-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, oadMubOeRCQfm8fuVXtVEVk2dAq5gPO+50MRZakqv04AVBqkmIABT3tLJOYnk7tG Z144jVHSRPBQJXNUgEES3w== 0000855108-94-000031.txt : 19940926 0000855108-94-000031.hdr.sgml : 19940926 ACCESSION NUMBER: 0000855108-94-000031 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940923 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERATED MUNICIPAL TRUST CENTRAL INDEX KEY: 0000855108 STANDARD INDUSTRIAL CLASSIFICATION: STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 033-31259 FILM NUMBER: 94550059 BUSINESS ADDRESS: STREET 1: FEDERATED INVESTORS TOWER CITY: PITTSBURGH STATE: PA ZIP: 15222 BUSINESS PHONE: 4122887496 497 1 - -------------------------------------------------------------------------------- FLORIDA MUNICIPAL CASH TRUST (A PORTFOLIO OF FEDERATED MUNICIPAL TRUST) PROSPECTUS The shares of Florida Municipal Cash Trust (the "Fund") offered by this prospectus represent interests in a non-diversified portfolio of Federated Municipal Trust (the "Trust"), an open-end management investment company (a mutual fund). The investment objective of the Fund is to provide current income exempt from federal regular income tax consistent with stability of principal and liquidity and to maintain an investment portfolio that will cause its shares to be exempt from the Florida intangibles tax. THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO. This prospectus contains the information you should read and know before you invest in the Fund. Keep this prospectus for future reference. The Fund has also filed a Statement of Additional Information dated September 19, 1994 with the Securities and Exchange Commission. The information contained in the Statement of Additional Information is incorporated by reference into this prospectus. You may request a copy of the Statement of Additional Information free of charge, by calling 1-800-235-4669. To obtain other information, or 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 September 19, 1994 TABLE OF CONTENTS - -------------------------------------------------------------------------------- SUMMARY OF FUND EXPENSES 1 - -------------------------------------------------- GENERAL INFORMATION 2 - -------------------------------------------------- INVESTMENT INFORMATION 2 - -------------------------------------------------- Investment Objective 2 Investment Policies 2 Florida Municipal Securities 5 Investment Risks 5 Non-Diversification 6 Investment Limitations 6 Regulatory Compliance 6 TRUST INFORMATION 7 - -------------------------------------------------- Management of the Trust 7 Other Payments to Financial Institutions 7 Distribution of Shares 8 Administration of the Trust 8 Expenses of the Fund 9 NET ASSET VALUE 9 - -------------------------------------------------- INVESTING IN THE FUND 10 - -------------------------------------------------- Share Purchases 10 Minimum Investment Required 10 Subaccounting Services 11 Certificates and Confirmations 11 Dividends 11 Capital Gains 11 REDEEMING SHARES 11 - -------------------------------------------------- Through a Financial Institution 11 By Mail 12 Accounts with Low Balances 13 SHAREHOLDER INFORMATION 13 - -------------------------------------------------- Voting Rights 13 Massachusetts Partnership Law 13 TAX INFORMATION 14 - -------------------------------------------------- Federal Income Tax 14 State and Local Taxes 14 Florida Intangibles Tax 14 Florida State Municipal Taxation 15 PERFORMANCE INFORMATION 15 - -------------------------------------------------- ADDRESSES Inside Back Cover - --------------------------------------------------
I SUMMARY OF FUND EXPENSES - --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES Maximum Sales Load Imposed on Purchases (as a percentage of offering price).................... None Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)......... None Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as applicable)..................................................................... None Redemption Fee (as a percentage of amount redeemed, if applicable)............................. None Exchange Fee................................................................................... None
ANNUAL FUND OPERATING EXPENSES* (As a percentage of projected average net assets) Management Fee (after waiver) (1)........................................................ 0.19% 12b-1 Fee (2)............................................................................ 0.00% Total Other Expenses..................................................................... 0.30% Shareholder Services Fee.................................................. 0.25% Total Fund Operating Expenses (3)................................................ 0.49% (1) The estimated management fee has been reduced to reflect the anticipated voluntary waiver of a portion of the management fee. The adviser can terminate this voluntary waiver at any time at its sole discretion. The maximum managment fee is 0.40% (2) The Fund has no present intention of paying or accruing the 12b-1 fee during the fiscal year ending October 31, 1994. If the Fund were paying or accruing the 12b-1 fee, the Fund 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 total Fund operating expenses are estimated to be 0.70% absent the anticipated voluntary waiver of a portion of the management fee. * Total Fund operating expenses are estimated based on average expenses expected to be incurred during the period ending October 31, 1994. During the course of this period, expenses may be more or less than the average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES, SEE "INVESTING IN THE FUND" AND "TRUST INFORMATION." WIRE-TRANSFERRED REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO ADDITIONAL FEES.
EXAMPLE 1 YEAR 3 YEARS - ------------------------------------------------------------------------------------- --------- --------- 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
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING OCTOBER 31, 1994. 1 GENERAL INFORMATION - -------------------------------------------------------------------------------- The Trust was established as a Massachusetts business trust under a Declaration of Trust dated September 1, 1989. The Declaration of Trust permits the Trust to offer separate series of shares of beneficial interest representing interests in separate portfolios of securities. The Fund is designed for financial institutions acting in an agency or fiduciary capacity as a convenient means of accumulating an interest in a professionally managed, non-diversified portfolio investing primarily in short-term Florida municipal securities. The Fund may not be a suitable investment for retirement plans or for non-Florida taxpayers because it invests in municipal securities of that state. A minimum initial investment of $10,000 over a 90-day period is required. INVESTMENT INFORMATION - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVE The investment objective of the Fund is to provide current income exempt from federal regular income tax consistent with stability of principal and liquidity and to maintain an investment portfolio that will cause its shares to be exempt from the Florida intangibles tax. This investment objective cannot be changed without shareholder approval. While there is no assurance that the Fund will achieve its investment objective, it endeavors to do so by following the investment policies described in this prospectus. INVESTMENT POLICIES The Fund pursues its investment objective by investing in a portfolio of Florida municipal securities (as defined below) maturing in 13 months or less. As a matter of investment policy, which cannot be changed without shareholder approval, at least 80% of the Fund's annual interest income will be exempt from federal regular income tax. (Federal regular income tax does not include the federal individual alternative minimum tax or the federal alternative minimum tax for corporations.) The average maturity of the securities in the Fund's portfolio, computed on a dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the investment policies set forth below may be changed by the Trustees without shareholder approval. Shareholders will be notified before any material change in these policies becomes effective. ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations issued by or on behalf of Florida and its political subdivisions and financing authorities (these will normally constitute at least 65% of the Fund's total assets), and obligations of other states, territories, and possessions of the United States, including the District of Columbia, and any political subdivision or financing authority of any of these, the income from which is, in the opinion of qualified legal counsel, exempt from federal regular income tax. Examples of Florida municipal securities include, but are not limited to: - tax and revenue anticipation notes ("TRANs") issued to finance working capital needs in anticipation of receiving taxes or other revenues; - bond anticipation notes ("BANs") that are intended to be refinanced through a later issuance of longer-term bonds; 2 - municipal commercial paper and other short-term notes; - variable rate demand notes; - municipal bonds (including bonds having serial maturities and pre-refunded bonds) and leases; and - participation, trust and partnership interests in any of the foregoing obligations. VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term debt instruments that have variable or floating interest rates and provide the Fund with the right to tender the security for repurchase at its stated principal amount plus accrued interest. Such securities typically bear interest at a rate that is intended to cause the securities to trade at par. The interest rate may float or be adjusted at regular intervals (ranging from daily to annually), and is normally based on a published interest rate or interest rate index. Most variable rate demand notes allow the Fund to demand the repurchase of the security on not more than seven days prior notice. Other notes only permit the Fund to tender the security at the time of each interest rate adjustment or at other fixed intervals. See "Demand Features." The Fund treats variable rate demand notes as maturing on the later of the date of the next interest rate