / 608,366 shares of beneficial interest outstanding) $9.55
- --------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM OCTOBER 18, 1993 (DATE OF INITIAL PUBLIC INVESTMENT)
TO MARCH 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest income (Note 2C)(net of dollar roll interest expense of $2,485) $ 171,049
- -----------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------
Investment advisory fee (Note 4) $16,145
- ------------------------------------------------------------------------
Administrative personnel and services fees (Note 4) 1,292
- ------------------------------------------------------------------------
Custodian and recordkeeping fees and expenses 28,964
- ------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 4) 76
- ------------------------------------------------------------------------
Fund share registration fees 633
- ------------------------------------------------------------------------
Legal fees 102
- ------------------------------------------------------------------------
Printing and postage 1,856
- ------------------------------------------------------------------------
Taxes 10
- ------------------------------------------------------------------------
Miscellaneous 1,317
- ------------------------------------------------------------------------ -------
Total expenses 50,395
- ------------------------------------------------------------------------
Deduct--
- --------------------------------------------------------------
Waiver of investment advisory fee (Note 4) $16,145
- --------------------------------------------------------------
Reimbursement of other operating expenses (Note 4) 34,250 50,395
- -------------------------------------------------------------- ------- -------
Net expenses 0
- ----------------------------------------------------------------------------------- ----------
Net investment income 171,049
- ----------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (141,420)
- -----------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (102,520)
- ----------------------------------------------------------------------------------- ----------
Net realized and unrealized loss on investments (243,940)
- ----------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $ (72,891)
- ----------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------
Net investment income $ 171,049
- --------------------------------------------------------------------------
Net realized gain (loss) on investments ($141,420 net loss as computed
for federal income tax purposes) (141,420)
- --------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (102,520)
- -------------------------------------------------------------------------- --------------
Change in net assets resulting from operations (72,891)
- -------------------------------------------------------------------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- --------------------------------------------------------------------------
Dividends to shareholders from net investment income (171,049)
- -------------------------------------------------------------------------- --------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- --------------------------------------------------------------------------
Net proceeds from sale of shares 10,250,500
- --------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 846
- --------------------------------------------------------------------------
Cost of shares redeemed (4,200,213)
- -------------------------------------------------------------------------- --------------
Change in net assets from Fund share transactions 6,051,133
- -------------------------------------------------------------------------- --------------
Change in net assets 5,807,193
- --------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------
Beginning of period --
- -------------------------------------------------------------------------- --------------
End of period $ 5,807,193
- -------------------------------------------------------------------------- --------------
</TABLE>
* For the period from October 18, 1993 (date of initial public investment) to
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
- --------------------------------------------------------------------------------
(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 two portfolios. The financial statements included herein
are only those of Government Qualifying Liquidity Fund (the "Fund"). The
financial statements of the other portfolio is presented separately. The assets
of each portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held.
The Fund provides two classes of shares ("Institutional Shares" and
"Institutional Service Shares"). Institutional Service Shares will be identical
in all respects to Institutional Shares except that Institutional Service Shares
will be 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. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by an
independent pricing service. Short-term securities with remaining maturities
of sixty days, or less may be stated at amortized cost, which approximates
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 and reverse
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor on a daily basis, the market value of each
repurchase agreements underlying collateral to ensure the value at least
equals the principal amount of the repurchase transaction, including accrued
interest.
The Fund is also permitted to enter into reverse repurchase agreements, in
which the Fund sells U.S. government securities to financial institutions and
agrees to repurchase the securities at an agreed upon price and date.
The Fund will only enter into repurchase and reverse 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 these agreements. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
GOVERNMENT QUALIFYING LIQUIDITY FUND
- --------------------------------------------------------------------------------
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and estimated
expenses are accrued daily. Bond premium and discount are amortized as
required by the Internal Revenue Code. Distributions to shareholders are
recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code ("Code"), applicable to regulated investment companies
and to distribute to shareholders each year substantially all of its taxable
income. Accordingly, no provisions for federal tax are necessary.
E. 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. The Fund records when-issued
securities and maintains security positions such that sufficient liquid
assets will be available to make payment for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis are marked to
market daily and begin earning interest on the settlement date.
G. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being amortized
using the straight-line method over a period of five years from the Fund's
commencement date.
H. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 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 (427,506)
- -------------------------------------------------------------------------- -------------
Shares outstanding, end of period 608,366
- -------------------------------------------------------------------------- -------------
</TABLE>
* For the period from October 18, 1993 (date of initial public investment) to
March 31, 1994.
GOVERNMENT QUALIFYING LIQUIDITY FUND
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE--Federated Management, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.50 of 1% of the Fund's average daily net assets. Adviser may voluntarily
choose to waive a portion of its fee and reimburse certain operating expenses of
the Fund. Adviser can modify or terminate this voluntary waiver and
reimbursement at any time at its sole discretion.
ADMINISTRATION FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the fee is based on
the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during any fiscal year shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
DISTRIBUTION AND SERVICE PLAN--The Trust has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The
Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's 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.
Under the terms of a shareholder service agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25 of 1% of average net assets
for the fund for the period. This fee is to obtain certain personal services for
shareholders and the maintenance of shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEE--Federated Services Company ("FServ")
serves as transfer agent and dividend disbursing agent for the Fund. Their fee
is based on the size, type and number of accounts and transactions made by
shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses ($38,751) and start-up
administrative service expenses ($39,516) were borne initially by Adviser. 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). For the period ended March 31, 1994, the Fund paid ($1,292) and
($1,317), respectively, pursuant to this agreement.
During the period from October 18, 1993 (date of initial public investment) to
March 31, 1994, the Fund engaged in purchase and sale transactions with other
funds advised by the Adviser pursuant to Rule 17a-7 of the Investment Company
Act of 1940 amounting to $8,456,976 and $3,873,550, respectively. These
purchases and sales were conducted on an arms-length basis and transacted for
cash consideration only, at independent current market prices and without
brokerage commissions, fee or other remuneration.
Certain of the Officers and Directors of the Fund are Officers and Directors of
the above companies.
GOVERNMENT QUALIFYING LIQUIDITY FUND
- --------------------------------------------------------------------------------
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term obligations, for the
period ended March 31, 1994, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------
PURCHASES-- $ 13,884,391
- ------------------------------------------------------------------------------ ------------
SALES-- $ 8,023,238
- ------------------------------------------------------------------------------ ------------
</TABLE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees of TRUST FOR FINANCIAL INSTITUTIONS
and Shareholders of GOVERNMENT QUALIFYING LIQUIDITY FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Government Qualifying Liquidity Fund (a
Portfolio of Trust for Financial Institutions) as of March 31, 1994, the related
statement of operations, the statement of changes in net assets, and the
financial highlights (see pages 2 and 17 of the prospectus) for the period from
October 18, 1993 (date of initial public investment) to March 31, 1994. These
financial statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned at March 31, 1994, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Government
Qualifying Liquidity Fund as of March 31, 1994, the results of its operations,
the changes in its net assets, and its financial highlights for the respective
stated period in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Boston, Massachusetts
May 13, 1994
[THIS PAGE INTENTIONALLY LEFT BLANK]
[THIS PAGE INTENTIONALLY LEFT BLANK]
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
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche 125 Summer Street
Boston, Massachusetts 02110
- ------------------------------------------------------------------------------------------------
</TABLE>
GOVERNMENT QUALIFYING
LIQUIDITY FUND
INSTITUTIONAL SHARES
PROSPECTUS
An Open-End, Diversified
Management Investment Company
May 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3070102A-IS (5/94)
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. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
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 May 31, 1994, with
the Securities and Exchange Commission. The information contained in the
Combined 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 May 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES--
INSTITUTIONAL SERVICE SHARES 1
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES 2
- ------------------------------------------------------
GENERAL INFORMATION 3
- ------------------------------------------------------
INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Mortgage-Related Securities 4
Collateralized Mortgage Obligations
("CMOs") 5
Real Estate Mortgage Investment
Conduits("REMICs") 5
Types of Credit Enhancement 5
Dollar Roll Transactions 6
Repurchase Agreements 6
Reverse Repurchase Agreements 6
Restricted and Illiquid Securities 7
When-Issued and Delayed
Delivery Transactions 7
Portfolio Turnover 7
Lending of Portfolio Securities 7
Investment Limitations 8
FUND INFORMATION 8
- ------------------------------------------------------
Management of the Fund 8
Board of Trustees 8
Investment Adviser 8
Advisory Fees 8
Adviser's Background 8
Distribution of Institutional
Service Shares 9
Distribution and Shareholder
Services Plans 9
Other Payments to Financial
Institutions 10
Administration of the Fund 10
Administrative Services 10
Custodian 11
Transfer Agent and Dividend
Disbursing Agent 11
Legal Counsel 11
Independent Auditors 11
Expenses of the Fund and
Institutional Service Shares 11
NET ASSET VALUE 11
- ------------------------------------------------------
INVESTING IN INSTITUTIONAL SERVICE SHARES 12
- ------------------------------------------------------
Share Purchases 12
By Wire 12
By Mail 12
Minimum Investment Required 12
What Shares Cost 12
Subaccounting Services 13
Certificates and Confirmations 13
Dividends 13
Capital Gains 13
REDEEMING INSTITUTIONAL SERVICE SHARES 13
- ------------------------------------------------------
Telephone Redemption 13
Written Requests 14
Signatures 14
Receiving Payment 14
Accounts with Low Balances 14
SHAREHOLDER INFORMATION 15
- ------------------------------------------------------
Voting Rights 15
Massachusetts Partnership Law 15
TAX INFORMATION 15
- ------------------------------------------------------
Federal Income Tax 15
Pennsylvania Corporate and
Personal Property Taxes 16
PERFORMANCE INFORMATION 16
- ------------------------------------------------------
OTHER CLASSES OF SHARES 17
- ------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES 18
- ------------------------------------------------------
FINANCIAL STATEMENTS 19
- ------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 27
- ------------------------------------------------------
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
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds as applicable)................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)....................... None
Exchange Fee............................................................................. None
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)......................................................... 0.00%
12b-1 Fee (after waiver)(2).............................................................. 0.10%
Total Other Expenses (after expense reimbursement)....................................... 0.40%
Shareholder Servicing Fee(3).................................................... 0.00%
Total Institutional Service Shares Operating Expenses(4).......................... 0.50%
</TABLE>
(1) The management fee has been reduced to reflect the 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 0.50%.
(2) The maximum 12b-1 fee is 0.25%.
(3) The Institutional Service Shares Class has no present intention of paying or
accruing the shareholder servicing fee during the fiscal year ending March 31,
1995. If the Institutional Service Shares Class were paying or accruing the
shareholder servicing fee, the Class would be able to pay up to 0.25% of its
average daily net assets for the shareholder servicing fee, see "Investing in
Institutional Service Shares" and "Trust Information."
(4) The Total Institutional Service Shares Operating Expenses in the table above
are based on expenses expected during the fiscal year ending March 31, 1995. The
total Institutional Service Shares operating expenses were 0.00% for the fiscal
year ended March 31, 1994, and were 1.56% absent the voluntary waiver of the
management fee and the voluntary reimbursement of certain other operating
expenses.
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" AND "TRUST INFORMATION."
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............... $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.
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."
GOVERNMENT QUALIFYING LIQUIDITY FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
As of March 31, 1994, the Institutional Service Shares did not receive any
public investment. Accordingly, there are no Financial Highlights for such
shares. The Financial Highlights presented below are historical information for
Institutional Shares.
Reference is made to the Independent Auditors' Report on page 27.
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
-------------------
<S> <C>
- -----------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- -----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------
Net investment income 0.23
- -----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.45)
------------------
- -----------------------------------------------------------------------------
Total from investment operations (0.22)
- -----------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.23)
------------------
- -----------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.55
------------------
- -----------------------------------------------------------------------------
TOTAL RETURN** (1.80)%
- -----------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------
Expenses 0.00%(b)
- -----------------------------------------------------------------------------
Net investment income 5.30%(b)
- -----------------------------------------------------------------------------
Expense waiver/reimbursement(a) 1.56%(b)
- -----------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------
Net assets, end of period (000 omitted) $5,807
- -----------------------------------------------------------------------------
Portfolio turnover rate 120%
- -----------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1993 (date of initial
public investment) to March 31, 1994.
