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<IMS-DOCUMENT>0000855108-94-000031.txt : 19940926
<IMS-HEADER>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
</IMS-HEADER>
<DOCUMENT>
<TYPE>497
<SEQUENCE>1
<TEXT>
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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
- --------------------------------------------------
</TABLE>
I
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)......... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable)..................................................................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)............................. None
Exchange Fee................................................................................... None
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
<S> <C> <C>
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%
<FN>
(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.
</TABLE>
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "INVESTING IN THE FUND" AND "TRUST INFORMATION." WIRE-TRANSFERRED
REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO ADDITIONAL FEES.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- ------------------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of each time period............................. $5 $16
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. 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:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
-------------------- ------------------------------------
<C> <S>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio. 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
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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
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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
- ---------------------------------------------------------
</TABLE>
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.
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
5
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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.
- ----------------------------------------------------------------------------------------------------------------------
<FN>
* 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.
</TABLE>
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.
<TABLE>
<CAPTION>
FLORIDA TAXABLE EQUIVALENT YIELD FOR 1994**
- ------------------------------------------------------
<S> <C> <C> <C>
FEDERAL MARGINAL RATE 31.00% 36.00% 39.60%
<CAPTION>
- ------------------------------------------------------
<S> <C> <C> <C>
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%
<CAPTION>
- ------------------------------------------------------
<FN>
* 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.
</TABLE>
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
</TEXT>
</DOCUMENT>
</IMS-DOCUMENT>
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