adjustment or the date on which the Fund may next tender the security for repurchase. PARTICIPATION INTERESTS. The Fund may purchase interests in Florida municipal securities from financial institutions such as commercial and investment banks, savings and loan associations, and insurance companies. These interests may take the form of participations, beneficial interests in a trust, partnership interests or any other form of indirect ownership that allows the Fund to treat the income from the investment as exempt from federal income tax. The Fund invests in these participation interests in order to obtain credit enhancement or demand features that would not be available through direct ownership of the underlying Florida municipal securities. MUNICIPAL LEASES. Municipal leases are obligations issued by state and local governments or authorities to finance the acquisition of equipment and facilities. They may take the form of a lease, an installment purchase contract, a conditional sales contract, or a participation interest in any of the above. The Fund may purchase municipal securities in the form of participation interests that represent an undivided proportional interest in lease payments by a governmental or nonprofit entity. The lease payments and other rights under the lease provide for and secure payments on the certificates. Lease obligations may be limited by municipal charter or the nature of the appropriation for the lease. Furthermore, a lease may provide that the participants cannot accelerate lease obligations upon default. The participants would only be able to enforce lease payments as they became due. In the event of a default or failure of appropriation, unless the participation interests are credit enhanced, it is unlikely that the participants would be able to obtain an acceptable substitute source of payment. RATINGS. The municipal securities in which the Fund invests must be rated in one of the two highest short-term rating categories by one or more nationally recognized statistical rating organizations ("NRSROs") or be of comparable quality to securities having such ratings. An NRSRO's two highest rating categories are determined without regard for sub-categories and gradations. For 3 example, securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Corporation ("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or FIN-1+, FIN-1, and FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all considered rated in one of the two highest short-term rating categories. The Fund will follow applicable regulations in determining whether a security rated by more than one NRSRO can be treated as being in one of the two highest short-term rating categories; currently, such securities must be rated by two NRSROs in one of their two highest rating categories. See "Regulatory Compliance." CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be credit enhanced by a guaranty, letter of credit, or insurance. The Fund typically evaluates the credit quality and ratings of credit enhanced securities based upon the financial condition and ratings of the party providing the credit enhancement (the "credit enhancer"), rather than the issuer. However, credit enhanced securities will not be treated as having been issued by the credit enhancer for diversification purposes, unless the Fund has invested more than 10% of its assets in securities issued, guaranteed or otherwise credit enhanced by the credit enhancer, in which case the securities will be treated as having been issued by both the issuer and the credit enhancer. The bankruptcy, receivership, or default of the credit enhancer will adversely affect the quality and marketability of the underlying security. The Fund may have more than 25% of its total assets invested in securities credit enhanced by banks. DEMAND FEATURES. The Fund may acquire securities that are subject to puts and standby commitments ("demand features") to purchase the securities at their principal amount (usually with accrued interest) within a fixed period (usually seven days) following a demand by the Fund. The demand feature may be issued by the issuer of the underlying securities, a dealer in the securities, or by another third party, and may not be transferred separately from the underlying security. The Fund uses these arrangements to provide the Fund with liquidity and not to protect against changes in the market value of the underlying securities. The bankruptcy, receivership, or default by the issuer of the demand feature, or a default on the underlying security or other event that terminates the demand feature before its exercise, will adversely affect the liquidity of the underlying security. Demand features that are exercisable even after a payment default on the underlying security may be treated as a form of credit enhancement. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities on a when-issued or delayed delivery basis. These transactions are arrangements in which the Fund purchases securities with payment and delivery scheduled for a future time. The seller's failure to complete these transactions may cause the Fund to miss a price or yield considered to be advantageous. Settlement dates may be a month or more after entering into these transactions, and the market values of the securities purchased may vary from the purchase prices. Accordingly, the Fund may pay more or less than the market value of the securities on the settlement date. The Fund may dispose of a commitment prior to settlement date if the adviser deems it appropriate to do so. In addition, the Fund may enter into transactions to sell its commitments to third parties at current market values and simultaneously acquire other commitments to purchase similar securities at later dates. The Fund may realize short-term profits or losses upon the sale of such commitments. RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted securities. Restricted securities are any securities in which the Fund may invest pursuant to its investment objective and 4 policies but which are subject to restrictions on resale under federal securities laws. Under criteria established by the Trustees, certain restricted securities are determined to be liquid. To the extent that restricted securities are not determined to be liquid, the Fund will limit their purchase, together with other illiquid securities, to 10% of its net assets. TEMPORARY INVESTMENTS. From time to time, when the investment adviser determines that market conditions call for a temporary defensive posture, the Fund may invest in tax-exempt or taxable securities such as: obligations issued by or on behalf of municipal or corporate issuers having the same quality characteristics as described above; obligations issued or guaranteed by the U.S. government, its agencies, or instrumentalities; instruments issued by a U.S. branch of a domestic bank or other deposit institution having capital, surplus, and undivided profits in excess of $100,000,000 at the time of investment; and repurchase agreements (arrangements in which the organization selling the Fund a temporary investment agrees at the time of sale to repurchase it at a mutually agreed upon time and price). Although the Fund is permitted to make taxable, temporary investments, there is no current intention to do so. However, the interest from certain Florida municipal securities is subject to the federal alternative minimum tax. FLORIDA MUNICIPAL SECURITIES Florida municipal securities are generally issued to finance public works, such as airports, bridges, highways, housing, hospitals, mass transportation projects, schools, streets, and water and sewer works. They are also issued to repay outstanding obligations, to raise funds for general operating expenses, and to make loans to other public institutions and facilities. Florida municipal securities include industrial development bonds issued by or on behalf of public authorities to provide financing aid to acquire sites or construct and equip facilities for privately or publicly owned corporations. The availability of this financing encourages these corporations to locate within the sponsoring communities and thereby increases local employment. The two principal classifications of Florida municipal securities are "general obligation" and "revenue" bonds. General obligation bonds are secured by the issuer's pledge of its full faith and credit and taxing power for the payment of principal and interest. Interest on and principal of revenue bonds, however, are payable only from the revenue generated by the facility financed by the bond or other specified sources of revenue. Revenue bonds do not represent a pledge of credit or create any debt of or charge against the general revenues of a municipality or public authority. Industrial development bonds are typically classified as revenue bonds. INVESTMENT RISKS Yields on Florida municipal securities depend on a variety of factors, including: the general conditions of the short-term municipal note market and of the municipal bond market; the size of the particular offering; the maturity of the obligations; and the rating of the issue. The ability of the Fund to achieve its investment objective also depends on the continuing ability of the issuers of Florida municipal securities and participation interests, or the credit enhancers of either, to meet their obligations for the 5 payment of interest and principal when due. In addition, from time to time, the supply of Florida municipal securities acceptable for purchase by the Fund could become limited. The Fund may invest in Florida municipal securities which are repayable out of revenue streams generated from economically related projects or facilities and/or whose issuers are located in the same state. Sizable investments in these Florida municipal securities could involve an increased risk to the Fund should any of these related projects or facilities experience financial difficulties. Obligations of issuers of Florida municipal securities are subject to the provisions of bankruptcy, insolvency, and other laws affecting the rights and remedies of creditors. In addition, the obligations of such issuers may become subject to laws enacted in the future by Congress, state legislators, or referenda extending the time for payment of principal and/or interest, or imposing other constraints