** 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 4).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated March 31, 1994, which can be obtained free of charge.
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 Board of
Trustees (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 (the "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
investment adviser. The investment 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.
The prices of fixed income securities fluctuate inversely to the direction of
interest rates.
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, as amended.
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 investment
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 on a short-term or a long-term basis 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 borrowings.
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 Adviser since 1993. Ms. Foody-Malus served as an
Assistant Vice President of the Adviser from 1990 until 1992, and from 1986
until 1989, she served 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 Adviser since 1993. Ms. Nason served as an Assistant Vice
President of the Adviser from 1990 until 1992, and from 1987 until 1990,
she served 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 AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Fund may pay to the distributor an amount, computed at an annual rate of .25
of 1% of the average daily net asset value of the Institutional Service Shares
to finance any activity which is principally intended to result in the sale of
shares subject to the Distribution Plan. The distributor may select financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide sales support services as agents for
their clients or customers.
The Distribution 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 amount or may earn a profit from future payments made by the Fund
under the Distribution Plan.
In addition, the Trust has adopted a Shareholder Services Plan (the "Services
Plan") under which it may make payments up to 0.25% of 1% of the average daily
net asset value of the Institutional Service Shares to obtain certain personal
services for shareholders and the maintenance of shareholder accounts
("shareholder services"). The Trust has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which Federated Shareholder Services will either perform
shareholder services directly or will select financial institutions to perform
shareholder services. Financial institutions will receive fees 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
Trust and Federated Shareholder Services.
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.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Distribution and Shareholder Services Plans,
certain financial institutions may be compensated by the Adviser or its
affiliates for the continuing investment of customers' assets in certain funds,
including the Fund, advised by those entities. These payments will be made
directly by the distributor or Adviser from their assets, and will not be made
from the assets of the Fund or by the assessment of a sales charge on Shares.
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 (the "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.
CUSTODIAN. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, with offices in Boston, Massachusetts, is transfer
agent for the Shares of the Fund and dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania and Dickstein, Shapiro and Morin, Washington, D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche, Boston, Massachusetts.
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 Trustees
reserve 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 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 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, 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. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Eastern
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: Trust for Financial Institutions--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; and 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, Federated Services Company, P.O. Box 8602, Boston, Massachusetts
02266-8602. Orders by mail are considered received after payment by check is
converted by the transfer agents bank, State Street Bank and Trust Company
("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. (Eastern time), Monday through
Friday, except on (i) days on which there are not sufficient changes in the
value of the Fund's portfolio securities 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, Federated Services Company 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, upon instruction of
the transfer agent, 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.
(Eastern 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. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
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.
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, which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
- a member 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, 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.
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, as amended, 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.
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 financial
publications 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 and shareholder service expenses borne by shares of each respective
class.
The stated advisory fee is the same for both classes of shares.
GOVERNMENT QUALIFYING LIQUIDITY FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Independent Auditors' Report on page 27.
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
-------------------
<S> <C>
- --------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- --------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------
Net investment income 0.23
- --------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.45)
-----
- --------------------------------------------------------------------
Total from investment operations (0.22)
- --------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------
Dividends to shareholders from net investment income (0.23)
-----
- --------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $9.55
-----
- --------------------------------------------------------------------
TOTAL RETURN** (1.80)%
- --------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------
Expenses 0.00%(b)
- --------------------------------------------------------------------
Net investment income 5.30%(b)
- --------------------------------------------------------------------
Expense waiver/reimbursement(a) 1.56%(b)
- --------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 5,807
- --------------------------------------------------------------------
Portfolio turnover rate 120%
- --------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from October 18, 1993 (date of initial
public investment) to March 31, 1994.
** 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 4).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
Further information about the Fund's performance is contained in the Fund's
annual report dated March 31, 1994, which can be obtained free of charge.
GOVERNMENT QUALIFYING LIQUIDITY FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- --------------------------------------------------------------------- ----------
<C> <S> <C>
U.S. GOVERNMENT OBLIGATIONS--96.9%
- -----------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.--96.9%
---------------------------------------------------------------------
$3,670,000 6.00%, 3/1/99 $3,647,063
---------------------------------------------------------------------
2,012,651 5.50%, 9/1/98 1,980,569**
--------------------------------------------------------------------- ----------
TOTAL U.S. GOVERNMENT OBLIGATIONS 5,627,632
--------------------------------------------------------------------- ----------
</TABLE>
<TABLE>
<C> <S> <C>
*REPURCHASE AGREEMENT--20.6%
- -----------------------------------------------------------------------------------
1,195,000 J.P. Morgan Securities, Inc., dated 3/31/94, due 4/4/94
(AT AMORTIZED COST)(NOTE 2B) 1,195,000
--------------------------------------------------------------------- ----------
TOTAL INVESTMENTS (IDENTIFIED COST $6,925,152) $6,822,632+
--------------------------------------------------------------------- ----------
</TABLE>
+ The cost for federal tax purposes amounts to $6,925,152. The net unrealized
depreciation on a federal tax basis amounts to $102,520.
* The 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 the repurchase agreement was through participation in joint
accounts with other Federated Funds.
** Includes securities with the market value of $984,060 subject to dollar roll
transactions.
Note: The categories of investments are shown as a percentage of net assets
($5,807,193) at March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------------
Investments in other securities (Note 2A) $5,627,632
- ---------------------------------------------------------------------
Investments in repurchase agreement (Note 2B) 1,195,000
- --------------------------------------------------------------------- ----------
Total investments, at value (identified and tax cost $6,925,152) $6,822,632
- ----------------------------------------------------------------------------------
Cash 883
- ----------------------------------------------------------------------------------
Interest receivable 23,458
- ----------------------------------------------------------------------------------
Deferred expenses (Note 2G) 5,698
- ---------------------------------------------------------------------------------- ----------
Total assets 6,852,671
- ----------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------
Payable for dollar roll transactions (Note 2E) 988,672
- ---------------------------------------------------------------------
Dividends payable 28,759
- ---------------------------------------------------------------------
Accrued expenses and other liabilities 28,047
- --------------------------------------------------------------------- ----------
Total liabilities 1,045,478
- ---------------------------------------------------------------------------------- ----------
NET ASSETS for 608,366 shares of beneficial interest outstanding $5,807,193
- ---------------------------------------------------------------------------------- ----------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------------
Paid-in capital $6,051,133
- ----------------------------------------------------------------------------------
Unrealized depreciation of investments (102,520)
- ----------------------------------------------------------------------------------
Accumulated net realized loss on investments (141,420)
- ---------------------------------------------------------------------------------- ----------
Total $5,807,193
- ---------------------------------------------------------------------------------- ----------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($5,807,193 / 608,366 shares of beneficial interest outstanding) $9.55
- ---------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM OCTOBER 18, 1993 (DATE OF INITIAL PUBLIC INVESTMENT)
TO MARCH 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest income (Note 2C)(net of dollar roll interest expense of $2,485) $ 171,049
- ------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------
Investment advisory fee (Note 4) $16,145
- -------------------------------------------------------------------------
Administrative personnel and services fees (Note 4) 1,292
- -------------------------------------------------------------------------
Custodian and recordkeeping fees and expenses 28,964
- -------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 4) 76
- -------------------------------------------------------------------------
Fund share registration fees 633
- -------------------------------------------------------------------------
Legal fees 102
- -------------------------------------------------------------------------
Printing and postage 1,856
- -------------------------------------------------------------------------
Taxes 10
- -------------------------------------------------------------------------
Miscellaneous 1,317
- ------------------------------------------------------------------------- -------
Total expenses 50,395
- -------------------------------------------------------------------------
Deduct--
- ---------------------------------------------------------------
Waiver of investment advisory fee (Note 4) $16,145
- ---------------------------------------------------------------
Reimbursement of other operating expenses (Note 4) 34,250 50,395
- --------------------------------------------------------------- ------- -------
Net expenses 0
- ------------------------------------------------------------------------------------ ---------
Net investment income 171,049
- ------------------------------------------------------------------------------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments (identified cost basis) (141,420)
- ------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (102,520)
- ------------------------------------------------------------------------------------ ---------
Net realized and unrealized loss on investments (243,940)
- ------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $ (72,891)
- ------------------------------------------------------------------------------------ ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------
Net investment income $ 171,049
- --------------------------------------------------------------------------
Net realized gain (loss) on investments ($141,420 net loss as computed
for federal income tax purposes) (141,420)
- --------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (102,520)
- -------------------------------------------------------------------------- --------------
Change in net assets resulting from operations (72,891)
- -------------------------------------------------------------------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- --------------------------------------------------------------------------
Dividends to shareholders from net investment income (171,049)
- -------------------------------------------------------------------------- --------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- --------------------------------------------------------------------------
Net proceeds from sale of shares 10,250,500
- --------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 846
- --------------------------------------------------------------------------
Cost of shares redeemed (4,200,213)
- -------------------------------------------------------------------------- --------------
Change in net assets from Fund share transactions 6,051,133
- -------------------------------------------------------------------------- --------------
Change in net assets 5,807,193
- --------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------
Beginning of period --
- -------------------------------------------------------------------------- --------------
End of period $ 5,807,193
- -------------------------------------------------------------------------- --------------
</TABLE>
* For the period from October 18, 1993 (date of initial public investment) to
March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT QUALIFYING LIQUIDITY FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
- --------------------------------------------------------------------------------
(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 two portfolios. The financial statements included herein
are only those of Government Qualifying Liquidity Fund (the "Fund"). The
financial statements of the other portfolio is presented separately. The assets
of each portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held.
The Fund provides two classes of shares ("Institutional Shares" and
"Institutional Service Shares"). Institutional Service Shares will be identical
in all respects to Institutional Shares except that Institutional Service Shares
will be 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. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by an
independent pricing service. Short-term securities with remaining maturities
of sixty days, or less may be stated at amortized cost, which approximates
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 and reverse
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor on a daily basis, the market value of each
repurchase agreements underlying collateral to ensure the value at least
equals the principal amount of the repurchase transaction, including accrued
interest.
The Fund is also permitted to enter into reverse repurchase agreements, in
which the Fund sells U.S. government securities to financial institutions and
agrees to repurchase the securities at an agreed upon price and date.
The Fund will only enter into repurchase and reverse 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 these agreements. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
GOVERNMENT QUALIFYING LIQUIDITY FUND
- --------------------------------------------------------------------------------
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and estimated
expenses are accrued daily. Bond premium and discount are amortized as
required by the Internal Revenue Code. Distributions to shareholders are
recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code, ("Code") applicable to regulated investment companies
and to distribute to shareholders each year substantially all of its taxable
income. Accordingly, no provisions for federal tax are necessary.
E. 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. The Fund records when-issued
securities and maintains security positions such that sufficient liquid
assets will be available to make payment for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis are marked to
market daily and begin earning interest on the settlement date.
G. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being amortized
using the straight-line method over a period of five years from the Fund's
commencement date.
H. OTHER--Investment transactions are accounted for on the trade date.
GOVERNMENT QUALIFYING LIQUIDITY FUND
- --------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 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 (427,506)
---------
- ------------------------------------------------------------------
Shares outstanding, end of period 608,366
---------
- ------------------------------------------------------------------
* For the period from October 18, 1993 (date of initial public investment) to March 31,
1994.
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE--Federated Management, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.50 of 1% of the Fund's average daily net assets. Adviser may voluntarily
choose to waive a portion of its fee and reimburse certain operating expenses of
the Fund. Adviser can modify or terminate this voluntary waiver and
reimbursement at any time at its sole discretion.
ADMINISTRATION FEE--Federated Administrative Services ("FAS") provides the Fund
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the fee is based on
the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during any fiscal year shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
DISTRIBUTION AND SERVICE PLAN--The Trust has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940. The
Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's 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.
Under the terms of a shareholder service agreement with Federated Shareholders
Services ("FSS"), the Fund will pay FSS up to 0.25 of 1% of average net assets
for the fund for the period. This fee is to obtain certain personal services for
shareholders and the maintenance of shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEE--Federated Services Company ("FServ")
serves as transfer agent and dividend disbursing agent for the Fund. The fee is
based on the size, type and number of accounts and transactions made by
shareholders.
GOVERNMENT QUALIFYING LIQUIDITY FUND
- --------------------------------------------------------------------------------
ORGANIZATIONAL EXPENSES--Organizational expenses ($38,751) and start-up
administrative service expenses ($39,516) were borne initially by Adviser. 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). For the period ended March 31, 1994, the Fund paid ($1,292) and
($1,317), respectively, pursuant to this agreement.
During the period from October 18, 1993 (date of initial public investment) to
March 31, 1994, the Fund engaged in purchase and sale transactions with other
funds advised by the Adviser pursuant to Rule 17a-7 of the Investment Company
Act of 1940 amounting to $8,456,976 and $3,873,550, respectively. These
purchases and sales were conducted on an arms-length basis and transacted for
cash consideration only, at independent current market prices and without
brokerage commissions, fee or other remuneration.
Certain of the Officers and Directors of the Fund are Officers and Directors of
the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term obligations for the
period ended March 31, 1994, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------
PURCHASES-- $ 13,884,391
- ------------------------------------------------------------------------------ ------------
SALES-- $ 8,023,238
- ------------------------------------------------------------------------------ ------------
</TABLE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees of TRUST FOR FINANCIAL INSTITUTIONS
and Shareholders of GOVERNMENT QUALIFYING LIQUIDITY FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Government Qualifying Liquidity Fund (a
Portfolio of Trust for Financial Institutions) as of March 31, 1994, the related
statement of operations, the statement of changes in net assets, and the
financial highlights (see pages 2 and 18 of the prospectus) for the period from
October 18, 1993 (date of initial public investment) to March 31, 1994. These
financial statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned at March 31, 1994, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Government
Qualifying Liquidity Fund as of March 31, 1994, the results of its operations,
the changes in its net assets, and its financial highlights for the respective
stated period in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Boston, Massachusetts
May 13, 1994
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
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
- ------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin 2101 L Street, N.W.
Washington, D.C. 20037
- ------------------------------------------------------------------------------------------------
Independent Auditors
Deloitte & Touche 125 Summer Street
Boston, Massachusetts 02110
- ------------------------------------------------------------------------------------------------
</TABLE>
GOVERNMENT
QUALIFYING
LIQUIDITY FUND
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
An Open-End, Diversified
Management Investment Company
May 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
3070102A-ISS (5/94)
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 May
31, 1994. 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 May 31, 1994
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ----------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ----------------------------------------------------------------
Types of Investments 1
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 and Shareholder Services Plans 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 10
- ----------------------------------------------------------------
PERFORMANCE COMPARISONS 10
- ----------------------------------------------------------------
Duration 10
APPENDIX 11
- ----------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
Government Qualifying Liquidity 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) [12 C.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 ("BIF")-insured banks
and Savings Association Insurance Fund ("SAIF")-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 BIF-or 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.
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. 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.
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 Board of Trustees (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 period from October 18, 1993 (date
of initial public investment) to March 31, 1994, the portfolio turnover rate was
120%.
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. 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.
For the purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings and loan having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash items."
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 Services Company, and
Federated Administrative Services and the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
John F. Donahue*+ Chairman and Chairman and Trustee, Federated Investors; Chairman and
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.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
John T. Conroy, Jr. Trustee President, Investment Properties Corporation, Senior Vice-
Wood/IPC Commercial President, John R. Wood and Associates, Inc., Realtors;
Department President, Northgate Village Development Corporation;
John R. Wood & 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
One PNC Plaza Baker, Inc.; Director, Trustee, or Managing General Partner
23rd Floor of the Funds; formerly Vice Chairman and Director, PNC
Pittsburgh, PA Bank, N.A., and PNC Bank 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 Professor, Foreign Policy and Management Consultant;
1202 Cathedral of Trustee, Carnegie Endowment for International Peace, RAND
Learning Corporation, Online Computer Library Center, Inc., and U.S.
University of Pittsburgh Space Foundation; Chairman, National Advisory Council for
Pittsburgh, PA Environmental Policy & Technology; Chairman, Czecho Slovak
Management Center; Director, Trustee or Managing General
Partner of the Funds; President Emeritus, 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; Trustee, Federated Administrative Services;
Pittsburgh, PA Trustee, Federated Services Company; 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.
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.; Trustee, Federated Services Company; Chairman,
Treasurer, and Trustee, Federated Administrative Services;
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; Trustee, Federated Services Company;
Executive Vice President, Secretary, and Trustee, Federated
Administrative Services; Executive Vice President and
Director, Federated Securities Corp.; Vice President and
Secretary of the Funds.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<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 Trustees between
meetings of the Board.
THE FUNDS
"The Funds," and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.;
High Yield Cash Trust; Insight Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc.-1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain
Funds; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash Trust;
111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust for Financial Institutions, Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of May 9, 1994, the following shareholders of record owned 5% or more of the
outstanding Institutional Shares of the Fund: Midland Financial S&L, Des Moines,
IA, owned approximately 506,586 Shares (91.2%) and Lincoln Bank & Trust Co.,
Ardmore, OK, owned approximately 48,763 Shares (8.8%).
As of May 9, 1994 no shareholder of record owned 5% or more of the outstanding
Institutional Service Shares of the Fund.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Federated Management (the "Adviser"). It is a
subsidiary of Federated Investors. All of the 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 and Trustee, 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; Trustee, Federated Administrative Services; Trustee,
Federated Services Company; 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 Trustee, Federated Administrative Services; Executive Vice
President, and Director, Federated Securities Corp., Trustee, Federated Services
Company; and Vice President and Secretary of the Trust.
The Adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus. For the period from October 18, 1993 (date
of initial public investment) to March 31, 1994, the Adviser earned $16,145, of
which all was voluntarily waived.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2 1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1 1/2% per
year of the remaining average net assets, the Adviser will reimburse the
Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory 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 the 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 for a fee as
described in the prospectus. Prior to March 1, 1994, Federated Administrative
Services, Inc., also a subsidiary of Federated Investors, served as the Fund's
administrator. (For purposes of this Statement of Additional Information,
Federated Administrative Services and Federated Administrative Services, Inc.,
may hereinafter collectively be referred to as, the "Administrators".) For the
period from October 18, 1993 (date of initial public investment) to March 31,
1994, the Administrators, earned $1,292. John A. Staley, IV, an officer of the
Trust, 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., and Federated Administrative Services.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the 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 AND SHAREHOLDER SERVICES PLANS
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; 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; and assisting
clients in changing dividend options, account designations, and addresses.
With respect to the Institutional Service Shares class of the Fund, by adopting
the Distribution Plan, the Trustees expect 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
pursuing its investment objectives. By identifying potential investors whose
needs are served by the Fund's objectives, and properly servicing these
accounts, it may be possible to curb sharp fluctuations in rates of redemptions
and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; and (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' 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. Federated Services Company
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.
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 Trustees; or
- - for short-term obligations with remaining maturities of 60 days or less at the
time of purchase, at amortized cost unless the Trustees determine 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, as amended,
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 total return for the period from October 18, 1993 (date of initial public
investment) to March 31, 1994, for Institutional Shares and Institutional
Service Shares were (1.80%) and (1.85%), respectively.
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 yields for the thirty-day period ended March 31, 1994, for Institutional
Shares and Institutional Service Shares were 6.75% and 6.65%, respectively.
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 offering price per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of yield and total
return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
- - LIPPER ANALYTICAL SERVICES, INC. ranks funds in various 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.
- - MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
- - LEHMAN BROTHERS FIVE-YEAR TREASURY BELLWETHER INDEX is an unmanaged index
comprised of U.S. government Treasury Bonds with an average maturity of five
years.
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
Corporation. Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
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
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
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 RATING DEFINITIONS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated 'A-1.'
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATING DEFINITIONS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
leading market positions in well established industries; high rates of return on
funds employed; conservative capitalization 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.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
FITCH INVESTORS SERVICE, INC., SHORT-TERM DEBT RATING DEFINITIONS
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment only slightly less in degree than issues rated
'F-1+.'
F-2--Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as for
issues assigned F-1+ and F-1 ratings.
3070102B (5/94)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part A)
(b) Exhibits:
(1) Copy of Declaration of Trust of the Registrant (1.);
(i) Conformed copy of Amendment No. 1 to Declaration of
Trust dated May 28, 1993 (4.);
(ii) Conformed copy of Amendment No. 2 to Declaration
of Trust dated May 28, 1993 (4.);
(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 (4.);
(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 (4.);
(6) Conformed copy of Distributor's Contract of the
Registrant (4.);
(i) Conformed copy of Exhibits A through
F to the Distributor's Contract (4.);
(7) Not applicable;
(8) Conformed copy of Custodian Agreement of the
Registrant (4.);
(9) Conformed copy of Fund Accounting and Transfer Agency
and Service Agreement of the Registrant;+
(i) Form of Copy of the Shareholder Services Plan of
the Registrant;+
(10) Copy of Opinion and Consent of Counsel as to
legality of shares being registered (3.);
(11) Conformed copy of Consent of Independent
Auditors;+
(12) Not applicable;
(13) Copy of Initial Capital Understanding (2.);
(14) Not Applicable
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).
4. Response is incorporated by reference to Registrant's Post-effective
Amendment No. 1 to its Registration Statement filed on March 29, 1994.
(File No. 33-4771).
(15) Conformed copy of Distribution plan (4.);
(i) Conformed copy of Exhibits A through C
(4.);
(16) Copy of Schedule for Computation of Fund
Performance Data (4.);
(17) Power of Attorney (1.);
(18) Conformed Copy of Opinion and Consent of
Counsel as to Availability of Rule 485(b);+
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of May , 1994
Shares of beneficial interest -
no par value
Government Money Market Fund 138
Institutional Shares
Government Money Market Fund 9
Institutional Service Shares
Government Qualifying Liquidity Fund 5
Institutional Shares
Government Qualifying Liquidity Fund 0
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 Presidents; 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,
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed July 14, 1993.
(File No. 33-49771).
4. Response is incorporated by reference to Registrant's Post-effective
Amendment No. 1 to its Registration Statement filed on March 29, 1994.
(File No. 33-4771).
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."
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; and World Investment
Series, Inc.
Federated Securities Corp. also acts as principal
underwriter for the following closed-end investment company:
Liberty Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief President and
Federated Investors Tower Executive Officer, Chief Trustee
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Vice President and
Federated Investors Tower President, and Treasurer, Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John A. Staley, IV Executive Vice President 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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
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:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Registrant Federated Investors Tower
Federated Services Company Pittsburgh, PA 15222-3779
("Transfer Agent, Dividend Disbursing
Agent, and Portfolio Recordkeeper")
Federated Administrative Services
("Administrator")
Federated Management Corp.
("Adviser")
State Street Bank and Trust Company P.O. Box 8602
("Custodian") Boston, MA 02266-8206
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
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 27th day of May, 1994.
TRUST FOR FINANCIAL INSTITUTIONS
BY: /s/Robert C. Rosselot
Robert C. Rosselot, Assistant Secretary
Attorney in Fact for John F. Donahue
May 27, 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 May 27, 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
Exhibit 11 under Form N-1A
Exhibit 23 under Form 601/Reg. S-K
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 2 to
Registration Statement No. 33-49771 of Trust for Financial Institutions
(including Government Qualifying Liquidity Fund and Government Money Market
Fund portfolios) of our reports dated May 13, 1994, appearing in the
Prospectus, which is a part of such Registration Statement, and to the
references to us under the heading "Financial Highlights" in such
Prospectus.
By: DELOITTE & TOUCHE
Deloitte & Touche
Boston, Massachusetts
May 23, 1994
Exhibit 18 under Form N-1A
Exhibit 99 under 601/Reg. S-K
HOUSTON, HOUSTON & DONNELLY
ATTORNEYS AT LAW
2510 CENTRE CITY TOWER
WILLIAM McC. HOUSTON PITTSBURGH, PA. 15222
FRED CHALMERS HOUSTON, JR. __________
THOMAS J. DONNELLY
JOHN F. MECK (412) 471-5828 FRED CHALMERS HOUSTON
FAX (412) 471-0736 (1914 - 1971)
MARIO SANTILLI, JR.