upon enforcement of such obligations or upon the ability of states or municipalities to levy taxes. There is also the possibility that, as a result of litigation or other conditions, the power or ability of any issuer to pay, when due, the principal of and interest on its municipal securities may be materially affected. For an expanded discussion regarding Florida's investment risks, please refer to the Fund's Statement of Additional Information. NON-DIVERSIFICATION The Fund is non-diversified. An investment in the Fund, therefore, will entail greater risk than would exist if it were diversified because the higher percentage of investments among fewer issuers may result in greater fluctuation in the total market value of the Fund's portfolio. Any economic, political, or regulatory developments affecting the value of the securities in the Fund's portfolio will have a greater impact on the total value of the portfolio than would be the case if the portfolio were diversified among more issuers. However, the Fund intends to comply with Subchapter M of the Internal Revenue Code. This undertaking requires that, at the end of each quarter of each taxable year, with regard to at least 50% of the Fund's total assets, no more than 5% of its total assets are invested in the securities of a single issuer and that with respect to the remainder of the Fund's total assets, no more than 25% of its total assets are invested in the securities of a single issuer. INVESTMENT LIMITATIONS The Fund will not borrow money or pledge securities except, under certain circumstances, the Fund may borrow up to one-third of the value of its total assets and pledge assets to secure such borrowings. This investment limitation cannot be changed without shareholder approval. REGULATORY COMPLIANCE The Fund may follow non-fundamental operational policies that are more restrictive than its fundamental investment limitations, as set forth in this prospectus and its Statement of Additional Information, in order to comply with applicable laws and regulations, including the provisions of and regulations under the Investment Company Act of 1940, as amended. In particular, the Fund will comply with the various requirements of Rule 2a-7, which regulates money market mutual funds. The Fund will determine the effective maturity of its investments, as well as its ability to consider a security as having received the requisite short-term ratings by NRSROs, according to Rule 2a-7. The 6 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 Fund's business affairs and for exercising all the Trust's powers except those reserved for the shareholders. An Executive Committee of the Board of Trustees handles the Board's responsibilities between meetings of the Board. INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated Management, the Fund's investment adviser, subject to direction by the Trustees. The adviser continually conducts investment research and supervision for the Fund and is responsible for the purchase and sale of portfolio instruments. ADVISORY FEES. The adviser receives an annual investment advisory fee equal to .40 of 1% of the Fund's average daily net assets. The adviser has undertaken to reimburse the Fund up to the amount of the advisory fee for operating expenses in excess of limitations established by certain states. The adviser also may voluntarily choose to waive a portion of its fee or reimburse other expenses of the Fund, but reserves the right to terminate such waiver or reimbursement at any time at its sole discretion. ADVISER'S BACKGROUND. Federated 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. 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 7 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. DISTRIBUTION OF SHARES Federated Securities Corp. is the principal distributor for shares of the Fund. It is a Pennsylvania corporation organized on November 14, 1969, and is the principal distributor for a number of investment companies. Federated Securities Corp. is a subsidiary of Federated Investors. 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 Fund, 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 amounts or may earn a profit from future payments made by the Fund under the Distribution Plan. In addition, the Fund has adopted a Shareholder Services Plan (the "Services Plan") under which it will pay Financial Institutions an amount not exceeding .25 of 1% of the average daily net asset value of the Fund to obtain certain personal services for shareholders and the maintenance of shareholder accounts ("shareholder services"). The Fund has entered into a Shareholder Services Agreement with Federated Shareholder Services, a subsidiary of Federated Investors, under which Federated Shareholder Services will either perform 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 Fund and Federated Shareholder Services. ADMINISTRATION OF THE TRUST ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of Federated Investors, provides certain administrative personnel and services (including certain legal and accounting 8 services) necessary to operate the Fund. Federated Administrative Services provides these at an annual rate as specified below:
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS -------------------- ------------------------------------ .15 of 1% on the first $250 million .125 of 1% on the next $250 million .10 of 1% on the next $250 million .075 of 1% on assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least $125,000 per portfolio. Average aggregate daily net assets include those of all mutual funds advised by subsidiaries of Federated Investors. Federated Administrative Services may choose voluntarily to waive a portion of its fee. CUSTODIAN. State Street Bank and Trust Company, Boston, MA is custodian for the securities and cash of the Fund. TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company, Pittsburgh, PA is transfer agent for the shares of, and dividend disbursing agent for, the Fund. LEGAL COUNSEL. Legal counsel is provided by Houston, Houston and Donnelly, Pittsburgh, PA and Dickstein, Shapiro & Morin, L.L.P., Washington, D.C. INDEPENDENT PUBLIC ACCOUNTANTS. The independent public accountants for the Fund are Arthur Andersen & Co., Pittsburgh, PA. EXPENSES OF THE FUND The Fund pays all of its own expenses and its allocable share of Trust expenses. These expenses include, but are not limited to the cost of: organizing the Trust and continuing its existence; Trustees' fees; investment advisory and administrative services; printing prospectuses and other documents for shareholders; registering the Trust, the Fund, and shares of the Fund; taxes and commissions; issuing, purchasing, repurchasing and redeeming shares; fees for custodians, transfer agents, dividend disbursing agents, shareholder servicing agents, and registrars; printing, mailing, auditing, accounting, and legal expenses; reports to shareholders and government agencies; meetings of Trustees and shareholders and proxy solicitations therefore; insurance premiums; association membership dues; and such non-recurring and extraordinary items as may arise. NET ASSET VALUE - -------------------------------------------------------------------------------- The Fund attempts to stabilize the net asset value of its shares at $1.00 by valuing the portfolio securities using the amortized cost method. The net asset value per share is determined by subtracting total liabilities from total assets and dividing the remainder by the number of shares outstanding. The Fund cannot guarantee that its net asset value will always remain at $1.00 per share. The net asset value is determined at 12:00 noon, 1:00 p.m., 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 9 portfolio securities that its net asset value might be materially affected; (ii) days during which no shares are tendered for redemption and no orders to purchase shares are received; or (iii) the following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. INVESTING IN THE FUND - -------------------------------------------------------------------------------- SHARE PURCHASES Shares are sold at their net asset value, without a sales charge, next determined after an order is received, on days on which the New York Stock Exchange and the Federal Reserve Wire System are open for business. Shares may be purchased either by wire or mail. The Fund reserves the right to reject any purchase request. To make a purchase, open an account by calling Federated Securities Corp. Information needed to establish the account will be taken by telephone. THROUGH A FINANCIAL INSTITUTION. Investors may call their financial institutions to place an order. Orders through a financial institution are considered received when the Fund receives payment by wire or converts payment by check from the financial institution into federal funds. It is the financial institution's responsibility to transmit orders promptly. Financial institutions may charge additional fees for their services. BY WIRE. To purchase by wire, call the Fund. All information needed will be taken over the telephone, and the order is considered received when State Street Bank receives payment by wire. Federal funds should be wired as follows: State Street Bank and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Florida Municipal Cash Trust; Fund Number (this number can be found on the account statement or by contacting the Fund); Group Number or Order Number; Nominee or Institution Name; and ABA Number 011000028. Shares cannot be purchased by wire on days on which the New York Stock Exchange is closed and on federal holidays restricting wire transfers. BY MAIL. To purchase by mail, send a check made payable to Florida Municipal Cash Trust to State Street Bank and Trust Company, P.O. Box 8602, Boston, MA 02666-8602. Orders by mail are considered received when payment by check is converted by State Street Bank into federal funds. This is normally the next business day after the check is received. MINIMUM INVESTMENT REQUIRED The minimum initial investment is $10,000. However, an account may be opened with a smaller amount as long as the minimum is reached within 90 days. Minimum investments will be calculated by combining all accounts maintained with the Fund. Financial institutions may impose different minimum investment requirements on their customers. 10 SUBACCOUNTING SERVICES Financial institutions are encouraged to open single master accounts. However, certain financial institutions may wish to use the transfer agent's subaccounting system to minimize their internal recordkeeping requirements. The transfer agent charges a fee based on the level of subaccounting services rendered. Financial institutions may charge or pass through subaccounting fees as part of or in addition to normal trust or agency account fees. They may also charge fees for other services provided which may be related to the ownership of Fund shares. This prospectus should, therefore, be read together with any agreement between the customer and the financial institution with regard to the services provided, the fees charged for those services and any restrictions and limitations imposed. 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 or Federated Services Company in writing. Monthly confirmations are sent to report transactions such as all purchases and redemptions as well as dividends paid during the month. 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 to the Fund. Shares purchased by wire before 1:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by check begin earning dividends the day after the check is converted into federal funds. CAPITAL GAINS The Fund does not expect to realize any capital gains or losses. If capital gains or losses were to occur, they could result in an increase or decrease in dividends. The Fund will distribute in cash or additional shares any realized net long-term capital gains at least once every 12 months. REDEEMING SHARES - -------------------------------------------------------------------------------- Shares are redeemed at their net asset value next determined after the Fund receives the redemption request. Redemptions will be made on days on which the Fund computes its net asset value. Redemption requests must be received in proper form and can be made as described below. THROUGH A FINANCIAL INSTITUTION Shares may be redeemed by calling the shareholder's financial institution. Shares will be redeemed at the net asset value next determined after the Fund receives the redemption request from the financial institution. The financial institution is responsible for promptly submitting redemption requests and providing proper written redemption instructions. The financial institution may charge customary fees and commissions for this service. 11 An authorization form permitting redemption requests by telephone must first be completed. Authorization forms and information on this service are available from Federated Securities Corp. 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. In the event of drastic economic or market changes, a shareholder may experience difficulty in redeeming by telephone. If this occurs, another method of redemption, such as "By Mail," should be considered. RECEIVING PAYMENT. Pursuant to instructions from the financial institution, redemptions will be made by check or by wire. BY WIRE. Proceeds for redemption requests received before 12:00 noon (Eastern time) will be wired the same day but will not be entitled to that day's dividend. Redemption requests received after 12:00 noon (Eastern time) will receive that day's dividends and will be wired the following business day. BY CHECK. Normally, a check for the proceeds is mailed within one business day, but in no event more than seven days, after receipt of a proper redemption request. Dividends are paid up to and including the day that a redemption request is processed. BY MAIL Shares may be redeemed by sending a written request to the transfer agent. The written request should state: Florida Municipal Cash Trust; shareholder's name; the account number; and the share or dollar amount requested. Sign the request exactly as the shares are registered. Shareholders should call the Fund for assistance in redeeming by mail. If share certificates have been issued, they must be properly endorsed and should be sent by registered or certified mail with the written request. Shareholders 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 their signatures 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 firm of the New York, American, Boston, Midwest, or Pacific Stock Exchanges; - a savings bank or savings and loan association whose deposits are insured by the Savings Association Insurance Fund, 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 the 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 12 institutions that are members of the signature guarantee program. The Fund and its transfer agent reserve the right to amend these standards at any time without notice. Normally, a check for the proceeds is mailed within one business day, but in no event more than seven days, after receipt of a proper written redemption request. Dividends are paid up to and including the day that a redemption request is processed. BY WRITING A CHECK. At the shareholder's request, State Street Bank will establish a checking account for redeeming shares. A fee is charged for this service. For further information, contact the Fund. With this checking account, shares may be redeemed by writing a check. The redemption will be made at the net asset value on the date that the check is presented to the Fund. A check may not be written to close an account. A shareholder may obtain cash by negotiating the check through the shareholder's local bank. Checks should never be made payable or sent to State Street Bank to redeem shares. Cancelled checks are sent to the shareholder each month. 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 $10,000 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 Trust gives the shareholder one vote in Trustee elections and other matters submitted to shareholders for vote. All shares of all classes of each portfolio in the Trust have equal voting rights, except that in matters affecting only a particular portfolio or class, only shares of that portfolio or class are entitled to vote. As a Massachusetts business trust, the Trust is not required to hold annual shareholder meetings. Shareholder approval will be sought only for certain changes in the Trust's or the Fund's operation and for the election of Trustees under 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. MASSACHUSETTS PARTNERSHIP LAW Under certain circumstances, shareholders may be held personally liable as partners under Massachusetts law for obligations of the Trust. To protect its shareholders, the Trust has filed legal documents with Massachusetts that expressly disclaim the liability of its shareholders for acts or obligations of the Trust. These documents require notice of this disclaimer to be given in each agreement, obligation, or instrument the Trust or its Trustees enter into or sign. 13 In the unlikely event a shareholder is held personally liable for the Trust's obligations, the Trust is required by the Declaration of Trust to use its property to protect or compensate the shareholder. On request, the Trust will defend any claim made and pay any judgment against a shareholder for any act or obligation of the Trust. Therefore, financial loss resulting from liability as a shareholder will occur only if the Trust itself cannot meet its obligations to indemnify shareholders and pay judgments against them. TAX INFORMATION - -------------------------------------------------------------------------------- FEDERAL INCOME TAX The Fund will pay no federal income tax because it expects to meet requirements of the Internal Revenue Code applicable to regulated investment companies and to receive the special tax treatment afforded to such companies. The Fund will be treated as a single, separate entity for federal income tax purposes so that income (including capital gains) and losses realized by the Trust's other portfolios will not be combined for tax purposes with those realized by the Fund. Shareholders are not required to pay the federal regular income tax on any dividends received from the Fund that represent net interest on tax-exempt municipal bonds. However, under the Tax Reform Act of 1986, dividends representing net interest earned on certain "private activity" bonds issued after August 7, 1986, may be included in calculating the federal individual alternative minimum tax or the federal alternative minimum tax for corporations. The Fund may purchase all types of municipal bonds, including private activity bonds. The alternative minimum tax applies when it exceeds the regular tax for the taxable year. Alternative minimum taxable income is equal to the regular taxable income of the taxpayer increased by certain "tax preference" items not included in regular taxable income and reduced by only a portion of the deductions allowed in the calculation of the regular tax. Dividends of the Fund representing net interest income earned on some temporary investments and any realized net short-term gains are taxed as ordinary income. These tax consequences apply whether dividends are received in cash or as additional shares. STATE AND LOCAL TAXES Income from the Fund is not necessarily free from taxes in states other than Florida. Shareholders are urged to consult their own tax advisers regarding the status of their accounts under state and local tax laws. FLORIDA INTANGIBLES TAX Shareholders of the Fund that are subject to the Florida intangibles tax will not be required to include the value of their Fund shares in their taxable intangible property if all of the Fund's investments on the annual assessment date are obligations that would be exempt from such tax if held directly by such shareholders, such as Florida and U.S. government obligations. As described earlier, the Fund 14 will normally attempt to invest substantially all of its assets in securities which are exempt from the Florida intangibles tax. Accordingly, the value of the Fund shares held by a shareholder should under normal circumstances be exempt from the Florida intangibles tax. However, if the portfolio consists of any assets which are not so exempt on the annual assessment date, only the portion of the shares of the Fund which relate to securities issued by the United States and its possessions and territories will be exempt from the Florida intangibles tax, and the remaining portion of such shares will be fully subject to the