THEODORE M. HAMMER
May 16, 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. 2 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 on May 31, 1994.
Our review also included an examination of other relevant portions of
the amended 1933 Act Registration Statement of the Trust and such other
documents and records deemed appropriate. On the basis of this review we are
of the opinion that Post-effective Amendment No. 2 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: Thomas J. Donnelly
TJD:heh
Exhibit 9 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AGREEMENT
for
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
and
CUSTODY SERVICES PROCUREMENT
<TABLE>
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AGREEMENT made as of the 1st day of December, 1993, by and between those investment
companies listed on Exhibit 1 as may be amended from time to time, having their
principal office and place of business at Federated Investors Tower, Pittsburgh, PA
15222-3779 (the "Trust"), on behalf of the portfolios (individually referred to herein
as a "Fund" and collectively as "Funds") of the Trust, and FEDERATED SERVICES COMPANY, a
Delaware business trust, having its principal office and place of business at Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779 (the "Company").
WHEREAS, the Trust is registered as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), with authorized and
issued shares of capital stock or beneficial interest ("Shares"); and
WHEREAS, the Trust wishes to retain the Company to provide certain pricing,
accounting and recordkeeping services for each of the Funds, including any classes of
shares issued by any Fund ("Classes"), and the Company is willing to furnish such
services; and
WHEREAS, the Trust desires to appoint the Company as its transfer agent, dividend
disbursing agent, and agent in connection with certain other activities, and the Company
desires to accept such appointment; and
WHEREAS, the Trust desires to appoint the Company as its agent to select, negotiate
and subcontract for custodian services from an approved list of qualified banks and the
Company desires to accept such appointment; and
WHEREAS, from time to time the Trust may desire and may instruct the Company to
subcontract for the performance of certain of its duties and responsibilities hereunder
to State Street Bank and Trust Company or another agent (the "Agent"); and
WHEREAS, the words Trust and Fund may be used interchangeably for those investment
companies consisting of only one portfolio;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
SECTION ONE: Fund Accounting.
Article 1. Appointment.
The Trust hereby appoints the Company to provide certain pricing and accounting
services to the Funds, and/or the Classes, for the period and on the terms set forth in
this Agreement. The Company accepts such appointment and agrees to furnish the services
herein set forth in return for the compensation as provided in Article 3 of this
Section.
Article 2. The Company and Duties.
Subject to the supervision and control of the Trust's Board of Trustees or Directors
("Board"), the Company will assist the Trust with regard to fund accounting for the
Trust, and/or the Funds, and/or the Classes, and in connection therewith undertakes to
perform the following specific services;
A. Value the assets of the Funds and determine the net asset value per share of each
Fund and/or Class, at the time and in the manner from time to time determined by
the Board and as set forth in the Prospectus and Statement of Additional
Information ("Prospectus") of each Fund;
B. Calculate the net income of each of the Funds, if any;
C. Calculate capital gains or losses of each of the Funds resulting from sale or
disposition of assets, if any;
D. Maintain the general ledger and other accounts, books and financial records of
the Trust, including for each Fund, and/or Class, as required under Section
31(a) of the 1940 Act and the Rules thereunder in connection with the services
provided by the Company;
E. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records
to be maintained by Rule 31a-1 under the 1940 Act in connection with the
services provided by the Company. The Company further agrees that all such
records it maintains for the Trust are the property of the Trust and further
agrees to surrender promptly to the Trust such records upon the Trust's request;
F. At the request of the Trust, prepare various reports or other financial documents
required by federal, state and other applicable laws and regulations; and
G. Such other similar services as may be reasonably requested by the Trust.
Article 3. Compensation and Allocation of Expenses.
A. The Funds will compensate the Company for its services rendered pursuant to
Section One of this Agreement in accordance with the fees set forth on Fee
Schedules A ("A1, A2, A3 etc..."), annexed hereto and incorporated herein, as
may be added or amended from time to time. Such fees do not include out-of-
pocket disbursements of the Company for which the Funds shall reimburse the
Company upon receipt of a separate invoice. Out-of-pocket disbursements shall
include, but shall not be limited to, the items specified in Schedules B ("B1,
B2, B3, etc..."), annexed hereto and incorporated herein, as may be added or
amended from time to time. Schedules B may be modified by the Company upon not
less than thirty days' prior written notice to the Trust.
B. The Fund and/or the Class, and not the Company, shall bear the cost of:
custodial expenses; membership dues in the Investment Company Institute or any
similar organization; transfer agency expenses; investment advisory expenses;
costs of printing and mailing stock certificates, Prospectuses, reports and
notices; administrative expenses; interest on borrowed money; brokerage
commissions; taxes and fees payable to federal, state and other governmental
agencies; fees of Trustees or Directors of the Trust; independent auditors
expenses; Federated Administrative Services and/or Federated Administrative
Services, Inc. legal and audit department expenses billed to Federated Services
Company for work performed related to the Trust, the Funds, or the Classes; law
firm expenses; or other expenses not specified in this Article 3 which may be
properly payable by the Funds and/or classes.
C. The Company will send an invoice to each of the Funds as soon as practicable
after the end of each month. Each invoice will provide detailed information
about the compensation and out-of-pocket expenses in accordance with Schedules A
and Schedules B. The Funds and or the Classes will pay to the Company the
amount of such invoice within 30 days of receipt of the invoices.
D. Any compensation agreed to hereunder may be adjusted from time to time by
attaching to Schedules A revised Schedules dated and signed by a duly authorized
officer of the Trust and/or the Funds and a duly authorized officer of the
Company.
E. The fee for the period from the effective date of this Agreement with respect to
a Fund or a Class to the end of the initial month shall be prorated according to
the proportion that such period bears to the full month period. Upon any
termination of this Agreement before the end of any month, the fee for such
period shall be prorated according to the proportion which such period bears to
the full month period. For purposes of determining fees payable to the Company,
the value of the Fund's net assets shall be computed at the time and in the
manner specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time subcontract to, employ
or associate with itself such person or persons as the Company may believe to be
particularly suited to assist it in performing services under this Section One.
Such person or persons may be third-party service providers, or they may be
officers and employees who are employed by both the Company and the Funds. The
compensation of such person or persons shall be paid by the Company and no
obligation shall be incurred on behalf of the Trust, the Funds, or the Classes
in such respect.
SECTION TWO: Shareholder Recordkeeping.
Article 4. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement, the Trust hereby
appoints the Company to act as, and the Company agrees to act as, transfer agent and
dividend disbursing agent for each Fund's Shares, and agent in connection with any
accumulation, open-account or similar plans provided to the shareholders of any Fund
("Shareholder(s)"), including without limitation any periodic investment plan or
periodic withdrawal program.
As used throughout this Agreement, a "Proper Instruction" means a writing signed or
initialed by one or more person or persons as the Board shall have from time to time
authorized. Each such writing shall set forth the specific transaction or type of
transaction involved. Oral instructions will be deemed to be Proper Instructions if (a)
the Company reasonably believes them to have been given by a person previously
authorized in Proper Instructions to give such instructions with respect to the
transaction involved, and (b) the Trust, or the Fund, and the Company promptly cause
such oral instructions to be confirmed in writing. Proper Instructions may include
communications effected directly between electro-mechanical or electronic devices
provided that the Trust, or the Fund, and the Company are satisfied that such procedures
afford adequate safeguards for the Fund's assets. Proper Instructions may only be
amended in writing.
Article 5. Duties of the Company.
The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Trust as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of shares and
promptly deliver payment and appropriate documentation therefore to the
custodian of the relevant Fund, (the "Custodian"). The Company shall
notify the Fund and the Custodian on a daily basis of the total amount of
orders and payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's current
Prospectus, the Company shall compute and issue the appropriate number of
Shares of each Fund and/or Class and hold such Shares in the appropriate
Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its agent
requests a certificate, the Company, as Transfer Agent, shall countersign
and mail by first class mail, a certificate to the Shareholder at its
address as set forth on the transfer books of the Funds, and/or Classes,
subject to any Proper Instructions regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of Shares of
the Fund and/or Class is returned unpaid for any reason, the Company shall
debit the Share account of the Shareholder by the number of Shares that
had been credited to its account upon receipt of the check or other order,
promptly mail a debit advice to the Shareholder, and notify the Fund
and/or Class of its action. In the event that the amount paid for such
Shares exceeds proceeds of the redemption of such Shares plus the amount
of any dividends paid with respect to such Shares, the Fund and/the Class
or its distributor will reimburse the Company on the amount of such
excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any distribution to
Shareholders, the Company shall act as Dividend Disbursing Agent for the
Funds in accordance with the provisions of its governing document and the
then-current Prospectus of the Fund. The Company shall prepare and mail
or credit income, capital gain, or any other payments to Shareholders. As
the Dividend Disbursing Agent, the Company shall, on or before the payment
date of any such distribution, notify the Custodian of the estimated
amount required to pay any portion of said distribution which is payable
in cash and request the Custodian to make available sufficient funds for
the cash amount to be paid out. The Company shall reconcile the amounts
so requested and the amounts actually received with the Custodian on a
daily basis. If a Shareholder is entitled to receive additional Shares by
virtue of any such distribution or dividend, appropriate credits shall be
made to the Shareholder's account, for certificated Funds and/or Classes,
delivered where requested; and
(2) The Company shall maintain records of account for each Fund and Class and
advise the Trust, each Fund and Class and its Shareholders as to the
foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption directions
and, if such redemption requests comply with the procedures as may be
described in the Fund Prospectus or set forth in Proper Instructions,
deliver the appropriate instructions therefor to the Custodian. The
Company shall notify the Funds on a daily basis of the total amount of
redemption requests processed and monies paid to the Company by the
Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from the
Custodian with respect to any redemption, the Company shall pay or cause
to be paid the redemption proceeds in the manner instructed by the
redeeming Shareholders, pursuant to procedures described in the then-
current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request for redemption
does not comply with the procedures for redemption approved by the Fund,
the Company shall promptly notify the Shareholder of such fact, together
with the reason therefor, and shall effect such redemption at the price
applicable to the date and time of receipt of documents complying with
said procedures.
(4) The Company shall effect transfers of Shares by the registered owners
thereof.
(5) The Company shall identify and process abandoned accounts and uncashed
checks for state escheat requirements on an annual basis and report such
actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund, and/or Class,
and maintain pursuant to applicable rules of the Securities and Exchange
Commission ("SEC") a record of the total number of Shares of the Fund
and/or Class which are authorized, based upon data provided to it by the
Fund, and issued and outstanding. The Company shall also provide the Fund
on a regular basis or upon reasonable request with the total number of
Shares which are authorized and issued and outstanding, but shall have no
obligation when recording the issuance of Shares, except as otherwise set
forth herein, to monitor the issuance of such Shares or to take cognizance
of any laws relating to the issue or sale of such Shares, which functions
shall be the sole responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to applicable
rules of the SEC relating to the services to be performed hereunder in the
form and manner as agreed to by the Trust or the Fund to include a record
for each Shareholder's account of the following:
(a) Name, address and tax identification number (and whether such number
has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including dividends
paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a foreign
account or an account for which withholding is required by the
Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend address
and correspondence relating to the current maintenance of the
account;
(g) Certificate numbers and denominations for any Shareholder holding
certificates;
(h) Any information required in order for the Company to perform the
calculations contemplated or required by this Agreement.
(3) The Company shall preserve any such records required to be maintained
pursuant to the rules of the SEC for the periods prescribed in said rules
as specifically noted below. Such record retention shall be at the
expense of the Company, and such records may be inspected by the Fund at
reasonable times. The Company may, at its option at any time, and shall
forthwith upon the Fund's demand, turn over to the Fund and cease to
retain in the Company's files, records and documents created and
maintained by the Company pursuant to this Agreement, which are no longer
needed by the Company in performance of its services or for its
protection. If not so turned over to the Fund, such records and documents
will be retained by the Company for six years from the year of creation,
during the first two of which such documents will be in readily accessible
form. At the end of the six year period, such records and documents will
either be turned over to the Fund or destroyed in accordance with Proper
Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each state for
"blue sky" purposes as determined according to Proper Instructions
delivered from time to time by the Fund to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution agreements,
allocations of sales loads, redemption fees, or other transaction-
or sales-related payments;
(f) Such other information as may be agreed upon from time to time.