intangibles tax, even if they partly relate to Florida tax exempt securities. FLORIDA STATE MUNICIPAL TAXATION In a majority of states that have an income tax, dividends paid by a mutual fund attributable to investments in a particular state's municipal obligations are exempt from both Federal and such state's income tax. If Florida were to adopt an income tax in the future, and assuming that its income tax policy with respect to mutual funds investing in Florida state and local municipal obligations would be similar to the general tax policy of other states, dividends paid by the Fund would be exempt from Florida state income tax. A constitutional amendment approved by referendum would be required before an individual income tax could be imposed. PERFORMANCE INFORMATION - -------------------------------------------------------------------------------- From time to time the Fund advertises its yield, effective yield, and tax-equivalent yield. Yield represents the annualized rate of income earned on an investment over a seven-day period. It is the annualized dividends earned during the period on an investment shown as a percentage of the investment. The effective yield is calculated similarly to the yield, but when annualized, the income earned by an investment is assumed to be reinvested daily. The effective yield will be slightly higher than the yield because of the compounding effect of this assumed reinvestment. The tax-equivalent yield is calculated similarly to the yield, but is adjusted to reflect the taxable yield that would have to be earned to equal the Fund's tax exempt yield, assuming a specific tax rate. Advertisements and sales literature may also refer to total return. Total return represents the change, over a specified period of time, in the value of an investment in the Fund after reinvesting all income distributions. It is calculated by dividing that change by the initial investment and is expressed as a percentage. From time to time, the Fund may advertise its performance using certain reporting services and/or compare its performance to certain indices. 15 - -------------------------------------------------------------------------------- FLORIDA MUNICIPAL CASH TRUST PROSPECTUS A non-diversified Portfolio of Federated Municipal Trust, an Open-End Management Investment Company Prospectus dated September 19, 1994 [LOGO] Distributor A subsidiary of FEDERATED INVESTORS FEDERATED INVESTORS TOWER PITTSBURGH, PA 15222-3779 314229 75 8 [LOGO] RECYCLED 005392 (9/94) PAPER FLORIDA MUNICIPAL CASH TRUST (A PORTFOLIO OF FEDERATED MUNICIPAL TRUST) STATEMENT OF ADDITIONAL INFORMATION This Statement of Additional Information should be read with the prospectus of Florida Municipal Cash Trust (the "Fund") dated September 19, 1994. This Statement is not a prospectus. To receive a copy of a prospectus, write or call Federated Municipal Trust. FEDERATED INVESTORS TOWER PITTSBURGH, PENNSYLVANIA 15222-3779 Statement dated September 19, 1994 [LOGO] 012345678 DISTRIBUTOR A SUBSIDIARY OF FEDERATED INVESTORS TABLE OF CONTENTS - -------------------------------------------------------------------------------- INVESTMENT POLICIES 1 - --------------------------------------------------------- Acceptable Investments 1 Participation Interests 1 Municipal Leases 1 When-Issued And Delayed Delivery Transactions 1 Repurchase Agreements 1 Florida Investment Risks 1 INVESTMENT LIMITATIONS 2 - --------------------------------------------------------- Selling Short and Buying on Margin 2 Issuing Senior Securities and Borrowing Money 2 Pledging Assets 3 Lending Cash or Securities 3 Investing in Commodities 3 Investing in Real Estate 3 Underwriting 3 Concentration of Investments 3 Investing in Restricted Securities 3 Investing in Illiquid Securities 3 Investing in Securities of Other Investment Companies 3 Investing in New Issuers 3 Investing for Control 3 Investing in Issuers Whose Securities Are Owned by Officers of the Fund 3 Investing in Options 4 Investing in Minerals 4 BROKERAGE TRANSACTIONS 4 - --------------------------------------------------------- FEDERATED MUNICIPAL TRUST MANAGEMENT 5 - --------------------------------------------------------- The Funds 7 Share Ownership 7 Trustee Liability 7 INVESTMENT ADVISORY SERVICES 7 - --------------------------------------------------------- Investment Adviser 7 Advisory Fees 7 FUND ADMINISTRATION 8 - --------------------------------------------------------- TRANSFER AGENT AND DIVIDEND DISBURSING AGENT 8 - --------------------------------------------------------- DISTRIBUTION AND SHAREHOLDER SERVICES PLANS 8 - --------------------------------------------------------- Custodian and Portfolio Recordkeeper 8 DETERMINING NET ASSET VALUE 8 - --------------------------------------------------------- Redemption in Kind 9 The Fund's Tax Status 9 PERFORMANCE INFORMATION 9 - --------------------------------------------------------- Yield 9 Effective Yield 9 Tax-Equivalency Table 10 Total Return 10 Performance Comparisons 10 APPENDIX 11 - ---------------------------------------------------------
I INVESTMENT POLICIES - -------------------------------------------------------------------------------- Unless indicated otherwise, the policies described below may be changed by the Trustees without shareholder approval. Shareholders will be notified before any material change in these policies becomes effective. ACCEPTABLE INVESTMENTS When determining whether a municipal security presents minimal credit risks, the investment adviser will consider the creditworthiness of: the issuer of a municipal security, the issuer of a demand feature if the Fund has the unconditional right to demand payment for the municipal security, or any guarantor of payment by either of those issuers. PARTICIPATION INTERESTS The financial institutions from which the Fund purchases participation interests frequently provide or secure from another financial institution irrevocable letters of credit or guarantees and give the Fund the right to demand payment of the principal amounts of the participation interests plus accrued interest on short notice (usually within seven days). The municipal securities subject to the participation interests are not limited to the Fund's maximum maturity requirements so long as the participation interests include the right to demand payment from the issuers of those interests. By purchasing participation interests having a seven day demand feature, the Fund is buying a security meeting the maturity and quality requirements of the Fund and also is receiving the tax-free benefits of the underlying securities. MUNICIPAL LEASES In determining the liquidity of municipal lease securities, the investment adviser, under the authority delegated by the Board of Trustees, will base its determination on the following factors: whether the lease can be terminated by the lessee; the potential recovery, if any, from a sale of the leased property upon termination of the lease; the lessee's general credit strength (e.g., its debt, administrative, economic and financial characteristics and prospects); the likelihood that the lessee will discontinue appropriating funding for the leased property because the property is no longer deemed essential to its operations (e.g., the potential for an "event of non-appropriation"); and any credit enhancement or legal recourse provided upon an event of non-appropriation or other termination of the lease. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS These transactions are made to secure what is considered to be an advantageous price or yield for the Fund. 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 are maintained until the transaction has been settled. The Fund does not intend to engage in when-issued and delayed delivery transactions to an extent that would cause the segregation of more than 20% of the total value of its assets. REPURCHASE AGREEMENTS Certain securities in which the Fund invests may be purchased pursuant to repurchase agreements. Repurchase agreements are arrangements in which banks, brokers/dealers, and other recognized financial institutions sell securities to the Fund and agree at the time of sale to repurchase them at a mutually agreed upon time and price. To the extent that the seller does not repurchase the securities from the Fund, the Fund could receive less than the repurchase price on any sale of such securities. The Fund or its custodian will take possession of the securities subject to repurchase agreements, and these securities will be marked to market daily. In the event that a defaulting seller filed for bankruptcy or became insolvent, disposition of such securities by the Fund might be delayed pending court action. The Fund believes that under the regular procedures normally in effect for custody of the Fund's portfolio securities subject to repurchase agreements, a court of competent jurisdiction would rule in favor of the Fund and allow retention or disposition of such securities. The Fund will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, which are deemed by the Fund's adviser to be creditworthy pursuant to guidelines established by the Trustees. FLORIDA INVESTMENT RISKS The Fund invests in obligations of Florida issuers which results in the Fund's performance being subject to risks associated with the overall conditions present within the state. The following information is a brief summary of the recent prevailing economic conditions and a general summary of the state's financial status. This information 1 - -------------------------------------------------------------------------------- is based on official statements relating to securities that have been offered by Florida issuers and from other sources believed to be reliable but should not be relied upon as a complete description of all relevant information. Florida is the twenty-second largest state with an area of 54,136 square miles and a water area of 4,424 square miles. The state is 447 miles long and 361 miles wide with a tidal shoreline of almost 2,300 miles. According to the U.S. Census Bureau, Florida moved past Illinois in 1986 to become the fourth most populous state, and as of 1990, had an estimated population of 13.2 million. Services and trade continue to be the largest components of the Florida economy, reflecting the importance of tourism as well as the need to