(2) The Company shall prepare in the appropriate form, file with the Internal
Revenue Service and appropriate state agencies, and, if required, mail to
Shareholders, such notices for reporting dividends and distributions paid
as are required to be so filed and mailed and shall withhold such sums as
are required to be withheld under applicable federal and state income tax
laws, rules and regulations.
(3) In addition to and not in lieu of the services set forth above, the Company
shall:
(a) Perform all of the customary services of a transfer agent, dividend
disbursing agent and, as relevant, agent in connection with
accumulation, open-account or similar plans (including without
limitation any periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining all Shareholder
accounts, mailing Shareholder reports and Prospectuses to current
Shareholders, withholding taxes on accounts subject to back-up or
other withholding (including non-resident alien accounts), preparing
and filing reports on U.S. Treasury Department Form 1099 and other
appropriate forms required with respect to dividends and
distributions by federal authorities for all Shareholders, preparing
and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other
confirmable transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders, and providing
Shareholder account information; and
(b) provide a system which will enable the Fund to monitor the total
number of Shares of each Fund and/or Class sold in each state ("blue
sky reporting"). The Fund shall by Proper Instructions (i) identify
to the Company those transactions and assets to be treated as exempt
from the blue sky reporting for each state and (ii) verify the
classification of transactions for each state on the system prior to
activation and thereafter monitor the daily activity for each state.
The responsibility of the Company for each Fund's and/or Class's
state blue sky registration status is limited solely to the
recording of the initial classification of transactions or accounts
with regard to blue sky compliance and the reporting of such
transactions and accounts to the Fund as provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders relating to their
Share accounts and such other correspondence as may from time to time be
addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy cards and
other material supplied to it by the Fund in connection with Shareholder
Meetings of each Fund; receive, examine and tabulate returned proxies,
and certify the vote of the Shareholders;
(3) The Company shall establish and maintain facilities and procedures for
safekeeping of stock certificates, check forms and facsimile signature
imprinting devices, if any; and for the preparation or use, and for
keeping account of, such certificates, forms and devices.
Article 6. Duties of the Trust.
A. Compliance
The Trust or Fund assume full responsibility for the preparation, contents and
distribution of their own and/or their classes' Prospectus and for complying
with all applicable requirements of the Securities Act of 1933, as amended (the
"1933 Act"), the 1940 Act and any laws, rules and regulations of government
authorities having jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of blank Share
certificates and from time to time shall renew such supply upon request of the
Company. Such blank Share certificates shall be properly signed, manually or by
facsimile, if authorized by the Trust and shall bear the seal of the Trust or
facsimile thereof; and notwithstanding the death, resignation or removal of any
officer of the Trust authorized to sign certificates, the Company may continue
to countersign certificates which bear the manual or facsimile signature of such
officer until otherwise directed by the Trust.
C. Distributions
The Fund shall promptly inform the Company of the declaration of any dividend or
distribution on account of any Fund's shares.
Article 7. Compensation and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Two of this Agreement, the
Trust and/or the Fund agree to pay the Company an annual maintenance fee for
each Shareholder account as set out in Schedules C ("C1, C2, C3 etc..."),
attached hereto, as may be added or amended from time to time. Such fees may be
changed from time to time subject to written agreement between the Trust and the
Company. Pursuant to information in the Fund Prospectus or other information or
instructions from the Fund, the Company may sub-divide any Fund into Classes or
other sub-components for recordkeeping purposes. The Company will charge the
Fund the fees set forth on Schedule C for each such Class or sub-component the
same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust and/or Fund agree
to reimburse the Company for out-of-pocket expenses or advances incurred by the
Company for the items set out in Schedules D ("D1, D2, D3 etc..."), attached
hereto, as may be added or amended from time to time. In addition, any other
expenses incurred by the Company at the request or with the consent of the Trust
and/or the Fund, will be reimbursed by the appropriate Fund.
C. Payment
The Company shall send an invoice with respect to fees and reimbursable expenses
to the Trust or each of the Funds as soon as practicable at the end of each
month. Each invoice will provide detailed information about the Compensation
and out-of-pocket expenses in accordance with Schedules C and Schedules D. The
Trust or the Funds will pay to the Company the amount of such invoice within 30
days following the receipt of the invoices.
Article 8. Assignment of Shareholder Recordkeeping.
Except as provided below, no right or obligation under this Section Two may be
assigned by either party without the written consent of the other party.
(1) This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
(2) The Company may without further consent on the part of the Trust
subcontract for the performance hereof with (A) State Street Bank and its
subsidiary, Boston Financial Data Services, Inc., a Massachusetts Trust
("BFDS"), which is duly registered as a transfer agent pursuant to
Section 17A(c)(1) of the Securities Exchange Act of 1934, as amended, or
any succeeding statute ("Section 17A(c)(1)"), or (B) a BFDS subsidiary
duly registered as a transfer agent pursuant to Section 17A(c)(1), or (C)
a BFDS affiliate, or (D) such other provider of services duly registered
as a transfer agent under Section 17A(c)(1) as Company shall select;
provided, however, that the Company shall be as fully responsible to the
Trust for the acts and omissions of any subcontractor as it is for its own
acts and omissions; or
(3) The Company shall upon instruction from the Trust subcontract for the
performance hereof with an Agent selected by the Trust, other than BFDS or
a provider of services selected by Company, as described in (2) above;
provided, however, that the Company shall in no way be responsible to the
Trust for the acts and omissions of the Agent.
SECTION THREE: Custody Services Procurement
Article 9. Appointment.
The Trust hereby appoints Company as its agent to evaluate and obtain custody
services from a financial institution that (i) meets the criteria established in
Section 17(f) of the 1940 Act and (ii) has been approved by the Board as
eligible for selection by the Company as a custodian (the "Eligible Custodian").
The Company accepts such appointment.
Article 10. The Company and Its Duties.
Subject to the review, supervision and control of the Board, the Company shall:
(1) evaluate the nature and the quality of the custodial services provided by
the Eligible Custodian;
(2) employ the Eligible Custodian to serve on behalf of the Trust as Custodian
of the Trust's assets substantially on the terms set forth as the form of
agreement in Exhibit 2;
(3) negotiate and enter into agreements with the Custodians for the benefit of
the Trust, with the Trust as a party to each such agreement. The Company
shall not be a party to any agreement with any such Custodian;
(4) establish procedures to monitor the nature and the quality of the services
provided by the Custodians;
(5) continuously monitor the nature and the quality of services provided by the
Custodians; and
(6) periodically provide to the Trust (i) written reports on the activities and
services of the Custodians; (ii) the nature and amount of disbursement
made on account of the Trust with respect to each custodial agreement; and
(iii) such other information as the Board shall reasonably request to
enable it to fulfill its duties and obligations under Sections 17(f) and
36(b) of the 1940 Act and other duties and obligations thereof.
Article 11. Fees and Expenses.
A. Annual Fee
For the performance by the Company pursuant to Section Three of this Agreement,
the Trust and/or the Fund agree to pay the Company an annual fee as set forth in
Schedule E, attached hereto.
B. Payment
The Company shall send an invoice with respect to fees and reimbursable expenses
to each of the Trust/or Fund as soon as practicable at the end of each month.
Each invoice will provide detailed information about the Compensation and out-of-
pocket expenses in occurrence with Schedule E. The Trust and/or Fund will pay
to the Company the amount of such invoice within 30 days following the receipt
of the invoice.
Article 12. Representations.
The Company represents and warrants that it has obtained all required approvals
from all government or regulatory authorities necessary to enter into this
arrangement and to provide the services contemplated in Section Three of this
Agreement.
SECTION FOUR: General Provisions.
Article 13. Documents.
A. In connection with the appointment of the Company under this Agreement, the Trust
shall file with the Company the following documents:
(1) A copy of the Charter and By-Laws of the Trust and all amendments thereto;
(2) A copy of the resolution of the Board of the Trust authorizing this
Agreement;
(3) Specimens of all forms of outstanding Share certificates of the Trust or
the Funds in the forms approved by the Board of the Trust with a
certificate of the Secretary of the Trust as to such approval;
(4) All account application forms and other documents relating to Shareholders
accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following documents:
(1) Each resolution of the Board of the Trust authorizing the original issuance
of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments thereof and
orders relating thereto in effect with respect to the sale of Shares of
any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document and the By-
Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing officers to give
Proper Instructions to the Custodian and agents for fund accountant,
custody services procurement, and shareholder recordkeeping or transfer
agency services;
(5) Specimens of all new Share certificates representing Shares of any Fund,
accompanied by Board resolutions approving such forms;
(6) Such other certificates, documents or opinions which the Company may, in
its discretion, deem necessary or appropriate in the proper performance of
its duties; and
(7) Revisions to the Prospectus of each Fund.
Article 14. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and in good standing
under the laws of the State of Delaware.
(2) It is duly qualified to carry on its business in the State of Delaware.
(3) It is empowered under applicable laws and by its charter and by-laws to
enter into and perform this Agreement.
(4) All requisite corporate proceedings have been taken to authorize it to
enter into and perform its obligations under this Agreement.
(5) It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
(6) It is in compliance with federal securities law requirements and in good
standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in good
standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform its obligations under this Agreement;
(3) All corporate proceedings required by said Charter and By-Laws have been
taken to authorize it to enter into and perform its obligations under this
Agreement;
(4) The Trust is an open-end investment company registered under the 1940 Act;
and
(5) A registration statement under the 1933 Act will be effective, and
appropriate state securities law filings have been made and will continue
to be made, with respect to all Shares of each Fund being offered for
sale.
Article 15. Indemnification.
A. Indemnification by Trust
The Company shall not be responsible for and the Trust or Fund shall indemnify
and hold the Company, including its officers, directors, shareholders and their
agents employees and affiliates, harmless against any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liabilities arising out of
or attributable to:
(1) The acts or omissions of any Custodian,
(2) The Trust's or Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Trust's or The Fund's lack of good
faith, negligence or willful misconduct or which arise out of the breach
of any representation or warranty of the Trust or Fund hereunder or
otherwise.
(3) The reliance on or use by the Company or its agents or subcontractors of
information, records and documents in proper form which
(a) are received by the Company or its agents or subcontractors and
furnished to it by or on behalf of the Fund, its Shareholders or
investors regarding the purchase, redemption or transfer of Shares
and Shareholder account information; or
(b) have been prepared and/or maintained by the Fund or its affiliates or
any other person or firm on behalf of the Trust.
(4) The reliance on, or the carrying out by the Company or its agents or
subcontractors of Proper Instructions of the Trust or the Fund.
(5) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or
in violation of any stop order or other determination or ruling by any
federal agency or any state with respect to the offer or sale of such
Shares in such state.
Provided, however, that the Company shall not be protected by this Article
15.A. from liability for any act or omission resulting from the Company's
willful misfeasance, bad faith, gross negligence or reckless disregard of
its duties.
B. Indemnification by the Company
The Company shall indemnify and hold the Trust or each Fund harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liabilities arising out of or attributable to any action or failure
or omission to act by the Company as a result of the Company's willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties.
C. Reliance
At any time the Company may apply to any officer of the Trust or Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by the Company under
this Agreement, and the Company and its agents or subcontractors shall not be
liable and shall be indemnified by the Trust or the appropriate Fund for any
action reasonably taken or omitted by it in reliance upon such instructions or
upon the opinion of such counsel provided such action is not in violation of
applicable federal or state laws or regulations. The Company, its agents and
subcontractors shall be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Trust or the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a co-transfer
agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this Article 15 shall
apply, upon the assertion of a claim for which either party may be required to
indemnify the other, the party seeking indemnification shall promptly notify the
other party of such assertion, and shall keep the other party advised with
respect to all developments concerning such claim. The party who may be
required to indemnify shall have the option to participate with the party
seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 16. Termination of Agreement.
This Agreement may be terminated by either party upon one hundred twenty (120)
days written notice to the other. Should the Trust exercise its rights to
terminate, all out-of-pocket expenses associated with the movement of records
and materials will be borne by the Trust or the appropriate Fund. Additionally,
the Company reserves the right to charge for any other reasonable expenses
associated with such termination. The provisions of Article 15 shall survive
the termination of this Agreement.
Article 17. Amendment.
This Agreement may be amended or modified by a written agreement executed by
both parties.
Article 18. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company and the Trust
may from time to time agree on such provisions interpretive of or in addition to
the provisions of this Agreement as may in their joint opinion be consistent
with the general tenor of this Agreement. Any such interpretive or additional
provisions shall be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any provision of the
Charter. No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this Agreement.
Article 19. Governing Law.
This Agreement shall be construed and the provisions hereof interpreted under
and in accordance with the laws of the Commonwealth of Massachusetts
Article 20. Notices.
Except as otherwise specifically provided herein, Notices and other writings
delivered or mailed postage prepaid to the Trust at Federated Investors Tower,
Pittsburgh, Pennsylvania, 15222-3779, or to the Company at Federated Investors
Tower, Pittsburgh, Pennsylvania, 15222-3779, or to such other address as the
Trust or the Company may hereafter specify, shall be deemed to have been
properly delivered or given hereunder to the respective address.
Article 21. Counterparts.
This Agreement may be executed simultaneously in two or more counterparts, each
of which shall be deemed an original.
Article 22. Limitations of Liability of Trustees and Shareholders of the Trust.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by an authorized officer of the Trust, acting
as such, and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Trustees or
Shareholders of the Trust, but bind only the appropriate property of the Fund,
or Class, as provided in the Declaration of Trust.
Article 23. Limitations of Liability of Trustees and Shareholders of the Company.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, and
the obligations of this Agreement are not binding upon any of the Trustees or
Shareholders of the Company, but bind only the property of the Company as
provided in the Declaration of Trust.
Article 24. Assignment.
This Agreement and the rights and duties hereunder shall not be assignable with
respect to the Trust or the Funds by either of the parties hereto except by the
specific written consent of the other party.
Article 25. Merger of Agreement.
This Agreement constitutes the entire agreement between the parties hereto and
supersedes any prior agreement with respect to the subject hereof whether oral
or written.
Article 26. Successor Agent.
If a successor agent for the Trust shall be appointed by the Trust, the Company
shall upon termination of this Agreement deliver to such successor agent at the
office of the Company all properties of the Trust held by it hereunder. If no
such successor agent shall be appointed, the Company shall at its office upon
receipt of Proper Instructions deliver such properties in accordance with such
instructions.
In the event that no written order designating a successor agent or Proper
Instructions shall have been delivered to the Company on or before the date when
such termination shall become effective, then the Company shall have the right
to deliver to a bank or trust company, which is a "bank" as defined in the 1940
Act, of its own selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than $2,000,000, all
properties held by the Company under this Agreement. Thereafter, such bank or
trust company shall be the successor of the Company under this Agreement.
Article 27. Force Majeure.
The Company shall have no liability for cessation of services hereunder or any
damages resulting therefrom to the Fund as a result of work stoppage, power or
other mechanical failure, natural disaster, governmental action, communication
disruption or other impossibility of performance.
Article 28. Assignment; Successors.
This Agreement shall not be assigned by either party without the prior written
consent of the other party, except that either party may assign to a successor
all of or a substantial portion of its business, or to a party controlling,
controlled by, or under common control with such party. Nothing in this Article
28 shall prevent the Company from delegating its responsibilities to another
entity to the extent provided herein.
Article 29. Severability.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in
their names and on their behalf under their seals by and through their duly authorized
officers, as of the day and year first above written.
ATTEST: INVESTMENT COMPANIES (listed on Exhibit 1)
/s/ John W. McGonigle_______ By:__/s/ John F. Donahue___
John W. McGonigle John F. Donahue
Secretary Chairman
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber By:_/s/ James J. Dolan_____
Jeannette Fisher-Garber James J. Dolan
Secretary President
Schedule A
Fund Accounting
Fee Schedule
I. 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
Additional class of shares per year $12,000
II. 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.
III. 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.
</TABLE>
Schedule A1
Fund Accounting
Fee Schedule
Annual
First $100 Million 3.0 Basis Points
$100 Million - $300 Million 2.0 Basis Points
$300 Million - $500 Million 1.0 Basis Points
Over $500 Million 0.5 Basis Points
Fund Minimum $39,000
Additional Class of Shares $12,000
(Plus pricing charges and other out-of-pocket expenses)
Schedule B
Out-of-Pocket Expenses
Fund Accounting
Out-of-pocket expenses include, but are not limited to, the following:
- Postage (including overnight courier service)
- Statement Stock
- Envelopes
- Telephones
- Telecommunication Charges (including FAX)
- Travel
- Duplicating
- Forms
- Supplies
- Microfiche
- Computer Access Charges
- Client Specific System Enhancements
- Access to the Shareholder Recordkeeping System
- Security Pricing Services
- Variable Rate Change Notification Services
- Paydown Factor Notification Services
Schedule C
- Federated Funds -
Fees and Expenses
Shareholder Recordkeeping
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.
Schedule C1
- Bank Proprietary Funds -
Fees and Expenses
Shareholder Recordkeeping
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
$2000, whichever is greater.
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.
Schedule C2
- Bank Proprietary Funds -
Fees and Expenses
Shareholder Recordkeeping
I. Group I Services
<TABLE>
<S> <C>
Base Fee * (Annual fee per fund, class or other subdivision) $24,000
Account Fee* (Annual account charge)
(includes system access and funds control and reconcilement)
- Daily dividend fund $16.00
- Monthly dividend fund $10.00
- Quarterly dividend fund $10.00
- Contingent Deferred Sales Charge (Additionally) $5.00
(monthly and quarterly funds only)
- Closed Accounts* $1.20
Termination Fee (One time charge per fund, class or other subdivision) $20,000
II. Group II Services
Other Account Fees* (Annual account charge - Services or features not covered above)
- Account Activity Processing $3.50
(includes account establishment, transaction and maintenance processing)
- Account Servicing $4.50
(includes shareholder servicing and correspondence)
* All fees are annualized and will be prorated on a monthly basis for billing
purposes. Out-of-pocket expenses are not covered by these fees.
</TABLE>
SCHEDULE D
Out-of-Pocket Expenses Schedule
- Postage (including overnight courier service)
- Statement Stock
- Envelopes
- Telecommunication Charges (including FAX)
- Travel
- Duplicating
- Forms
- Supplies
- Microfiche
- Computer Access Charges
- Client Specific Enhancements
- Disaster Recovery
SCHEDULE E
Fee Schedule
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
Wire Fees $2.70 per wire
Settlements:
o Each DTC Commercial Paper $9.00
o Each DTC Transaction $9.00
o Each Federal Reserve Book Entry Transaction (Repo) $4.50
o Each Repo with Banks Other than State Street Bank $7.50
o Each Physical Transaction (NY/Boston, Private Placement) $21.75
o Each Option Written/Exercised/Expired $18.75
o Each Stock Load Transaction $12.00
o Each Book Entry Muni (Sub-custody) Transaction $15.00
o Index Fund/ETD Cost + 15%
II. Out-Of-Pocket Expenses
Telephone
Postage & Insurance
Armored carrier costs
Legal fees
Supplies related to fund records
Processing validation certificates
Forms, envelopes, Xerox copies, supplies, etc.
III. 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.
IV. Coupon Clipping
Monitoring for calls and processing for each monthly issue held
Monthly Charge $5.00
V. Balance Credit
A balance credit equal to 75% of the average balance in the custodian
account for the
monthly billed times the 30-day T-Bill Rate on the last Monday of the month
billed will be
applied against Section I through IV above.
VI. 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 1
FA=Fund Accounting
SR=Shareholder Recordkeeping
CSP=Custody Services Procurement
<TABLE>
<CAPTION>
CONTRACT SERVICES RELEVANT
DATE INVESTMENT COMPANY PROVIDED SCHEDULES
<S> <C> <C> <C>
12/1/93 111 Corcoran Fund
12/1/93 111 Corcoran Bond Fund FA, SR A,B,C1
12/1/93 111 Corcoran North Carolina Municipal Securities Fund FA, SR A,B,C1
12/13/93 Alexander Hamilton Funds
12/13/93 Alexander Hamilton Government Income Fund FA,SR,CSP A,B,C2,D,E
12/13/93 Alexander Hamilton Equity Growth and Income Fund FA,SR,CSP A,B,C2,D,E
12/13/94 Alexander Hamilton Municipal Income Fund FA,SR,CSP A,B,C2,D,E
12/1/93 American Leaders Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Automated Cash Management Trust FA,SR,CSP A,B,C,E
12/1/93 Automated Government Money Trust FA,SR,CSP A,B,C,E
01/07/94 Peachtree Funds (2/11/94 effective/formerly BankSouth Select Funds)
01/07/94 Peachtree Select Georgia Tax-Free Income Fund FA,SR C2,D
01/07/94 Peachtree Select Government Money Market Fund FA,SR C2,D
01/07/94 Peachtree Select Prime Money Market Fund FA,SR C2,D
01/07/94 Peachtree Select Bond Fund FA,SR C2,D
01/07/94 Peachtree Select Equity Fund FA,SR C2,D
12/1/93 BayFunds
12/1/93 BayFunds Money Market Portfolio
12/1/93 Investment Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 BayFunds Bond Portfolio
1/1/94 Institutional Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 BayFunds Equity Portfolio
1/1/94 Institutional Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 BayFunds Short-Term Yield Portfolio
1/1/94 Institutional Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 BayFunds U.S. Treasury Money Market Portfolio
1/1/94 Institutional Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 The Biltmore Funds
12/1/93 Biltmore Balanced Fund FA,SR A1,B,C2,D
12/1/93 Biltmore Equity Fund FA,SR A1,B,C2,D
12/1/93 Biltmore Fixed Income Fund FA,SR A1,B,C2,D
12/1/93 Biltmore Equity Index Fund FA,SR A1,B,C2,D
12/1/93 Biltmore Money Market Fund
12/1/93 Institutional Shares FA,SR A1,B,C2,D
12/1/93 Investment Shares FA,SR A1,B,C2,D
12/1/93 Biltmore Prime Cash Management Fund
12/1/93 Institutional Shares FA,SR A1,B,C2,D
12/1/93 Biltmore Quantitative Equity Fund FA,SR A1,B,C2,D
12/1/93 Biltmore Short-Term Fixed Income Fund FA,SR A1,B,C2,D
12/1/93 Biltmore Special Values Fund FA,SR A1,B,C2,D
12/1/93 Biltmore Tax-Free Money Market Fund
12/1/93 Institutional Shares FA,SR A1,B,C2,D
12/1/93 Investment Shares FA,SR A1,B,C2,D
12/1/93 Biltmore U.S. Treasury Money Market Fund
12/1/93 Institutional Shares FA,SR A1,B,C2,D
12/1/93 Investment Shares FA,SR A1,B,C2,D
12/1/93 The Biltmore Municipal Funds
12/1/93 South Carolina Municipal Bond Fund FA,SR A1,B,C2,D
12/1/93 The Boulevard Funds
12/1/93 Boulevard Blue Chip Growth Fund FA,SR A1,B,C1
12/1/93 Boulevard Managed Income Fund FA,SR A1,B,C1
12/1/93 Boulevard Managed Municipal Fund FA,SR A1,B,C1
12/1/93 Boulevard Strategic Balanced Fund FA,SR A1,B,C1
12/1/93 California Municipal Cash Trust FA,SR,CSP A,B,C,E
12/1/93 Cash Trust Series, Inc.