serve Florida's rapidly growing population. Agriculture is also an important part of the economy, particularly citrus fruits. Oranges have been the principal crop, accounting for 70% of the nation's output. Manufacturing, although of less significance, is a rapidly growing component of the economy. The economy also has substantial insurance, banking, and export participation. Unemployment rates have historically been below national averages, but have recently risen above the national rate. Section 215.32, Florida Statutes, provides that financial operations of the State of Florida covering all receipts and expenditures must be maintained through the use of three funds--the General Revenue Fund, the Trust Fund, and the Working Capital Fund. The General Revenue Fund receives the majority of State tax revenues. The Working Capital Fund receives revenues in excess of appropriations and its balances are freely transferred to the General Revenue Fund as necessary. In November, 1992, Florida voters approved a constitutional amendment requiring the state to fund a Budget Stabilization Fund to 5% of general revenues, with funding to be phased in over five years beginning in fiscal 1995. The Working Capital Fund will become the Budget Stabilization Fund. Major sources of tax revenues to the General Revenue Fund are the sale and use tax, corporate income tax and beverage tax. The over-dependence on the sensitive sales tax creates vulnerability to recession. Accordingly, financial operations have been strained during the past few years, but the state has responded in a timely manner to maintain budgetary control. Hurricane Andrew devastated portions of southern Florida in August 1992, costing billions of dollars in emergency relief, damage, and repair costs. However, the overall financial condition of the major issuers of municipal bond debt in the state were relatively unaffected by Hurricane Andrew, due to federal disaster payments and the overall level of private insurance. However, it is possible that single revenue-based local bond issues could be severly impacted by storm damage in certain circumstances. Florida's debt structure is complex. Most state debt is payable from specified taxes and additionally secured by the full faith and credit of the state. Under the general obligation pledge, to the extent specified taxes are insufficient, the state is unconditionally required to make payment on bonds from all non-dedicated taxes. The Fund's concentration in securities issued by the state and its political subdivisions provides a greater level of risk than a fund which is diversified across numerous states and municipal entities. The ability of the state or its municipalities to meet their obligations will depend on the availability of tax and other revenues; economic, political, and demographic conditions within the state; and the underlying condition of the state, and its municipalities. INVESTMENT LIMITATIONS - -------------------------------------------------------------------------------- SELLING SHORT AND BUYING ON MARGIN The Fund will not sell any securities short or purchase any securities on margin but may obtain such short-term credits as are necessary for clearance of transactions. ISSUING SENIOR SECURITIES AND BORROWING MONEY The Fund will not issue senior securities except that the Fund may borrow money in amounts up to one-third of the value of its total assets, including the amounts borrowed. The Fund will not borrow money 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. 2 - -------------------------------------------------------------------------------- PLEDGING ASSETS The Fund will not mortgage, pledge, or hypothecate any assets except as necessary to secure permitted borrowings. LENDING CASH OR SECURITIES The Fund will not lend any of its assets, except that it may purchase or hold portfolio securities permitted by its investment objective, policies, and limitations, or Declaration of Trust. INVESTING IN COMMODITIES The Fund will not purchase or sell commodities, commodity contracts, or commodity futures contracts. INVESTING IN REAL ESTATE The Fund will not purchase or sell real estate, including limited partnership interests, although it may invest in securities of issuers whose business involves the purchase or sale of real estate or in securities which are secured by real estate or interests in real estate. UNDERWRITING The Fund will not underwrite any issue of securities, except as it may be deemed to be an underwriter under the Securities Act of 1933 in connection with the sale of securities in accordance with its investment objective, policies, and limitations. CONCENTRATION OF INVESTMENTS The Fund will not invest 25% or more of the value of its total assets in any one industry, or in industrial development bonds or other securities the interest upon which is paid from revenues of similar types of projects, except that the Fund may invest 25% or more of the value of its total assets in cash, cash items, or securities issued or guaranteed by the government of the United States or its agencies, or instrumentalities and repurchase agreement collateralized by such U.S. government securities. The above limitations cannot be changed without shareholder approval. The following investment limitations, however, may be changed by Trustees without shareholder approval. Shareholders will be notified before any material change in these limitations becomes effective. INVESTING IN RESTRICTED SECURITIES The Fund will not invest more than 10% of its total assets in securities subject to restrictions on resale under federal securities law, except for restricted securities determined to be liquid under criteria established by the Trustees. INVESTING IN ILLIQUID SECURITIES The Fund will not invest more than 10% of the value of its net assets in illiquid securities. INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES The Fund will not purchase securities of other investment companies, except as part of a merger, consolidation, or other acquisition. INVESTING IN NEW ISSUERS The Fund will not invest more than 5% of the value of its total assets in securities of issuers (including companies responsible for paying principal and interest on industrial development bonds) which have records of less than three years of continuous operations, including the operation of any predecessor. INVESTING FOR CONTROL The Fund will not invest in securities of a company for the purpose of exercising control or management. INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS OF THE FUND The Fund will not purchase or retain the securities of any issuer if the Officers and Trustees of the Fund or its investment adviser owning individually more than .50 of 1% of the issuer's securities together own more than 5% of the issuer's securities. 3 - -------------------------------------------------------------------------------- INVESTING IN OPTIONS The Fund will not invest in puts, calls, straddles, spreads, or any combination of them. INVESTING IN MINERALS The Fund will not purchase or sell interests in oil, gas, or other mineral exploration or development programs or leases, although it may purchase the securities of issuers which invest in or sponsor such programs. For purposes of the above limitations, the Fund considers 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". Except with respect to borrowing money, if a percentage limitation is adhered to at the time of investment, a later increase or decrease in percentage resulting from any change in value or net assets will not result in a violation of such limitation. The Fund does not intend to borrow money or pledge securities in excess of 5% of the value of its net assets during the coming fiscal year. BROKERAGE TRANSACTIONS - -------------------------------------------------------------------------------- When selecting brokers and dealers to handle the purchase and sale of portfolio instruments, the adviser looks for prompt execution of the order at a favorable price. In working with dealers, the adviser will generally use those who are recognized dealers in specific portfolio instruments, except when a better price and execution of the order can be obtained elsewhere. The adviser makes decisions on portfolio transactions and selects brokers and dealers subject to guidelines established by the Board of Trustees. The adviser may select brokers and dealers who offer brokerage and research services. These services may be furnished directly to the Fund or to the adviser and may include: advice as to the advisability of investing in securities; security analysis and reports; economic studies; industry studies; receipt of quotations for portfolio evaluations; and similar services. Research services provided by brokers and dealers may be used by the adviser or its affiliates in advising the Trust and other accounts. To the extent that receipt of these services may supplant services for which the adviser or its affiliates might otherwise have paid, it would tend to reduce their expenses. The adviser and its affiliates exercise reasonable business judgment in selecting brokers who offer brokerage and research services to execute securities transactions. They determine in good faith that commissions charged by such persons are reasonable in relationship to the value of the brokerage and research services provided. Although investment decisions for the Fund are made independently from those of the other accounts managed by the adviser, investments of the type the Fund may make may also be made by those other accounts. When the Fund and one or more other accounts managed by the adviser are prepared to invest in, or desire to dispose of, the same security, available investments or opportunities for sales will be allocated in a manner believed by the adviser to be equitable to each. In some cases, this procedure may adversely affect the price paid or received by the Fund or the size of the position obtained or disposed of by the Fund. In other cases, however, it is believed that coordination and the ability to participate in volume transactions will be to the benefit of the Fund. 4 FEDERATED MUNICIPAL TRUST MANAGEMENT - -------------------------------------------------------------------------------- Officers and Trustees are listed with their addresses, principal occupations, and present positions.
POSITION WITH PRINCIPAL OCCUPATIONS NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS - ---------------------------------------------------------------------------------------------------------------------- John F. Donahue@* Chairman and Chairman and Trustee, Federated Investors, Federated Federated Investors Trustee Advisers, Federated Management, and Federated Research; Tower Chairman and Director, Federated Research Corp.; Chairman, Pittsburgh, PA Passport Research, Ltd.; Director, AEtna Life and Casualty Company; Chief Executive Officer and Director, Trustee, or Managing General Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue, Vice President of the Trust. - ---------------------------------------------------------------------------------------------------------------------- John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice- Wood/IPC Commercial President, John R. Wood and Associates, Inc., Realtors; Department President, Northgate Village Development Corporation; John R. Wood and Partner or Trustee in private real estate ventures in Associates, Inc., Realtors Southwest Florida; Director, Trustee, or Managing General 3255 Tamiami Trail North Partner of the Funds; formerly, President, Naples Property Naples, FL 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 Funds; Concord, MA formerly, Director, Blue Cross of Massachusetts, Inc. - ---------------------------------------------------------------------------------------------------------------------- Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and 3471 Fifth Avenue, Montefiore Hospitals; Professor of Medicine and Trustee, Suite 1111 University of Pittsburgh; Director of Corporate Health, Pittsburgh, PA University of Pittsburgh Medical Center; Director, Trustee, or Managing General Partner of the Funds. - ---------------------------------------------------------------------------------------------------------------------- Edward L. Flaherty, Jr.@ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, 5916 Penn Mall Eat'N Park Restaurants, Inc., and Statewide Settlement Pittsburgh, PA Agency, Inc.; Director, Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon Financial, F.A., Western Region. - ---------------------------------------------------------------------------------------------------------------------- Glen R. Johnson* President and Trustee, Federated Investors; President and/or Trustee of Federated Investors Trustee some of the Funds; staff member, Federated Securities Corp. Tower and Federated Administrative Services. Pittsburgh, PA - ---------------------------------------------------------------------------------------------------------------------- Peter E. Madden Trustee Consultant; State Representative, Commonwealth of 225 Franklin Street Massachusetts; Director, Trustee, or Managing General Boston, MA Partner of the Funds; formerly, President, State Street Bank and Trust Company and State Street Boston Corporation and Trustee, Lahey Clinic Foundation, Inc. - ---------------------------------------------------------------------------------------------------------------------- Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, 5916 Penn Mall Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Pittsburgh, PA Director, Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman, Horizon Financial, F.A. - ----------------------------------------------------------------------------------------------------------------------
5 - --------------------------------------------------------------------------------
POSITION WITH PRINCIPAL OCCUPATIONS NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS - ---------------------------------------------------------------------------------------------------------------------- Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; 1202 Cathedral of Trustee, Carnegie Endowment for International Peace, RAND Learning Corporation, Online Computer Library Center, Inc., and U.S. University of Pittsburgh Space Foundation; Chairman, Czecho Slovak Management Center; Pittsburgh, PA Director, Trustee, or Managing General Partner of the Funds; President Emeritus, University of Pittsburgh; formerly, Chairman, National Advisory Council for Environmental Policy and Technology. - ---------------------------------------------------------------------------------------------------------------------- Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or 4905 Bayard Street Managing General Partner of the Funds. Pittsburgh, PA - ---------------------------------------------------------------------------------------------------------------------- J. Christopher Vice President President and Trustee, Federated Investors, Federated Donahue Advisers, Federated Management, and Federated Research; Federated Investors President and Director, Federated Research Corp.; President, Tower Passport Research, Ltd.; Trustee, Federated Administrative Pittsburgh, PA Services, Federated Services Company, and Federated Shareholder Services; President or Vice President of the Funds; Director, Trustee, or Managing General Partner of some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and Trustee of the Trust. - ---------------------------------------------------------------------------------------------------------------------- Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Federated Investors Director, Federated Research Corp.; Chairman and Director, Tower Federated Securities Corp.; President or Vice President of Pittsburgh, PA some of the Funds; Director or Trustee of some of the Funds. - ---------------------------------------------------------------------------------------------------------------------- Edward C. Gonzales Vice President Vice President, Treasurer, and Trustee, Federated Investors; Federated Investors and Treasurer Vice President and Treasurer, Federated Advisers, Federated Tower Management, Federated Research, Federated Research Corp., Pittsburgh, PA and Passport Research, Ltd.; Executive Vice President, Treasurer, and Director, Federated Securities Corp.; Trustee, Federated Services Company and Federated Shareholder Services; Chairman, Treasurer, and Trustee, Federated Administrative Services; Trustee or Director of some of the Funds; 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 Trustee, Tower Federated Advisers, Federated Management, and Federated Pittsburgh, PA Research; Vice President and Secretary, Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated Services Company; Executive Vice President, Secretary, and Trustee, Federated Administrative Services; Secretary and Trustee, Federated Shareholder Services; Executive Vice President and Director, Federated Securities Corp.; Vice President and Secretary of the Funds. - ---------------------------------------------------------------------------------------------------------------------- * This Trustee is deemed to be an "interested person" as defined in the Investment Company Act of 1940, as amended. @ Member of the Executive Committee. The Executive Committee of the Board of Trustees handles the responsibilities of the Board of Trustees between meetings of the Board.
6 - -------------------------------------------------------------------------------- THE FUNDS As referred to in the list of Trustees and Officers, "Funds" includes 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 Institutional Trust; Federated Intermediate Government Trust; Federated Master Trust; Federated Municipal Trust; Federated Short-Intermediate Government Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.; High Yield Cash Trust; Insight Institutional Series, Inc.; Insurance Management Series; Intermediate Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc. -- 1999; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain Funds; The Medalist 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; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust for Financial Institutions; Trust For Government Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; World Investment Series, Inc. SHARE OWNERSHIP Officers and Trustees own less than 1% of the Trust's outstanding shares. TRUSTEE LIABILITY The Declaration of Trust provides that the Trustees will not be liable for errors of judgment or mistakes or fact or law. However, they are not protected against any liability to which they would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence, or reckless disregard of the duties involved in the conduct of their office. INVESTMENT ADVISORY SERVICES - -------------------------------------------------------------------------------- INVESTMENT ADVISER The Florida Municipal Cash Trust's investment adviser is Federated Management. It is a subsidiary of Federated Investors. All the voting securities of Federated Investors are owned by a trust, the trustees of which are John F. Donahue, his wife and his son, J. Christopher Donahue. The adviser shall not be liable to 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 Trust. ADVISORY FEES For its advisory services, Federated Management receives an annual investment advisory fee as described in the prospectus. STATE EXPENSE LIMITATIONS The adviser has undertaken to comply with the expense limitations established by certain states for investment companies whose shares are registered for sale in those states. If the Fund's normal operating expenses (including the investment advisory fee, but not including brokerage commissions, interest, taxes, and extraordinary expenses) exceed 2 1/2% per year of the first $30 million of average net assets, 2% per 7 - -------------------------------------------------------------------------------- year of the next $70 million of average net assets, and 1 1/2% per year of the remaining average net assets, the adviser will reimburse the Fund for its expenses over the limitation. If the Fund's monthly projected operating expenses exceed this limitation, the investment advisory fee paid will be reduced by the amount of the excess, subject to an annual adjustment. If the expense limitation is exceeded, the amount to be reimbursed by the adviser will be limited, in any single fiscal year, by the amount of the investment advisory fees. This arrangement is not part of the advisory contract and may be amended or rescinded in the future. FUND ADMINISTRATION - -------------------------------------------------------------------------------- Federated Administrative Services, a subsidiary of Federated Investors, provides administrative personnel and services to the Fund for a fee as described in the prospectus. Dr. Henry J. Gailliot, an officer of Federated Management, the adviser to the Fund, holds approximately 20% of the outstanding common stock and serves as director of Commercial Data Services, Inc., a company which provides computer processing services to Federated Administrative Services, Inc. and Federated Administrative Services. TRANSFER AGENT AND DIVIDEND DISBURSING AGENT - -------------------------------------------------------------------------------- Federated Services Company 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. Federated Services Company also maintains the Trust's accounting records. The fee is based on the level of the Fund's average net assets for the period plus out-of-pocket expenses. 