12/1/93 Government Cash Series FA,SR,CSP A,B,C,E
12/1/93 Municipal Cash Series FA,SR,CSP A,B,C,E
12/1/93 Prime Cash Series FA,SR,CSP A,B,C,E
12/1/93 Treasury Cash Series FA,SR,CSP A,B,C,E
12/1/93 Cash Trust Series II
12/1/93 Municipal Cash Series II FA,SR,CSP A,B,C,E
12/1/93 Treasury Cash Series II FA,SR,CSP A,B,C,E
12/1/93 DG Investor Series
12/1/93 DG Equity Fund FA,SR A1,B,C2,D
12/1/93 DG Government Income Fund FA,SR A1,B,C2,D
12/1/93 DG Limited Term Government Income Fund FA,SR A1,B,C2,D
12/1/93 DG Municipal Income Fund FA,SR A1,B,C2,D
12/1/93 DG U.S. Government Money Market Fund FA,SR A1,B,C2,D
12/1/93 Federated ARMs Fund
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated U.S. Government Bond Fund FA,SR,CSP A,B,C,E
12/1/93 Federated Exchange Fund, Ltd. FA,SR,CSP A,B,C,E
12/1/93 Federated GNMA Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Government Trust
12/1/93 Automated Government Cash Reserves FA,SR,CSP A,B,C,E
12/1/93 Automated Treasury Cash Reserves FA,SR,CSP A,B,C,E
12/1/93 U.S. Treasury Cash Reserves FA,SR,CSP A,B,C,E
12/1/93 Federated Growth Trust FA,SR,CSP A,B,C,E
12/1/93 Federated High Yield Trust FA,SR,CSP A,B,C,E
12/1/93 Federated Income Securities Trust
12/1/93 Federated Short-Term Income Fund
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Intermediate Income Fund
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Income Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Index Trust
12/1/93 Max-Cap Fund
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Mid-Cap Fund FA,SR,CSP A,B,C,E
12/1/93 Mini-Cap Fund FA,SR,CSP A,B,C,E
12/1/93 Federated Intermediate Government Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Investment Funds
12/1/93 Growth Portfolio FA,SR,CSP A,B,C,E
12/1/93 High Quality Bond Portfolio FA,SR,CSP A,B,C,E
12/1/93 Pennsylvania Intermediate Municipal Income Portfolio FA,SR,CSP A,B,C,E
12/1/93 Value Equity Portfolio FA,SR,CSP A,B,C,E
12/1/93 Federated Master Trust FA,SR,CSP A,B,C,E
12/1/93 Federated Municipal Trust
12/1/93 Alabama Municipal Cash Trust FA,SR,CSP A,B,C,E
12/1/93 Connecticut Municipal Cash Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
3/2/94 Maryland Municipal Cash Trust FA,SR,SCP A,B,C,E
12/1/93 Massachusetts Municipal Cash Trust
12/1/93 BayFund Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Minnesota Municipal Cash Trust
12/1/93 Cash Series Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 New Jersey Municipal Cash Trust
12/1/93 Cash Series Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Ohio Municipal Cash Trust
12/1/93 Cash II Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Pennsylvania Municipal Cash Trust
12/1/93 Cash Series Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Virginia Municipal Cash Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Short-Intermediate Government Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Short-Intermediate Municipal Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Short-Term U.S. Government Trust FA,SR,CSP A,B,C,E
12/1/93 Stock and Bond Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Stock Trust FA,SR,CSP A,B,C,E
12/1/93 Federated Tax-Free Trust FA,SR,CSP A,B,C,E
12/1/93 Financial Reserves Fund FA A1,B
12/1/93 First Priority Funds
12/1/93 First Priority Equity Fund
12/1/93 Investment Shares FA,SR A1,B,C2,D
12/1/93 Trust Shares FA,SR A1,B,C2,D
12/1/93 First Priority Fixed Income Fund
12/1/93 Investment Shares FA,SR A1,B,C2,D
12/1/93 Trust Shares FA,SR A1,B,C2,D
12/1/93 First Priority Treasury Money Market Fund
12/1/93 Investment Shares FA,SR A1,B,C2,D
12/1/93 Trust Shares FA,SR A1,B,C2,D
12/1/93 First Priority Limited Maturity Government Fund FA,SR A1,B,C2,D
12/1/93 Fixed Income Securities, Inc.
12/1/93 Limited Term Fund
12/1/93 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Investment Shares FA,SR,CSP A,B,C,E
12/1/93 Limited Term Municipal Fund
12/1/93 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Investment Shares FA,SR,CSP A,B,C,E
12/1/93 Multi-State Municipal Income Fund FA,SR,CSP A,B,C,E
12/1/93 Limited Maturity Government Fund FA,SR,CSP A,B,C,E
4/12/94 Strategic Income Fund
4/12/94 Class A Shares FA,SR,CSP A,B,C,E
4/12/94 Class C Shares FA,SR,CSP A,B,C,E
4/12/94 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Fortress Adjustable Rate U.S. Government Fund, Inc. FA,SR,CSP A,B,C,E
12/1/93 Fortress Municipal Income Fund, Inc. FA,SR,CSP A,B,C,E
12/1/93 Fortress Utility Fund, Inc. FA,SR,CSP A,B,C,E
12/1/93 FT Series, Inc.
12/1/93 International Equity Fund
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 International Income Fund
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Fund for U.S. Government Securities, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
5/19/94 Class B Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Government Income Securities, Inc. FA,SR,CSP A,B,C,E
4/8/94 Independence One Mutual Funds
4/8/94 Independence One Michigan Municipal Cash Fund SR C1,D
4/8/94 Independence One Prime Money Market Fund SR C1,D
4/8/94 Independence One U.S. Government Securities Fund
4/8/94 Investment Shares SR C1,D
4/8/94 Trust Shares SR C1,D
4/8/94 Independence One U.S. Treasury Money Market Fund SR C1,D
1/11/94 Insight Institutional Series, Inc.
1/11/94 Insight Adjustable Rate Mortgage Fund FA,SR,CSP A,B,C,E
1/11/94 Insight Limited Term Income Fund FA,SR,CSP A,B,C,E
1/11/94 Insight Limited Term Municipal Fund FA,SR,CSP A,B,C,E
1/11/94 Insight U.S. Government Fund FA,SR,CSP A,B,C,E
12/15/93 Insurance Management Series
12/15/93 U.S. Government Bond Fund FA,SR,CSP A,B,C,E
12/15/93 Corporate Bond Fund FA,SR,CSP A,B,C,E
12/15/93 Utility Fund FA,SR,CSP A,B,C,E
12/15/93 Equity Growth & Income Fund FA,SR,CSP A,B,C,E
12/15/93 Prime Money Fund FA,SR,CSP A,B,C,E
12/1/93 Intermediate Municipal Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Ohio Intermediate Municipal Trust FA,SR,CSP A,B,C,E
12/1/93 Pennsylvania Intermediate Municipal Trust FA,SR,CSP A,B,C,E
2/16/94 California Intermediate Municipal Trust FA,SR,CSP A,B,C,E
12/1/93 Investment Series Fund, Inc.
12/1/93 Capital Growth Fund
12/1/93 Investment Shares (Schedules C2 & D are for IRM) FA,SR,CSP A,B,C,C2,D,E
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Fortress Bond Fund FA,SR,CSP A,B,C,E
12/1/93 Investment Series Trust
12/1/93 High Quality Stock Fund(Schedules C2 & D are for IRM) FA,SR,CSP A,B,C,C2,D,E
12/1/93 Municipal Securities Income Fund FA,SR,CSP A,B,C,E
12/1/93 U.S. Government Bond Fund(Schedules C2 & D are for IRM) FA,SR,CSP A,B,C,C2,D,E
12/1/93 Edward D. Jones & Co. Daily Passport Cash Trust FA,SR,CSP A,B,C,E
12/1/93 Liberty Equity Income Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Liberty High Income Bond Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Liberty Municipal Securities Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Liberty Term Trust, Inc. - 1999 FA,SR,CSP A,B,C,E
12/1/93 Liberty U.S. Government Money Market Trust FA,SR,CSP A,B,C,E
12/1/93 Liberty Utility Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Liquid Cash Trust FA,SR,CSP A,B,C,E
3/11/94 Managed Series Trust
3/11/94 Federated Managed Income Fund
3/11/94 Select Shares FA,SR,CSP A,B,C,E
3/11/94 Institutional Service Shares FA,SR,CSP A,B,C,E
3/11/94 Federated Managed Growth Fund
3/11/94 Select Shares FA,SR,CSP A,B,C,E
3/11/94 Institutional Service Shares FA,SR,CSP A,B,C,E
3/11/94 Federated Managed Growth and Income Fund
3/11/94 Select Shares FA,SR,CSP A,B,C,E
3/11/94 Institutional Service Shares FA,SR,CSP A,B,C,E
3/11/94 Federated Managed Aggressive Growth Fund
3/11/94 Select Shares FA,SR,CSP A,B,C,E
3/11/94 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Mark Twain Funds
12/1/93 Mark Twain Equity Portfolio FA,SR A,B,C2,D
12/1/93 Mark Twain Fixed Income Portfolio FA,SR A,B,C2,D
12/1/93 Mark Twain Government Money Market Portfolio
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 Mark Twain Municipal Income Portfolio FA,SR A,B,C2,D
12/1/93 Marshall Funds, Inc.
12/1/93 Marshall Government Income Fund FA,SR A1,B,C2,D
12/1/93 Marshall Intermediate Bond Fund FA,SR A1,B,C2,D
12/1/93 Marshall Money Market Fund
12/1/93 Investment Shares FA,SR A1,B,C2,D
12/1/93 Trust Shares FA,SR A1,B,C2,D
12/1/93 Marshall Short-Term Income Fund FA,SR A1,B,C2,D
12/1/93 Marshall Stock Fund FA,SR A1,B,C2,D
12/1/93 Marshall Tax-Free Money Market Fund FA,SR A1,B,C2,D
12/1/93 Marshall Balanced Fund FA,SR A1,B,C2,D
12/1/93 Marshall Equity Income Fund FA,SR A1,B,C2,D
12/1/93 Marshall Mid-Cap Stock Fund FA,SR A1,B,C2,D
12/1/93 Marshall Value Equity Fund FA,SR A1,B,C2,D
12/28/93 Marshall Short-Term Tax-Free Fund FA,SR A1,B,C2,D
12/28/93 Marshall Intermediate Tax-Free Fund FA,SR A1,B,C2,D
12/1/93 Money Market Management, Inc.(Schedules C2 & D are for IRM) FA,SR,CSP A,B,C,C2,D,E
12/1/93 Money Market Trust FA,SR,CSP A,B,C,E
12/1/93 Money Market Obligations Trust
12/1/93 Government Obligations Fund FA,SR,CSP A1,B,C,E
12/1/93 Prime Obligations Fund FA,SR,CSP A1,B,C,E
12/1/93 Tax-Free Obligations Fund FA,SR,CSP A1,B,C,E
12/1/93 Treasury Obligations Fund FA,SR,CSP A1,B,C,E
12/1/93 Municipal Securities Income Trust
12/1/93 California Municipal Income Fund
12/1/93 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Florida Municipal Income Fund FA,SR,CSP A,B,C,E
12/1/93 Maryland Municipal Income Fund FA,SR,CSP A,B,C,E
12/1/93 Michigan Municipal Income Fund FA,SR,CSP A,B,C,E
12/1/93 New Jersey Municipal Income Fund FA,SR,CSP A,B,C,E
12/1/93 New York Municipal Income Fund
12/1/93 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Ohio Municipal Income Fund
12/1/93 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Trust Shares FA,SR,CSP A,B,C,E
12/1/93 Pennsylvania Municipal Income Fund
12/1/93 Investment Shares FA,SR,CSP A,B,C,E
12/1/93 Trust Shares FA,SR,CSP A,B,C,E
12/1/93 Income shares FA,SR,CSP A,B,C,E
12/1/93 Texas Municipal Income Fund FA,SR,CSP A,B,C,E
12/1/93 Virginia Municipal Income Fund FA,SR,CSP A,B,C,E
12/1/93 New York Municipal Cash Trust
12/1/93 Cash II Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 The Planters Funds
12/1/93 Tennessee Tax-Free Bond Fund FA,SR A1,B,C2,D
12/1/93 Portage Funds
12/1/93 Portage Government Money Market Fund
12/1/93 Investment Shares [INV.SH. MERGED INTO TRUST SH. 2/1/94]
12/1/93 Trust Shares SR C2,D
12/1/93 RIMCO Monument Funds
12/1/93 RIMCO Monument Bond Fund FA,SR A,B,C2,D
12/1/93 RIMCO Monument Prime Money Market Fund FA,SR A,B,C2,D
12/1/93 RIMCO Monument Stock Fund FA,SR A,B,C2,D
12/1/93 RIMCO Monument U.S. Treasury Money Market Fund FA,SR A,B,C2,D
12/1/93 Signet Select Funds
12/1/93 Maryland Municipal Bond Fund
12/1/93 Investment Shares FA,SR A,B,C1
12/1/93 Trust Shares FA,SR A,B,C1
12/1/93 Money Market Fund
12/1/93 Investment Shares FA,SR A,B,C1
12/1/93 Trust Shares FA,SR A,B,C1
12/1/93 Treasury Money Market Fund
12/1/93 Investment Shares FA,SR A,B,C1
12/1/93 Trust Shares FA,SR A,B,C1
12/1/93 U.S. Government Income Fund
12/1/93 Investment Shares FA,SR A,B,C1
12/1/93 Trust Shares FA,SR A,B,C1
12/1/93 Value Equity Fund
12/1/93 Investment Shares FA,SR A,B,C1
12/1/93 Trust Shares FA,SR A,B,C1
12/1/93 Virginia Municipal Bond Fund
12/1/93 Investment Shares FA,SR A,B,C1
12/1/93 Trust Shares FA,SR A,B,C1
12/1/93 The Shawmut Funds
12/1/93 Shawmut Fixed Income Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 Shawmut Growth Equity Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 Shawmut Growth and Income Equity Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 Shawmut Intermediate Government Income Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 Shawmut Limited Term Income Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 Shawmut Prime Money Market Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 Shawmut Small Capitalization Equity Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 Shawmut Connecticut Municipal Money Market Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 Shawmut Connecticut Intermediate Municipal Income Fund FA,SR A,B,C2,D
12/1/93 Shawmut Massachusetts Municipal Money Market Fund FA,SR A,B,C2,D
12/1/93 Shawmut Massachusetts Intermediate Municipal
Income Fund FA,SR A,B,C2,D
12/1/93 Star Funds
5/16/94 Star Capital Appreciation Fund FA,SR A,B,C2,D
12/1/93 Star Prime Obligations Fund FA,SR A,B,C2,D
12/1/93 Star Relative Value Fund FA,SR A,B,C2,D
12/1/93 Star Tax-Free Money Market Fund FA,SR A,B,C2,D
12/1/93 Star Treasury Fund FA,SR A,B,C2,D
12/1/93 Star U.S. Government Income Fund FA,SR A,B,C2,D
12/1/93 The Stellar Fund FA,SR A,B,C2,D
12/1/93 Sunburst Funds
12/1/93 Sunburst Short-Intermediate Government Bond Fund FA,ST A,B,C2,D
12/1/93 Tax-Free Instruments Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 The Monitor Funds
12/1/93 The Monitor Fixed Income Securities Fund
12/1/93 Investment Shares SR C1
12/1/93 Trust Shares SR C1
12/1/93 The Monitor Growth Fund
12/1/93 Investment Shares SR C1
12/1/93 Trust Shares SR C1
12/1/93 The Monitor Income Equity Fund SR C1
12/1/93 The Monitor Money Market Fund
12/1/93 Investment Shares SR C1
12/1/93 Trust Shares SR C1
12/1/93 The Monitor Mortgage Securities Fund
12/1/93 Investment Shares SR C1
12/1/93 Trust Shares SR C1
12/1/93 The Monitor Ohio Municipal Money Market Fund
12/1/93 Investment Shares SR C1
12/1/93 Trust Shares SR C1
12/1/93 The Monitor Ohio Tax-Free Fund
12/1/93 Investment Shares SR C1
12/1/93 Trust Shares SR C1
12/1/93 The Monitor Short/Intermediate Fixed Income
12/1/93 Securities Fund SR C1
12/1/93 The Monitor U.S. Treasury Money Market Fund
12/1/93 Investment Shares SR C1
12/1/93 Trust Shares SR C1
12/1/93 The Starburst Funds
12/1/93 The Starburst Government Income Fund FA,SR A,B,C2,D
12/1/93 The Starburst Government Money Market Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 The Starburst Money Market Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 The Starburst Municipal Income Fund FA,SR A,B,C2,D
12/1/93 The Starburst Funds II
12/1/93 The Starburst Quality Income Fund FA,SR A,B,C2,D
3/9/94 Tower Mutual Funds
3/9/94 Cash Reserves Fund FA,SR A,B,C2,D
3/9/94 Capital Appreciation Fund FA,SR A,B,C2,D
3/9/94 Louisiana Municipal Income Fund FA,SR A,B,C2,D
3/9/94 U.S. Government Income Fund FA,SR A,B,C2,D
3/9/94 Total Return Fund FA,SR A,B,C2,D
3/9/94 U.S. Treasury Money Market Fund FA,SR A,B,C2,D
12/1/93 Trademark Funds
12/1/93 Trademark Equity Fund FA,SR A,B,C2,D
12/1/93 Trademark Government Income Fund FA,SR A,B,C2,D
12/1/93 Trademark Kentucky Municipal Bond Fund FA,SR A,B,C2,D
12/1/93 Trademark Short-Intermediate Government Fund FA,SR A,B,C2,D
12/1/93 Trust for Financial Institutions
12/1/93 Government Qualifying Liquidity Fund
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Government Money Market Fund
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Trust for Government Cash Reserves FA,SR,CSP A,B,C,E
12/1/93 Trust for Short-Term U.S. Government Securities FA,SR,CSP A,B,C,E
12/1/93 Trust for U.S. Treasury Obligations FA,SR,CSP A,B,C,E
12/1/93 Vulcan Funds
12/1/93 Vulcan Bond Fund FA,SR A1,B,C2,D
12/1/93 Vulcan Stock Fund FA,SR A1,B,C2,D
12/1/93 Vulcan Treasury Obligations Money Market Fund FA,SR A1,B,C2,D
2/24/94 World Investment Series, Inc.
World Utility Fund
Class A Shares FA,SR,CSP A,B,C,E
Fortress Shares FA,SR,CSP A,B,C,E
</TABLE>
FSS subcontract 1
Exhibit 9(i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
SHAREHOLDER SERVICES SUB-CONTRACT
This Agreement is made between the Financial Institution executing
this Agreement ("Provider") and Federated Shareholder Services ("FSS")
on behalf of the investment companies listed in Exhibit A hereto (the
"Funds"), for whom FSS administers the Shareholder Services Plan
("Plan") and who have approved this form of Agreement. In consideration
of the mutual covenants hereinafter contained, it is hereby agreed by
and between the parties hereto as follows:
1. FSS hereby appoints Provider to render or cause to be
rendered personal services to shareholders of the Funds and/or the
maintenance of accounts of shareholders of the Funds ("Services").
Provider agrees to provide Services which, in its best judgment, are
necessary or desirable for its customers who are investors in the Funds.
Provider further agrees to provide FSS, upon request, a written
description of the Services which Provider is providing hereunder.
2. During the term of this Agreement, the Funds will pay the
Provider fees as set forth in a written schedule delivered to the
Provider pursuant to this Agreement. The fee schedule for Provider may
be changed by FSS sending a new fee schedule to Provider pursuant to
Paragraph 9 of this Agreement. For the payment period in which this
Agreement becomes effective or terminates, there shall be an appropriate
proration of the fee on the basis of the number of days that this
Agreement is in effect during the quarter. To enable the Funds to
comply with an applicable exemptive order, Provider represents that the
fees received pursuant to this Agreement will be disclosed to its
customers, will be authorized by its customers, and will not result in
an excessive fee to the Provider.
3. The Provider understands that the Department of Labor views
ERISA as prohibiting fiduciaries of discretionary ERISA assets from
receiving shareholder service fees or other compensation from funds in
which the fiduciary's discretionary ERISA assets are invested. To date,
the Department of Labor has not issued any exemptive order or advisory
opinion that would exempt fiduciaries from this interpretation. Without
specific authorization from the Department of Labor, fiduciaries should
carefully avoid investing discretionary assets in any fund pursuant to
an arrangement where the fiduciary is to be compensated by the fund for
such investment. Receipt of such compensation could violate ERISA
provisions against fiduciary self-dealing and conflict of interest and
could subject the fiduciary to substantial penalties.
4. The Provider agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of a Fund in opposition to proxies solicited by management
of the Fund, unless a court of competent jurisdiction shall have
determined that the conduct of a majority of the Board of Trustees or
Directors of the Fund constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties. This paragraph 4 will
survive the term of this Agreement.
5. This Agreement shall continue in effect for one year from
the date of its execution, and thereafter for successive periods of one
year if the form of this Agreement is approved at least annually by the
Board of each Fund, including a majority of the members of the Board of
the Fund who are not interested persons of the Fund and have no direct
or indirect financial interest in the operation of the Fund's Plan or in
any related documents to the Plan ("Disinterested Board Members") cast
in person at a meeting called for that purpose.
6. Notwithstanding paragraph 5, this Agreement may be
terminated as follows:
(a) at any time, without the payment of any penalty, by
the vote of a majority of the Disinterested Board Members of the
Fund or by a vote of a majority of the outstanding voting
securities of the Fund as defined in the Investment Company Act
of 1940 on not more than sixty (60) days' written notice to the
parties to this Agreement;
(b) automatically in the event of the Agreement's
assignment as defined in the Investment Company Act of 1940; and
(c) by either party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice
of its intention to terminate.
7. The Provider agrees to obtain any taxpayer identification
number certification from its customers required under Section 3406 of
the Internal Revenue Code, and any applicable Treasury regulations, and
to provide the Fund or its designee with timely written notice of any
failure to obtain such taxpayer identification number certification in
order to enable the implementation of any required backup withholding.
8. The execution and delivery of this Agreement have been
authorized by the Trustees of FSS and signed by an authorized officer of
FSS, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of
them personally, and the obligations of this Agreement are not binding
upon any of the Trustees or shareholders of FSS, but bind only the trust
property of FSS as provided in the Declaration of Trust of FSS.
9. Notices of any kind to be given hereunder shall be in
writing (including facsimile communication) and shall be duly given if
delivered to Provider at the address set forth below and if delivered to
FSS at Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
10. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written. If any provision of this
Agreement shall be held or made invalid by a court or regulatory agency
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. Subject to the provisions of Sections 5
and 6, hereof, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
shall be governed by Pennsylvania law; provided, however, that nothing
herein shall be construed in a manner inconsistent with the Investment
Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
11. This Agreement may be executed by different parties on
separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together
constitute one and the same instrument.
12. This Agreement shall not be assigned by any party without
the prior written consent of FSS in the case of assignment by Provider,
or of Provider in the case of assignment by FSS, except that any party
may assign to a successor all of or a substantial portion of its
business to a party controlling, controlled by, or under common control
with such party.
13. This Agreement may be amended by FSS from time to time by
the following procedure. FSS will mail a copy of the amendment to the
Provider's address, as shown below. If the Provider does not object to
the amendment within thirty (30) days after its receipt, the amendment
will become part of the Agreement. The Provider's objection must be in
writing and be received by FSS within such thirty days.
14. This Agreement may be terminated with regard to a
particular Fund or Class at any time, without the payment of any
penalty, by FSS or by the vote of a majority of the Disinterested
Trustees or Directors, as applicable, or by a majority of the
outstanding voting securities of the particular Fund or Class on not
more than sixty (60) days' written notice to the Provider. This
Agreement may be terminated by Provider on sixty (60) days' written
notice to FSS.
15. The Provider acknowledges and agrees that FSS has entered
into this Agreement solely in the capacity of agent for the Funds and
administrator of the Plan. The Provider agrees not to claim that FSS is
liable for any responsibilities or amounts due by the Funds hereunder.
[Provider]
Address
City State Zip Code
Dated: By:
Authoried Signature
Title
Print Name of Authorized Signature
FEDERATED SHAREHOLDER SERVICES
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:
Vice President
EXHIBIT A to Shareholder Services Sub-Contract with
Funds covered by this Agreement:
Trust for Financial Institutions
Government Money Market Fund
Government Qualifying Liquidity Fund
Shareholder Service Fees
1. During the term of this Agreement, FSS will pay Provider a
quarterly fee. This fee will be computed at the annual rate of .25% of
the average net asset value of shares of the Funds held during the
quarter in accounts for which the Provider provides Services under this
Agreement, so long as the average net asset value of Shares in the Funds
during the quarter equals or exceeds such minimum amount as FSS shall
from time to time determine and communicate in writing to the Provider.
2. For the quarterly period in which the Agreement becomes
effective or terminates, there shall be an appropriate proration of any
fee payable on the basis of the number of days that the Agreement is in
effect during the quarter.