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. By adopting the Distribution Plan, the Board of Trustees expects that the Fund will be able to achieve a more predictable flow of cash for investment purposes and to meet redemptions. This will facilitate more efficient portfolio management and assist the Fund in pursuing its investment objective. By identifying potential investors whose needs are served by the Fund's objective, 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; (3) enhancing shareholder recordkeeping systems; and (4) responding promptly to shareholders' requests and inquiries concerning their accounts. CUSTODIAN AND PORTFOLIO RECORDKEEPER State Street Bank and Trust, Boston, MA is custodian for the securities and cash of the Fund. Federated Services Company, Pittsburgh, PA provides certain accounting and recordkeeping services with respect to the Fund's portfolio investments. DETERMINING NET ASSET VALUE - -------------------------------------------------------------------------------- The Trustees have decided that the best method for determining the value of portfolio instruments is amortized cost. Under this method, portfolio instruments are valued at the acquisition cost as adjusted for amortization of 8 - -------------------------------------------------------------------------------- premium or accumulation of discount rather than at current market value. Accordingly, neither the amount of daily income nor the net asset value is affected by any unrealized appreciation or depreciation of the portfolio. In periods of declining interest rates, the indicated daily yield on shares of the Fund computed by dividing the annualized daily income on the Fund's portfolio by the net asset value computed as above may tend to be higher than a similar computation made by using a method of valuation based upon market prices and estimates. In periods of rising interest rates, the opposite may be true. The Fund's use of the amortized cost method of valuing portfolio instruments depends on its compliance with certain conditions in Rule 2a-7 (the "Rule") promulgated by the Securities and Exchange Commission under the Investment Company Act of 1940. Under the Rule, the Trustees must establish procedures reasonably designed to stabilize the net asset value per share, as computed for purposes of distribution and redemption, at $1.00 per share, taking into account current market conditions and the Fund's investment objective. The procedures include monitoring the relationship between the amortized cost value per share and the net asset value per share based upon available indications of market value. The Trustees will decide what, if any, steps should be taken if there is a difference of more than 0.5 of 1% between the two values. The Trustees will take any steps they consider appropriate (such as redemption in kind or shortening the average portfolio maturity) to minimize any material dilution or other unfair results arising from differences between the two methods of determining net asset value. REDEMPTION IN KIND The Fund is obligated to redeem shares solely in cash up to $250,000 or 1% of the Fund's net asset value, whichever is less, for any one shareholder within a 90-day period. Any redemption beyond this amount will also be in cash unless the Trustees determine that further payments should be in kind. In such cases, the Fund will pay all or a portion of the remainder of the redemption in portfolio instruments valued in the same way as the Fund determines net asset value. The portfolio instruments will be selected in a manner that the Trustees deem fair and equitable. Redemption in kind is not as liquid as a cash redemption. If redemption is made in kind, shareholders who sell these securities could receive less than the redemption value and could incur certain transaction costs. THE FUND'S TAX STATUS To qualify for the special tax treatment afforded to regulated investment companies, the Fund must, among other requirements: derive at least 90% of its gross income from dividends, interest, and gains from the sale of securities; derive less than 30% of its gross income from the sale of securities held less than three months; invest in securities within certain statutory limits; and distribute to its shareholders at least 90% of its net income earned during the year. PERFORMANCE INFORMATION - -------------------------------------------------------------------------------- Performance depends upon such variables as: portfolio quality; average portfolio maturity; type of instruments in which the portfolio is invested; changes in interest rates; changes in expenses; and the relative amount of cash flow. To the extent that financial institutions and broker/dealers charge fees in connection with services provided in conjunction with an investment in shares of the Fund, the performance will be reduced for those shareholders paying those fees. YIELD The Fund calculates its yield based upon the seven days ending on the day of the calculation, called the "base period." This yield is computed by: determining the net change in the value of a hypothetical account with a balance of one share at the beginning of the base period, with the net change excluding capital changes but including the value of any additional shares purchased with dividends earned from the original one share and all dividends declared on the original and any purchased shares; dividing the net change in the account's value by the value of the account at the beginning of the base period to determine the base period return; and multiplying the base period return by 365/7. EFFECTIVE YIELD The Fund calculates its effective yield by compounding the unannualized base period return by: adding 1 to the base period return; raising the sum to the 365/7th power; and subtracting 1 from the result. 9 - -------------------------------------------------------------------------------- TAX-EQUIVALENCY TABLE A tax-equivalency table may be used in advertising and sales literature. The interest earned by the municipal securities in the Fund's portfolio generally remains free from federal regular income tax,* and is often free from state and local taxes as well. As the table below indicates, a "tax-free" investment can be an attractive choice for investors, particularly in times of narrow spreads between tax-free and taxable yields.
FLORIDA TAXABLE EQUIVALENT YIELD FOR 1994** - ------------------------------------------------------ FEDERAL MARGINAL RATE 31.00% 36.00% 39.60% - ------------------------------------------------------ Net Yield** Taxable Equivalent Yields*** 2.50% 3.94% 4.25% 4.50% 3.00% 4.66% 5.02% 5.32% 3.50% 5.38% 5.80% 6.15% 4.00% 6.10% 6.58% 6.97% 4.50% 6.83% 7.36% 7.80% 5.00% 7.55% 8.14% 8.62% 5.50% 8.27% 8.92% 9.45% 6.00% 9.00% 9.70% 10.28% - ------------------------------------------------------ * For some investors, income may be subject to the federal alternative minimum tax and state and local taxes. ** These yields are for illustrative purposes only and are not indicative of past or future performance of the Fund. Actual yields will vary. *** These calculations are based upon an investment value of $10,000 subject to the Florida intangibles tax, and the assumption that this tax is deducted in full for federal tax purposes.
TOTAL RETURN Average annual total return 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 compounded by multiplying the number of shares owned at the end of the period by the net asset value 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. PERFORMANCE COMPARISONS Investors may use financial publications and/or indices to obtain a more complete view of the Fund's performance. When comparing performance, investors should consider all relevant factors such as the composition of any index used, prevailing market conditions, portfolio compositions of other funds, and methods used to value portfolio securities and compute net asset value. The financial publications and/or indices which the Fund uses in advertising may include: - LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories based on total return, which assumes the reinvestment of all income dividends and capital gains distributions, if any. - DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market funds weekly. Donoghue's Money Market Insight publication reports monthly and 12-month-to-date investment results for the same money funds. - MONEY, a monthly magazine, regularly ranks money market funds in various categories based on the latest available seven-day effective yield. 10 APPENDIX - -------------------------------------------------------------------------------- MUNICIPAL BOND RATING DEFINITIONS STANDARD AND POOR'S CORPORATION AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's Corporation. Capacity to pay interest and repay principal is extremely strong. AA--Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the higher rated issues only in small degree. A--Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effect of changes in circumstances and economic conditions than debt in higher rated categories. MOODY'S INVESTORS SERVICE, INC. Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edged." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa--Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group, they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A--Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. LONG-TERM DEBT RATING DEFINITIONS FITCH INVESTORS SERVICE, INC. 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+. A--Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings. MUNICIPAL NOTE RATINGS STANDARD AND POOR'S CORPORATION SP-1--Very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics will be given a plus (+) designation. SP-2--Satisfactory capacity to pay principal and interest. SHORT-TERM LOAN RATINGS MOODY'S INVESTORS SERVICE, INC. MIG1/VMIG1--This designation denotes best quality. There is a present strong protection by established cash flows superior liquidity support or demonstrated broadbased access to the market for refinancing. MIG2/VMIG2--This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group. 11 - -------------------------------------------------------------------------------- COMMERCIAL PAPER RATING DEFINITIONS STANDARD & POOR'S CORPORATION 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. PRIME-1--Issuers rated Prime-1 (or related supporting institutions) have a superior capacity for repayment of short-term promissory obligations. Prime-1 repayment capacity will normally be evidenced by the following characteristics: -- Leading market positions in well established industries. -- High rates of return on funds employed. -- Conservative capitalization structure with moderate reliance on debt and ample asset protection. -- Broad margins in earning coverage of fixed financial charges and high internal cash generation. -- Well-established access to a range of financial markets and assured sources of alternate liquidity PRIME-2--Issuers rated Prime-2 (or related supporting institutions) have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. SHORT-TERM DEBT RATING DEFINITIONS FITCH INVESTORS SERVICE, INC. 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. 12 -----END PRIVACY-ENHANCED MESSAGE-----